The Sun Belt's overbuilding problem turned into the housing market's solution

Two years ago, housing analysts called the Sun Belt overbuilt. This spring, it's leading the country in home sales growth.

According to Zillow's April market report, home sales rose 20% year over year in Austin, more than in any other major U.S. metros. Active inventory there sits 52.4% above its pre-pandemic average, also a national high. Of the top 10 markets for annual sales growth, six have more homes on the market than they did before the pandemic, most of them in the South and West.

The national picture is quieter. Sales in April were down 0.4% from a year earlier and remain roughly 20% below pre-pandemic norms. Inventory is up 3.7% year over year but still trails 2018–2019 levels by about 19%. Housing inventory now exceeds pre-pandemic norms in 19 of the 50 most populous U.S. metros, and those metros are, broadly, the same ones where sales are climbing. Across the data, the pattern is consistent: where supply is ample, buyers are coming back.

"After years of low supply, markets with restocked shelves are seeing relatively stronger sales growth," said Zillow Senior Economist Orphe Divounguy. "Construction boomed across the Sun Belt, and we saw activity slow in many markets as they went through a transition period. Those same markets are now coming out the other side as incomes are more in line with prices. Having more homes on the market is helping the market function again."

The difference is affordability

The clearest evidence that supply does the work shows up in monthly mortgage payments. Nationally, the typical monthly payment fell 3.4% year over year in April. In the metros where inventory has been rebuilt, the declines were several times larger: 9.8% in Austin, 7.4% in Dallas, 7% in Denver, 6.2% in Raleigh, and 6% in San Antonio. Those gaps reflect the difference between markets where price adjustments have done meaningful work and markets where they haven't.

The math is simple. More homes on the market puts downward pressure on prices, which translates into lower monthly costs for the buyer who finally decides to act. Without that supply response, the math doesn't change, and buyers stay on the sidelines waiting for rates to do the work that inventory should.

"A lack of supply and stretched consumer budgets are contributing to lower sales volumes," Divounguy said. "The lack of inventory has prevented a larger price correction and limited improvements in affordability. And ultimately, shoppers can't buy what isn't for sale."

What does this all mean?

The story data shows that prevailing sentiment — that new home buyers have disappeared — simply isn’t true. It's that the market still doesn't have enough homes to transact at normal volume. Nationally, listings that do sell are moving at about the same pace as they did before the pandemic, but overall sales, inventory and new listings remain well below 2018–2019 levels. In other words, demand is still there; the market just needs more homes in it.

That aligns with other expert opinions on how to fix housing affordability. The White House's 2026 Economic Report of the President, prepared by the Council of Economic Advisers and released April 13, dedicated an entire chapter to the homeownership crunch and identified supply expansion as a primary lever for restoring affordability. The National Association of Home Builders' chief economist Robert Dietz has argued that the solution is "the enactment of policies that will bend the construction cost curve and enable additional supply of attainable housing."

The inverse case shows up clearly in Zillow's own forecast of the hottest U.S. housing markets for 2026. The metros at the top of that list are, broadly, places where supply still hasn't rebuilt, which helps explain why competition remains intense and affordability gains remain limited. The lesson from both sets of Zillow data is the same: where supply returns, the market starts working again. 

Until more markets follow this blueprint, navigating local variances will remain a buyer's primary challenge. Features such as BuyAbility and Zillow's AI-powered search are designed for this specific landscape, where a shopper's purchasing power and search strategy are dictated by metro-level inventory dynamics rather than national headlines.

That said, the results of the April market report is encouraging news. The data shows the housing market's problems are solvable, and that supply, not just rates, is the lever that moves it. For buyers in metros that built, the spring of 2026 is the most workable market in years. For everyone else, the April data is a real-world demonstration of what their market could look like if more homes get built.