Southern U.S. Faces Looming Housing Crisis: Experts Warn of Bubble Burst

Southern U.S. Faces Looming Housing Crisis: Experts Warn of Bubble Burst

ALQ Capital
4 min read

Southern U.S. Faces Looming Housing Crisis: Experts Warn of Bubble Burst

A significant increase in the supply of new homes in the Southern United States has prompted warnings from real estate experts about a potential housing bubble. The surge in construction was a response to heightened demand during the COVID-19 pandemic when many Americans moved south in search of more affordable housing. However, as the pandemic wanes, so does the demand for these new homes. On Monday, Nick Gerli, CEO of Reventure Consulting, warned on X (formerly Twitter) about the looming threat. "A massive housing bubble has developed, and is about to pop, in the South," Gerli stated, pointing out that the number of new homes for sale in the region has spiked to nearly 300,000, surpassing the previous peak in August 2006 before the last major crash.

Gerli emphasized that rampant speculation by home builders and investors over the past 3-4 years has led to prices far exceeding what locals can afford, creating a bubble that is slowly popping. He cautioned that a recession could expedite this process, potentially leading to a rapid burst of the bubble.

Key Takeaways

  • Overconstruction and Waning Demand: The Southern states have seen a dramatic increase in new home construction during the pandemic, driven by the influx of people seeking cheaper housing. Now, with the pandemic's impact diminishing, the demand has dropped, leaving a surplus of homes.
  • Potential Housing Bubble: The excess supply has led to fears of a housing bubble similar to the one before the 2008 financial crisis. Gerli warns that the bubble could burst, especially if a recession occurs.
  • Market Normalization: Some experts, like Danielle Hale, chief economist at, believe the market is normalizing rather than crashing. Prices in certain areas, like Austin, Texas, have already started to decrease, and the availability of homes has increased.
  • Regional Differences: The issue is more pronounced in the South. Other regions like the Northeast and Midwest are not experiencing the same levels of overvaluation and have lower speculative inventory activity.
  • Property Taxes and Insurance Costs: Rising property taxes and insurance premiums are putting additional financial pressure on homeowners, potentially forcing more homes onto the market.


The real estate market in the Southern United States is facing a complex situation. During the pandemic, low mortgage rates and the flexibility of remote work led to a housing boom in the South. Builders responded by significantly increasing the construction of new homes. However, this surge has now resulted in an oversupply, with nearly 300,000 homes currently for sale in states like Florida, Georgia, Tennessee, and Texas.

Gerli's warning highlights the risk of a housing bubble similar to the one that precipitated the 2008 financial crisis. The market dynamics are driven by speculation and rapid price increases, which have outpaced local affordability. If a recession hits, the bursting of this bubble could accelerate, leading to significant financial instability in the region.

Contrastingly, Danielle Hale offers a more tempered view, suggesting that what we're seeing is a market correction rather than a crash. In places like Austin, where home prices have decreased by 3% compared to the previous year, the market is adjusting to more sustainable levels. The South's relative affordability continues to attract new residents, which could help stabilize the market in the long run.

Property taxes and insurance premiums are additional factors exacerbating the situation. Increases in property taxes, in some cases as high as 650%, and rising insurance costs, particularly in states prone to natural disasters, are putting financial pressure on homeowners. These rising costs could force many to sell, further increasing the supply of homes on the market and driving prices down.

Another factor to consider is the increasing number of foreclosures. The COVID-19 pandemic led to government interventions that temporarily halted foreclosures, but as those measures are lifted, foreclosure rates are beginning to rise again. In areas like Texas, appraisers are reporting a significant increase in foreclosure activity, reminiscent of the pre-2008 period.

The banking sector also shows signs of strain. The Federal Deposit Insurance Corporation (FDIC) reported $517 billion in unrealized losses and identified 63 problem banks in the first quarter of the year, primarily due to rising interest rates affecting mortgage-backed securities. This situation is eerily similar to the conditions leading up to the 2008 financial crisis.

Moreover, new mortgage products, such as zero-down payment loans, are re-emerging. These products, which contributed to the last housing crisis, pose significant risks if home prices decline, leaving homeowners with negative equity and increasing the likelihood of defaults and foreclosures.

Did You Know?

  • The current spike in new home listings in the Southern U.S. has reached nearly 300,000, the highest level on record, even surpassing the previous peak before the 2008 housing crash.
  • Property taxes on single-family homes in the U.S. rose by 7% in 2023, amounting to a total of $363 billion, with some areas seeing increases as high as 650%.
  • Insurance premiums in hurricane-prone states like Florida and Louisiana have surged dramatically, doubling or even tripling in recent years, contributing to the financial strain on homeowners.
  • The median home price in the U.S. reached $434,000 during the pandemic, a significant increase that has started to decline in some areas as the market adjusts.
  • New mortgage products, such as zero-down payment loans, have re-emerged, reminiscent of the risky lending practices that fueled the 2008 financial crisis.

The potential for a housing bubble burst in the Southern U.S. is a critical issue that warrants close attention. While some experts foresee a market correction, others fear a more severe downturn. Homeowners and prospective buyers alike should stay informed and consider the various factors at play, from property taxes to insurance costs, as they navigate the evolving real estate landscape.

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