Homebuilders were one of the big surprise winners in the US economy last year as record-low inventory of existing houses for sale and gently rising prices allowed companies such as KB Home and Lennar Corp. to ramp up construction and maintain high profit margins. Both have said they expect more of the same in 2024 — they may be in for another surprise.

There’s growing evidence that we’re about to see the most significant increase in resale housing inventory since the financial crisis of 2008, making the prospect for price gains this year tenuous. The question for homebuilders is whether a sharp rise in the number of existing homes for sale does the damage that was expected from sharply higher mortgage rates, hurting profitability, and necessitating a strategic pivot. Any pullback has longer-term implications for a market where new construction is seen as an important antidote to a lack of affordability.

The backdrop for the housing market since the financial crisis has been one of ever-dwindling levels of resale inventory, which declined just about every year following a peak in July 2007.