Congress recently passed the bipartisan 21st Century ROAD to Housing Act, a significant effort to address the nation's housing shortage. Although the bill remains stalled at the White House as of this writing over unrelated legislation, it has renewed attention on a question that has defined the housing market for years: Why don't we have enough supply of homes?

At the end of May, the National Association of REALTORS® reported the standing inventory of resale homes in the United States at 1.55 million units. While that represents the highest level in 10 months, it stands a mere 9,000 above the same point last year. For context, pre-pandemic inventory generally ranged between 1.9 and 2 million homes available for purchase and peaked at just over 4 million during the housing crisis in 2007.

Real estate sources routinely estimate that our country, based on population trends, is short between 3 and 4 million housing units, explaining why both chambers of Congress set aside their entrenched ideological differences to act. The bill is worthy of support, though some elements are more show than substance. It is also unlikely to expand supply enough in the near term to offset the dominant affordability factors of higher prices and mortgage rates.

I often spotlight the disconnect between national and local housing markets and today offers another telling example. While supply is essentially flat year-over-year nationally, with gains in many markets, the Gulf Coast presents a very different story. New listings began to decline in the middle of 2025 and have continued to fall since. The result: available inventory year-over-year has plummeted 21% in Sarasota and 22% in Naples, with the decline more pronounced among single-family homes than condominiums.

Within that lower count, meaningful distinctions emerge by price range. In the moderate category, where supply is most constrained, months of inventory, which represents available homes divided by average monthly sales over the trailing three months, sits under five months in Sarasota County, providing sellers with considerable leverage. Much higher on the spectrum, between $5 million and $10 million, the figure jumps to 17 months. Above $10 million, Sarasota is oversupplied at 35 months. In essence, if no additional homes entered this ultra-luxury segment, clearing the existing inventory would take roughly three years.

Another way to view it is that homes above $10 million, at present, have less than a 3% chance of selling each month unless they hold a unique, competitive advantage. There, the power shifts decisively to the buyer's side of the table. As the numbers demonstrate, a market does not have one supply but several.

The data points to an overarching theme. The number of available homes continues to fall, yet a true shortage exists only in the moderate price category. So why aren't more owners choosing to sell when changes in life that drive real estate decisions haven't changed? Much has been written over the past three years about the diminished pool of buyers, including affordability and household formation. Do those forces explain the decline in sellers?

For some time, the most common explanation has centered on the lock-in effect, noting that owners holding low-rate mortgages are unwilling to absorb the substantial financial penalty of replacing them at today's far higher rates over a new 15- or 30-year term. With approximately 40% of owners holding no mortgage and another approximately 30% with a mortgage rate below 5%, the majority are incentivized to be sidelined.

A second explanation lies in the potential capital gains liability at the time of sale, following years of noticeable appreciation. The $250,000 exclusion for single filers and $500,000 for joint filers has not been adjusted since 1997, despite a more than doubling in both consumer prices and median home values. This is an area where indexing would prove both logical and impactful. One pending measure, the bipartisan More Homes on the Market Act (H.R. 1340), would raise the exclusion to $500,000 for individuals and $1 million for joint filers and index it going forward.

A third factor is longevity. As people live longer, the desire to age in place has grown, reducing the number of baby boomers electing to sell. For those with sizable equity, the stepped-up basis at death creates a die-in-place incentive, allowing wealth to pass to family members insulated from federal tax. And for some in this group, selling and downsizing would trigger not only a capital gains occurrence but also a property tax reassessment on the replacement home with the potential for alarming increases. Rising insurance costs compound the calculus, as some owners are reluctant to give up an existing policy they may find hard to replace.

Negotiating leverage remains the zero-sum dimension of this business: buyers seek more inventory at lower prices, while sellers crave the scarcity that drives further appreciation. At present, that leverage is not held market-wide by either side but split across segments at the same moment. One thing is certain: we are witnessing a reset in the number of owners willing to enter the market, and no one is quite sure what will change the course.