The Census Department supply of homes numbers are bogus. Let’s discuss better numbers and implications.
The Census Department says there are 500,000 homes for sale. Of them, 102,000 are not started vacant plots. 119,00 homes are finished.
New Homes for Sale by Stage of Construction
Stage of Construction Details
- Not Started: 102,000
- Finished: 119,000
- Under Construction: 279,000
- Started or Completed: 398,000
- Total: 500,000
New Homes for Sale Supply in Months
Supply in Months Detail
- Alleged Supply: 8.9 Months
- Under Construction or Finished: 7.1 Months
- Finished: 2.1 Months
The Census Department would calculate 8.9 percent no matter if none were started or all were finished.
This post is not about supply calculations but rather about homebuilder speculation.
New Homes for Sale as Percent of New Home Sales
New Homes for Sale as Percent of New Home Sales Details
- Completed: 18 percent
- Under Construction or Completed: 59 percent
The 59 percent under construction or construction or completed percentage is very elevated compared to 2013-2020 and 2001-2006 pre-Great Recession.
Stage of Construction Highlights
Homebuilder Speculation
- 398,000 started or completed is the most since 405,000 in March of 2008
- 102,000 vacant lots for sale is the most in history
- 119,000 completed homes for sale is the most since 126,000 in July of 2009.
Homebuilders will be under increasing pressure to unload the started and completed homes at falling prices if recession hits.
The economy was slowing anyway and Trump’s tariffs will bite.
Homebuilder Pressures
Homebuilders have cost pressures on steel and lumber due to tariffs. The have labor supply issues with deportations.
A slowing economy and need to get rid of started and finished homes will overrule. Margins will drop.
Related Posts
March 20, 2025: Existing-Home Sales Rebound 4.2 Percent from -4.7 Percent in February
Meandering weakness continues. Sales have gone nowhere for two years.
February 19, 2025: Housing Starts Drop 9.8 Percent, Unable to Retain Any Traction
Housing starts have mostly been rangebound since late 2022 as high prices and high mortgage rates dampen demand.
March 17, 2025: The Wells Fargo Housing Market Index Declines Again in March, Dismal Traffic
Homebuilder confidence is lowest level in seven months.
March 25, 2025: New Home Sales Rebound Slightly in February, Remain Rangebound
After a steep plunge in January, new home sales rebound 2.1 percent.
March 10, 2025: Trump and Secretary of Treasury Bessent Discuss the “Detox Recession”
Don’t worry, it’s just a little more pain and inflation disturbance before tariff greatness begins.
March 4, 2025: A Global Trade War Has Started – Global Recession Will Follow
The most significant global trade war since Smoot-Hawley and the Great Depression is underway
Assets return to the mean or the historic trend line. For housing, I believe home prices appreciate 4% annually according to Professor Robert Shiller.
Go back 10 years and examine a home price or market value and apply a 4% annual increase to this in order to estimate its current market value.
For the S&P 500 its compound annual growth rate is around 10% for the last 100 years.
What is promising is at least the S&P 500’s P/E ratio has reversed itself and is on a downward path.
Remember what wall street and economists told us before the last financial crisis? Housing prices ALWAYS go up.
The Housing industry must be in more turmoil than I thought. I didn’t see this coming for a few more months anyway, as the Spring Season can yield great results. Not this season by the looks of it.
I recently saw a headline (didn’t read entirely) on CRE Issues abound, so it does make sense. With more layoffs and firings in both the Private and Government Levels. Look for this to only worsen, until we get much closer to the Mid-Terms, and we will see a spike I am assuming, but with price drops everywhere, and losses as well. Adding to the pain on that end of things, this could exacerbate a “Free Fall” but we shall see…
Mish, Thanks for collecting and sharing the real time news and economic data and thoughtful and sage commentary. This is a favorite economic/political blog and attracts the attention of a politically diverse group. Nice to keep a pulse on the right and left of center feedback comments. And as Irving Fisher would say .. “Stock prices have reached what looks like a permanently high plateau”.
Lots of new single-family home construction going up here in Central Florida. Massive developments with 1K+ homes along the turnpike and I-75 all the way up to Ocala. Many of the major builders are offering incentives to move the unsold inventory. 6%+ mortgage rate is not helping prospective buyers.
What Mish doesn’t show is *where* all the new homes are being built. It’s all in the South and West regions of the country. Almost nothing in the NE or Central regions.
That’s going to skew things if you try and interpret anything from the new home completion data (ie if you think it’s trouble, it means trouble for the south and west regions while north and central might be fine).
Texas has huge problems with influx of people moving here. I get weekly bond notices from Fidelity for various school districts, utility districts, city, county, and infrastructure bonds.
I’ve been loading up on them since many pay tax equivalent yield of 6 or 7 percent. No way these guys go bankrupt with so many people moving in.
I worry about our water supplies far more than I worry about our housing supply here in texas.
Wait, just above didn’t you post about mass layoffs causing home prices to crater?
If that happens, then those bonds are going to crater because there will be no tax revenue on empty homes.
It’s rare for munis to default but it does happen, you just have to know which ones to avoid. Come on Tim, how the heck do you manage your money? There is ALWAYS a way to make money, even in a depression.
https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/fixed-income/moodys-investors-service-data-report-us-municipal-bond.pdf
I’m not much of a short seller or for that matter a day trader.
When things turn south in the market I tend to just get into treasuries and federal savings bonds even if they pay next to nothing.
I expect to see a drop in 2026 but a slow burn may happen in 2025 unless Trump screws up the economy bigly. My theory is based on the following:
Q1 2007: $257,400 (peak)
Q1 2009: $208,400 (bottom)
19% drop
Q4 2022: $442,600 (peak)
Q4 2024: $419,200 (last data)
5.3% drop
It took 2 years for the financial fraud in 2007 to bottom out in 2009. We’re past two years already with only a 5.3% drop. If we had a sudden 15% drop this year that would likely crash the banking system and the Fed won’t let that happen so it’ll be more “extend and pretend” and slow cook this turkey thru 2026.
I predict housing bottom in Q3/Q4 of 2026 with median price of house hovering around $380,000. If you’re in the market for a house (I am), I will likely buy in 2026 and if you still can’t afford it then, you’re gonna be a renter for life.
All bets are off though if trump induces a great depression.
Source: https://fred.stlouisfed.org/series/MSPUS
Agree, Biden’s deep sinkholes are good for u. If there is a systemic change in the housing market the RE downdraft will be deeper and longer.
MPO: two years ago u wanted to buy at peak. That’s when I started my comment on Mish.
I am an investor, I buy when it makes investing sense Michael but yeah, I’ve been waiting for years for this market to make sense.
You should probably be able to buy in Austin soon (this year). That market is down WAY more than 5.3% from the peak.
Not sure we are going to bottom out anywhere near 19% like in 07 to 09. It’s a different kind of run up. It’s not full of liar loans and people buying 2nd and 3rd homes as speculation like then. This time it’s just loads of free money helicopter dropped into the system by the Covid response. It’s going to take a decade to smooth that out so I’d be surprised if 2026 is the bottom.
What will kill this market is the same thing that always kills the market, over leveraged people that can’t make mortgage payments. If trump sticks to his tariffs it will lead to massive layoffs and that will mean people can’t make mortgage payments then defaults.
We are at a point in time when the “consumer” is fully loaded with credit card debt, auto loan debt, mortgage debt and now “buy now, cry later” loan debt.
bookmark this and check back in with me in Q3 2026.
It’s going to be interesting to see what happens.
On one end is a declining working population (as you have noted many times) and on the other is a possibility of the economy going into the tank and layoffs. To me it’s likely that those laid off will be the older more expensive workers (early retirement) and that it may not cause as much detrimental effects as would happen with an increasing working population.
Agreed, but the loss of a talent pool, could be the barrier for many companies. Everybody knows things not written down, just done that way, never use that when doing this, sort of scenarios. They can be big in tech for sure, and today tech, is involved in nearly everything. It will work out as always in the end, but it’s the drag or slowdown before getting there that can do the most harm. Crashed momentum is a game changer for many industries…
Well put, and I keep seeing it easier and easier to get your hands on money. Of course at ridiculous interest rates, and most just get swallowed up by it all eventually. Playing catch-up only works, when you can actually catch up. These days it seems like keeping afloat is a choir all by itself…
We’d be down at least 10% by now if POS Biden hadn’t A. goosed absolutely everything with stimulus “programs” that went years past the plandemic era (including unfair taxpayer-funded student loan forgiveness and the democrats insistence on making mortgage/rent payments optional). B. Biden Bailing out the banks using taxpayer money by making mortgage payments on behalf of the deadbeats. That’s why home prices keep defying gravity and inventory refuses to show up.
For every 1% increase in the 30 yr mortgage rate, there should be a 10% drop in home price based on mortgage affordability standards.
Estimate at peak price, the 30 yr mortgage rate was around 4%, so a rate of 7% now means prices should be 30% below peak price.
Account for household income increasing about 20% from peak price to present day, so the market price for real estate should be 24% below peak price.
0.8 x 30% = 24%
I saw you estimated about a 14% drop by 2026 from peak price.
Started and completed (aqua): 398K. Completed for sale only :119K (green). Home
builders either speculate like the car dealers in 2020, or limit supply bc demand is low. There are more completed 398K than under construction (light brown): 279K Under construction is down from 317K to 279K. The whole industry (blue): 500K is an expensive cost center doing nothing all day. There is a systemic change in the housing market. Lower mortgage rates wouldn’t help.
Many of the people who bought new construction homes the last few years got below market interest rates – with the cost of that subsidy built into their purchase price. If rates fall enough to warrant refinancing (a big if) they could have trouble if their home value is dragged down by current new construction and they hadn’t put a lot down at the time of their purchase. They’d do well to avoid vehicle debt and to have a cash cushion – as would anyone.
“Why are my consumable prices going up but my home value crashing?”
-economic illiterates everywhere
The cost of RE insurance, mortgage, RE taxes, maintenance, legal, fines…especially in Fl, TX, the midwest and CA are too high. Consumers spend more their houses than ever before.
The Quantum Apocalypse Is Coming. Be Very Afraid
What happens when quantum computers can finally crack encryption and break into the world’s best-kept secrets? It’s called Q-Day—the worst holiday maybe ever. https://www.wired.com/story/q-day-apocalypse-quantum-computers-encryption/
Bitcoin goes to zero