by Calculated Risk on 9/27/2022 03:54:00 PM
Tuesday, September 27, 2022
New Home Sales Increased in August; Completed Inventory Increased
Today, in the Calculated Risk Real Estate Newsletter: New Home Sales Increased in August; Completed Inventory Increased
Brief excerpt:
The next graph shows the months of supply by stage of construction. “Months of supply” is inventory at each stage, divided by the sales rate.You can subscribe at https://calculatedrisk.substack.com/.
There are 0.86 months of completed supply (red line). This is about 60% of the normal level.
The inventory of new homes under construction is at 5.36 months (blue line). This elevated level of homes under construction is due to supply chain constraints.
And a record 106 thousand homes have not been started - about 1.86 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.
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First, as I discussed yesterday, 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.