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Rising Inventory, Sticky Prices: What’s Really Going On in Overbuilt Markets?

Real estate investors across the country are watching inventory climb in key markets, yet prices aren’t falling. What gives?

Nationally, the total number of homes for sale jumped 14.3% YoY in April 2025, reaching the highest level in nearly five years. Historically, a surge in supply like this would trigger price cuts and signal a cooling market. But this time, prices have remained surprisingly flat. 

That disconnect is frustrating for investors expecting distressed opportunities, but it’s also revealing. It suggests that the dynamics driving price movement today are no longer governed purely by supply and demand; they’re being shaped by financing tools, seller psychology, and new fallback strategies that simply didn’t exist in the last real estate cycle.

Here’s what’s really happening and how smart investors can navigate it.

High Inventory, Flat Prices: The Numbers

Despite inventory levels surging across key investor states like Florida, Texas, and Georgia, home prices have barely budged, defying historical norms and signaling a structural shift in how today’s housing market absorbs excess supply.

In previous cycles, this type of oversupply would lead to aggressive price drops. But 2024–2025 looks different, and DSCR loans are a big reason why.

Expert Theory: DSCR Loans Are Holding Up Pricing

Before 2020, a flipper who couldn’t sell a property had few options. Maybe they’d plead for a local bank refi, if they were even “bankable.” More often, they’d drop the price until it moved, resetting the comp lower in the process.

Enter the DSCR (Debt Service Coverage Ratio) loan, a financing product that became mainstream post-2020. These loans are based on the property’s rental income, not the borrower’s income, and typically require only a 680+ credit score and a leased unit.

This gives flippers a fallback plan: instead of taking a loss, they refi into a DSCR loan and convert the home into a rental. The result? Fewer forced sales, fewer price drops, and no new low comps to drag values down.

Listings Are Being Pulled, Not Discounted

In today’s market, listings aren’t being discounted, they’re disappearing. For every two sales, one listing is withdrawn, as sellers increasingly opt out rather than negotiate. Without financial pressure from job relocations, foreclosures, or investor mandates, many owners are choosing to wait rather than lower their asking price.

This creates the illusion of plentiful supply while actual turnover remains sluggish. There is no economic event forcing them to move, so sellers simply sit tight.

The effect is most pronounced in investor-heavy markets where owners can easily convert listings to rentals and carry the cost with minimal leverage. Inventory grows, but price discovery stalls, distorting the true dynamics of supply and demand.

Builders Hold Pricing as Institutions Stay Selective

Despite a drop in single-family permits in Q1 2025, major builders continue to hold margins and resist discounting, thanks to strong balance sheets and cheap capital. Any real price movement is more likely to come from smaller, regional builders under financial strain. 

Meanwhile, institutional investors remain focused on stable, high-demand markets like Charlotte, Dallas, Orlando, Houston, and Kansas City, prioritizing newer homes over aging inventory that demands costly renovations.

What This Means for Investors

  • Prices may not fall significantly in high-inventory markets because flippers aren’t forced to sell.
  • DSCR loans are creating an artificial price floor by providing investors with an exit that doesn’t require discounting.
  • Institutional buyers are staying disciplined, avoiding older properties and oversaturated zones.
  • Retail investors have an opportunity to buy homes that no longer fit the institutional model, 1950s–1990s stock with value-add potential.

And perhaps most importantly: don’t mistake high inventory for a buyer’s market. But that opportunity may come if macro pressures (job losses, rate hikes, builder distress) create true forced sales.

Final Thought: Watch Behavior, Not Just Data

It’s easy to think price cuts follow supply gluts. But in 2025’s real estate market, behavioral economics matter more than ever. When sellers have alternatives, they don’t panic. When flippers can refi, they don’t slash prices. And when builders have balance sheet strength, they don’t cut margins.

For now, prices are sticky, not soft. But no cycle holds forever.

Stay liquid. Stay local. And keep watching for behavioral shifts, that’s where opportunity emerges first.

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