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Record Number of Homes Under Construction, the Alleged Shortage Will Vanish

Is there a housing shortage or a housing glut?
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Housing units under construction data from Census Department, chart by Mish

Housing units under construction data from Census Department, chart by Mish

1.7 Million Homes Under Construction

Several people commented today that the falloff in new home sales will exacerbate the housing shortage.

The above chart screams "really?"

There are 1.7 million homes under constriction. This is a series record. And those are real numbers, not annualized numbers. 

Homes under construction included homes "for sale" as well as homes already "sold". 

The people who bought those homes will vacate the premises where they currently live, so the pending new supply really is 1.7 million. 

New Homes for Sale by Stage of Construction

New Home Sales data from Census Department, chart by Mish

New Home Sales data from Census Department, chart by Mish

It's important not to confuse new homes for sale under construction with homes under construction. 

Supply of Homes Under Construction Seasonally Adjusted  

  • New Homes For Sales Under Construction: 306,000
  • Homes Under Construction: 1,680,000 

Homes already sold under construction = 1,680,000 - 306,000 = 1,374,000

This is a record supply. 

Meanwhile, existing homes sales are crashing. 

Existing Home Sales Last 25 Years

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Existing home sales courtesy of Trading Economics

Existing home sales courtesy of Trading Economics

On July 20, I noted Existing Home Sales Dive Another 5.4 Percent in June, Down Fifth Month

Key Points 

  • Total housing inventory registered at the end of June was 1,260,000 units, an increase of 9.6% from May and a 2.4% rise from the previous year (1.23 million).
  • Unsold inventory sits at a 3.0-month supply at the current sales pace, up from 2.6 months in May and 2.5 months in June 2021.
  • Individual investors or second-home buyers, who make up many cash sales, purchased 16% of homes in June, unchanged from May and a slight increase from 14% in June 2021.

Individual investors and second-home buyers have been buying like crazy. That will slow to a trickle if not reverse entirely as the wealth impact of a falling market and rising mortgage rates takes a toll. 

New Home Sales Crash 15 Percent From Original May Report, 8.1 Percent as Revised

For the latest on new home sales please see New Home Sales Crash 15 Percent From Original May Report, 8.1 Percent as Revised

So, is there a housing shortage or a housing glut? 

At best, it's neither. 

But the alleged shortage is nothing but a mirage of cheap money from the Fed coupled with free money stimulus and a fee good wealth effect also courtesy of the Fed.

At the top of every market it always seems like there is a shortage. That's what cheap money does.

This post originated at MishTalk.Com

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