A Huge Wave of Housing Supply Will Soon Hit the Market

February 25, 2022

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2:30 pm

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18 comments

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Economics

New homes for sale data from St. Louis Fed, chart by Mish

New Residential Sales

The New Home Sales report for January shows sales of new single‐family houses in January 2022 were at a seasonally adjusted annual rate of 801,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development.

This is 4.5 percent below the revised December rate of 839,000 and is 19.3 percent below the January 2021 estimate of 993,000.

Those are seasonally-adjusted annualized numbers. Actual sales were a mere 64,000 as shows in the following chart.

New Home Sales Seasonally Adjusted and Unadjusted

*New homes sales data from St. Louis Fed, chart by Mish*

Builders sold 64,000 homes in January, but the more relevant number is 258,000 homes “for sale”. Those are homes started but not sold.

There is another 39,000 homes that are finished and for sale.

Housing Starts, Permits, Completions

Housing starts data from St. Louis Fed, chart by Mish

Housing starts are another way of looking at things. The numbers are seasonally-adjusted and annualized, but building has been at an above trend pace since January 2021.

Supply

The long-term chart of new homes for sale (lead chart) without the seasonal adjustments better shows the coming supply.

And that supply is coming with the stock market falling, and geopolitical tensions rising, and mortgage rates the highest in a couple of years.

This could put a damper on prices, cooling off overheated housing and rental markets.

This post originated on MishTalk.Com.

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18 Comments

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oee

2 years ago

The Trump tax cuts promised a wave of private investment. Where is it? Where are the chip plants? Why shortages of goods ? Inquiring minds want to know? I can tell you they were not used for new investments. They were used to…purchase shares of stock.

Johnson1

2 years ago

That is good there are more homes coming on the market. I know several people who keep getting outbid and are very frustrated in finding a home.

I have never see inventory this tight before and this many people looking for a home and cannot find one.

Casual_Observer2020

2 years ago

Reply to Johnson1

Investors are outbidding people who actually want to live in the house. Most people who don’t own a house should just wait for the next crash.

Captain Ahab

2 years ago

My experience with developers, house builders, real estate agents, and appraisers is they generally have a very poor understanding of the economic fundamentals driving their market(s). They live in a past-predicts-the-future mentality, with insufficient resources set aside to keep going when the past does not predict the future.

Casual_Observer2020

2 years ago

Where is all this housing supply ? If Chinese and Russian money stops coming into the United States, housing across the country is toast.

Billy

2 years ago

In 2007-2008 there were a lot of developers who built out 4-8 model homes per track and kept building right along. They did great because investors would buy them up. Sometimes they would be building 30 homes at a time. In Southern California it was common to have 40+ large tracks going at the same time. Most of those developers claimed bankruptcy. The ones left are still here today. A few more guys popped up but they all learned a lesson. They now build 3-4 model homes and have options for each style of home drawn out. Not built out. Once they get a down payment, they put you in line to have your house built. This reduces and helps control the inventory.

In my opinion, the only bubble we are in is caused from the fact that investing in real estate and stocks are the only way you can get a real positive return. Fed interest rates under 3% helps grow the economy. We will be there for the next 10+ years.

Captain Ahab

2 years ago

Reply to Billy

IN 2007-8 I flew into Las Vegas a few times, (not to gamble, but to give lectures). I was stunned by the terrain seen from the air, mile after mile of a weird pattern, suburban streets under sand. No houses, just the imprint of streets. Lots and lots of streets. Up to that point in time, Las Vegas had a zero-beta with respect to employment correlation with the USA, and other cities in the USA. Boom or recession, Las Vegas kept growing–until then

Billy

2 years ago

Reply to Captain Ahab

That reminds me of a place called California city.

Search: California City: A utopian dream turned ghost town

It will bring up an article about this place and I’m certain it’ll look just like what you saw.

A funny thing that I thought of one day was that I wondered if U2’s song Where the Streets Have No Name was named after it.

Many of there songs were named after places around there like Red Hill Mining Town and even Joshua Tree. U2 said that song was about a person’s religion and income were evident by the street on which they lived. I’m guessing drugs made them forget. With lyrics like: I wanna feel sunlight on my face I see the dust-cloud Disappear without a trace. We’re beaten and blown by the wind Trampled in dust I’ll show you a place High on a desert plain, yeah Where the streets have no name.

BTW they still haven’t developed California City. It’s still a ghost town.

honestcreditguy

2 years ago

Reply to Billy

or is it Ludlow, Randsburg, Daggett

interesting obeservation….

JimK

2 years ago

Reply to Billy

Most of the streets in the high desert around Palmdale/Lancaster are just numbered or letters. East-west streets are Avenue A, Avenue B, … North-south streets numbered, like 170th St West, 110 St East… And yes there are lots of Joshua trees out there. That album is one of U2’s best.

StukiMoi

2 years ago

Reply to Billy

“Fed interest rates under 3% helps grow the economy.”

Printing dead guys’ faces on paper pieces always “grows” what they gullibly believe to be “the economy” in the minds of the illiterate.

As if facilitating, and bailing out, capital destroying malinvestment ever “grew” anything useful. But hey, it’s America in the DumbAge. Elementary logic and algebra is just too darned hard. And stuff.

Rbm

2 years ago

Built in a period of high cost and rising interest rates. Humm

Guess in theory higher interest rates should lower the cost a home because more of the purchasers income goes to the bank.

Who knows.

KidHorn

2 years ago

Seems housing has a lot of headwinds. Not a good time to buy right now.

MPO45

2 years ago

Lots of people I know are now adopting remote work lifestyles and they are becoming digital nomads. I will be joining them soon as I will likely go 100% remote in a few months. As such, my spouse (100% remote now) and I are planning on living in different states, primarily those that have zero state income tax, over the next few years. We are mapping out rentals in Washington, Nevada, New Hampshire (Fall colors), Texas, Tennessee, and Wyoming (summer).

Our plan is to live there for a few months or longer if we like it and work remote. Our existing home will become a rental and we will become renters so I like this build to rent model.

This is the new trend, to think of housing as in the past is a mistake imho. The world changes but some people’s mentality doesnt (you know who you are).

oh and after the US, it will be international remote.

PreCambrian

2 years ago

Reply to MPO45

You had better check to see what it takes to establish residency in the state for income tax purposes. Many times if you are less than a six month resident then you might have to file as a non-resident. Just check.

az_dirt

2 years ago

Here’s a better visualization of “build to rent”

link to calculatedriskblog.com

RonJ

2 years ago

Reply to az_dirt

The best visualization is Klaus Schwab: you will own nothing and be happy.

az_dirt

2 years ago

Some of those are “build to rent”

link to azbigmedia.com

A Huge Wave of Housing Supply Will Soon Hit the Market

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