Rising inventory in some of the nation’s hottest markets signals trouble

Zoom towns are facing a potential bust, with experts saying their housing markets could be overvalued by as much as 40 percent.

Cities like Austin, Texas and Jacksonville, Florida, whose residential real estate markets saw price growth skyrocket in the past four years, could come crashing down, Reventure Consulting CEO Nick Gerli said in an interview on CNBC. 

“These pandemic boom towns, they just got way too expensive over the last two or three years,” he said. “They’re 20, 30, maybe even 40 percent overvalued in some cases.”

Gerli, whose Reventure is a real estate data firm, pointed to markets in Texas, Florida, Tennessee and Arizona where inventory is rising, a leading indicator for price drops. He also pointed to a crash in demand for Airbnbs, which spiked during the pandemic and led many investors to flood key zoom town markets, fueling price growth. 

“The Airbnb crash is certainly something that’s playing into the rising inventory we’re seeing in Texas and Florida,” he said. 

In the case of Austin, Gerli has been predicting the market’s housing bubble will burst for years, saying in 2022 that he expected prices to drop as much as 40 percent by 2025. 

“Austin is a market that is legitimately crashing,” he said in the interview. 

While prices are up year-over-year in Texas’ capital, they have come down to $585,000 from their 2022 high of $667,000, Redfin shows.