by Calculated Risk on 10/26/2022 10:52:00 AM
Today, in the Calculated Risk Real Estate Newsletter: New Home Sales Decreased in September; Completed Inventory Increased
The inventory of new homes under construction is at 6.0 months (blue line). This elevated level of homes under construction is due to supply chain constraints.
And a record 105 thousand homes have not been started – about 2.1 months of supply (grey line) – about double the normal level. Homebuilders are probably waiting to start some homes until they have a firmer grasp on prices and demand.
First, as I discussed last month, the Census Bureau overestimates sales, and underestimates inventory when cancellation rates are rising, see: New Home Sales and Cancellations: Net vs Gross Sales. So, take the headline sales number with a large grain of salt – the actual negative impact on the homebuilders is greater than the headline number suggests!
There are a large number of homes under construction, and this suggests we will see a sharp increase in completed inventory over the next several months – and that will put pressure on new home prices.
You can subscribe at https://calculatedrisk.substack.com/.