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

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

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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

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

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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Mike Shedlock

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51 Comments
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Oldest Most Voted
CoxSwane
CoxSwane
4 years ago
Hoisington’s latest missive. Always a good read…
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RonJ
RonJ
4 years ago
“This is a series record.”
Another one. How many post government lockdown records does that make now?
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KidHorn
KidHorn
4 years ago
Housing has a lot of head winds. People are or will soon be retiring in mass. Interest rates are going up and I’m not sure the FED will ever drop rates back towards 0. A lot more are working from home, so they no longer have to live near where they work. Obviously they have to live somewhere, but places where few could live in the past can now potentially have more people living there. I get multiple job opening emails every week. Almost all are for remote work.
A lot of people who bought 2nd homes, planning to rent them out when not in use, will find it’s frequently not worth the trouble. Maintaining a home is expensive and troublesome. And as the economy slows, there will be lower demand for short term vacation rentals. And if home prices are dropping, many will elect to sell now before prices drop even more.
We have a lot of undocumented immigrants, but it’s going to be years before they can buy a house. For the next several years they’ll huddle together in slums. Maybe there will be a housing shortage in slums, but I can’t see many in slums moving up to better homes. if they could, they would have already moved. They’ll just be more cramped.
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Jojo
Jojo
4 years ago
International entities and investors should not be allowed to buy residential real estate! Large Chinese buying over the past couple of decades has been a significant contributory factor to the huge increases in home values here in the SF Bay area.
———-
Chinese Investors Shouldn’t Be Allowed to Buy US Properties: DeSantis
July 24, 2022
Florida Gov. Ron DeSantis warned about China’s malign influence in the Sunshine State after reports showed that Chinese investors have spent billions of dollars buying U.S. farmland and other real estate.
Calling China the United States’s “No. 1 adversary,” DeSantis told Fox News on July 23 that companies linked to the Chinese Communist Party (CCP) shouldn’t be allowed to buy U.S. properties.
“I don’t think they should be able to do it. I think the problem is these companies have ties to the CCP, and it’s not always apparent on the face of whatever a company is doing—but I think it’s a huge problem,” he said.
Foreign buyers from China spent $6.1 billion, more than from any other foreign country, on U.S. homes from April 2021 to March, according to a recent report from the National Association of Realtors (pdf).
Chinese buyers spent an average of more than $1 million per transaction—the highest average among foreign purchases—and up from the $710,400 average from the year before. California was the top destination for their purchases with 31 percent, followed by New York (10 percent), Indiana (7 percent), Florida (7 percent), Oklahoma (5 percent), and Missouri (5 percent).
The report also pointed out that 58 percent of Chinese buyers made all-cash purchases, the third highest behind Canadians (69 percent) and Colombians (65 percent).
….
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KidHorn
KidHorn
4 years ago
Reply to  Jojo
Wise words from our next president.
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Casual_Observer2020
Casual_Observer2020
4 years ago
Up next: layoffs of remote employees. Because they didn’t really want to work anyway.
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Six000mileyear
Six000mileyear
4 years ago
A housing crash can’t come fast enough. The missus is caught up in the home ownership dream, but doesn’t realize what a nightmare it can be when purchased at the top. Now that prices are being slashed and a recession has not yet been declared, there are more price slashes coming.
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dtj
dtj
4 years ago
There’s a housing shortage in New England. They don’t build a ton of new homes here like in other parts of the country. It’s more common to refurbish an older house in an area that’s undergoing gentrification.
Both rents and housing prices have gotten downright ridiculous here considering most of New England (apart from Boston) is economically depressed.
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Esclaro
Esclaro
4 years ago
Reply to  dtj
Go to Downeast Maine and rural Vermont. Plenty of cheap houses.
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worleyeoe
worleyeoe
4 years ago
There’s not a housing shortage. Excluding investor purchased homes, most everyone else falls into an affordability crisis, especially those who’ve never owned a home. Tons of houses were never put on the market, because those smart persons knew they couldn’t afford to move up. Now that we’re at the top, additional inventory is being listed by wealthy individuals who purchased a 2nd or even 3rd home.
What is needed is a 30% decline in home values with a Fed that is Congressionally barred from purchasing anything other than 2-3 year treasury notes or bills. America will never run a revenue surplus again, so the Fed should not be allowed to purchase any treasuries with a greater than 3-year maturity to finance government debt. Get the fed out of the business of longer dated yield curve manipulation, so the housing market is completely subject to investor supply & demand.
Like Mish says and we all know, this entire mess is due to the governments profuse spending, profuse Fed QE and profuse rent & mortgage relief, all of which are going to happen again and again unless we wake up and hold the politicians accountable. Yet again, all that has happened is the Fed / Congress is kicking the can down the road. Well, the can just got a lot bigger and harder to kick next time.
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worleyeoe
worleyeoe
4 years ago
Reply to  worleyeoe
And just wait until late this year when the housing market continues to decline steadily while rent prices continue to go sky high. Letting 175-200K undocumented aliens into the country each month is helping to create a massively entrenched rent spiral. In addition, it’s going to keep food prices high, possibly even play a part in wider food shortages next summer, etc. Almost overnight, Biden is going to add 3-4M new mouths to feed and shelter in his first two years in office. Then, this grows to 7-8M by the time his only term ends. SCOTUS has already given Biden the green light to end the Remain in Mexico policy which is the final brick before the dam collapses. And then if we do find ourselves in that protracted downturn like Mish is talking about, working age, undocumented males are going to find it hard to find work turning to who knows what to get by. It’s a comedy that people aren’t talking about “at least the possibility of all this happening” if this looming recession actually arrives despite Biden’s best attempts to redefine the notion of what a recession really means. Well, we might need to add a social unrest factor to the definition of future recessions.
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effendi
effendi
4 years ago
Reply to  worleyeoe
The only solution to the high numbers crossing the border is for red states and counties to make it hard for illegals to stay in red areas. Then give even more incentives for them to go to places like NY and DC to swamp them even worse than is now happening. A million of them moving to DC will have every nice street where politicians and lobbyists live turn into tent cities with poop piles behind every tree. Watch how fast the border wall would go up then with bipartisan support.
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KidHorn
KidHorn
4 years ago
Reply to  effendi
We need to setup shelters in their neighborhoods. Just being in the same city won’t bother them. Every city has always had slums separated from the nice places.
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Casual_Observer2020
Casual_Observer2020
4 years ago
Reply to  worleyeoe
Who exactly do you think they are protecting? It is the investor and owner class. As we hurtle towards 25% of the federal budget going to interest payments, there will be a reckoning of historic proportions.
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RonJ
RonJ
4 years ago
Reply to  worleyeoe
“Get the fed out of the business of longer dated yield curve
manipulation, so the housing market is completely subject to investor
supply & demand.”
As MISH also says, a crisis is designed to grab more power. Tedros overruled the committee, to declare Monkeypox a health emergency.
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Pontius
Pontius
4 years ago

What housing is being built? Homes for upper middle class, McMansions, coastal second homes – not affordable housing for working middle class. No one is building SFH they can afford. America fast becoming renter nation – choice of multi-family and small SFR owned by Black Rock. George Bailey spinning in his grave.

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JackWebb
JackWebb
4 years ago
Reply to  Pontius
You don’t know that, but why limit yourself? LOL
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Pontius
Pontius
4 years ago
Reply to  JackWebb
The median new house price in April soared 19.6% from a year ago to a record $450,600. The average house price surged at a much faster 31.2% to $570,300, which suggested stronger price gains on lower-end homes.
Reuters lol
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Pontius
Pontius
4 years ago
Reply to  Pontius
Good to see Cell Block A getting some limited access to the internet. Better than cigs.
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Felix_Mish
Felix_Mish
4 years ago
Reply to  Pontius
“stronger price gains on lower-end homes” would push the median up more than the average, wouldn’t it?
When the average moves up-away from the median, it’s because the high end has gotten higher – way higher. Add a Bill Gates to a room of average guys and the median doesn’t change, but the average skyrockets.
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Jack
Jack
4 years ago
Reply to  Pontius
Pontiac: Your data would mean higher price gain on the top end, not the bottom end.
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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  Pontius
So I guess the median worker is now making $180,000 a year?
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TexasTim65
TexasTim65
4 years ago
Reply to  Pontius
I’m sure builders would be happy to build some smaller cheaper homes but the problem is that it’s almost impossible.
1) In many areas, builders build entire communities (whether gated or not) not 1 home at a time. Most communities now have an HOA and people in those communities don’t want smaller cheaper homes because it drags down the value of the community (ie their house) so there is often a minimum size they have to build to.
2) With the costs of materials (including land) skyrocketing, the minimum build cost even for a 1500 st ft 3 bedroom place is going to be very expensive (ie not a starter home).
3) Building standards themselves have risen dramatically. In Florida you can’t build those homes of the 50s and 60’s that were made of wood and had no hurricane protection on the windows (shutters or storm windows). In addition the electric, plumbing code standards are much stricter now than back then. So are roofing and insulation standards etc. All of that contributes to more expensive homes.
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Jojo
Jojo
4 years ago
Reply to  TexasTim65
And don’t forget developer fees. They can add 5-20% to the build cost in CA, depending on location.
Here’s something I found for SF:
And a hit list for anyone interested:
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Captain Ahab
Captain Ahab
4 years ago
Reply to  Pontius
The immediate effect of the Fed forcing real interest rates negative is a MASSIVE WEALTH TRANSFER from the ‘working middle class.’ The long term effect is the destruction of pensions and retirement accounts.
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Zardoz
Zardoz
4 years ago
Reply to  Captain Ahab
The rich will get richer, same as it ever was.
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RonJ
RonJ
4 years ago
Reply to  Zardoz
All while giving lip service to equality and equity.
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KidHorn
KidHorn
4 years ago
Reply to  Pontius
Where I live it’s townhouses and condos which range in price from $500k-$1m. Builders get the most bang for the acre building them. They’re supposed to build a new elementary school near me. So the kids have a school to go to. Problem is it’s currently a school bus depot and there’s nowhere to move it. Didn’t think everything through.
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MPO45
MPO45
4 years ago
It’s a complicated issue. Contrary to the narrative by a few commentators here about “people fleeing cities,” the evidence and data suggests otherwise. If the trend of moving away from rural areas to cities and city suburbs continues then there will be a shortage in cities and a surplus in rural areas. This isn’t unique to the US, it has been happening the world over for some time now.
What happens when cheap fuel isn’t available for those gas guzzling F150 trucks in rural america? Is it feasible to live in a rural area with a prius? People own those big trucks to fill up with goods and services from the cities but that may not be financially feasible anymore.
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MPO45
MPO45
4 years ago
Reply to  MPO45
Forgot to mention that as a hedge for either a surplus or a shortage, I bought slightly out of money puts on DHI as far out as I could go, Jan 2024. If housing tanks, i’ll make money. If housing stay flat, my rental properties continue to make money. If housing goes up, my houses will be worth more and I’ll make more money. I try to make it win-win-win whenever I can.
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JackWebb
JackWebb
4 years ago
Reply to  MPO45
You clearly don’t live in a rural area.
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MPO45
MPO45
4 years ago
Reply to  JackWebb
Grew up in one and never intend on going back.
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JackWebb
JackWebb
4 years ago
Reply to  MPO45
I live in a rural area, and drive less than I did when I lived in the big city.
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MPO45
MPO45
4 years ago
Reply to  JackWebb
I live in the city and don’t have a car here. Saving on gas, insurance, parking, tolls, maintenance, taxes, etc. Very liberating. When I do need to go somewhere I can rent a car, uber, taxi, train or even bus. I walk most places I need to go and that’s much healthier on me and the environment.
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Zardoz
Zardoz
4 years ago
Reply to  MPO45

I’ve studied this, and have determined it’s feasible. You just can’t be driving 1000 miles a month. One trip to town per week and you only have to fill the tank once a month, if that.

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TexasTim65
TexasTim65
4 years ago
Reply to  Zardoz
This can only happen if you work from home (either your a farmer or you have a remote work job). Otherwise you have to daily commute to town for your job even if it’s just a 10 mile rural commute to a small town. Also assumes you OK busing your kids to school.
My parents live 10 miles outside a small city. They make 2 trips a week but they can only do that because they are retired and don’t need to drive daily.
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Siliconguy
Siliconguy
4 years ago
Reply to  MPO45
“Is it feasible to live in a rural area with a prius?”
With a hybrid certainly. Most trips to town do not involve heavy hauling. Trips out and about in the fields often do, and there the hybrid car is useless, but a hybrid pickup would not be. You are not driving down the field at 60 mph, or even 60 kph.
Also of note, a lot of field running about is now done with an ATV. No license or insurance cost, small engine so fuel efficient, and just as fast when off road.
An EV is a problem, mostly due to the inability to refuel it in the field.
Even then, a run to town for parts should be doable in an EV provided town is no more than 40% of the EV’s range away. Use the truck only for the heavy work.
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MPO45
MPO45
4 years ago
Reply to  Siliconguy
So you suggest two vehicles. That’s two capital expenses or loans if financing, two insurance payments, two maintenance schedules, two tax, title, licensing, inspection fees, toll tags, car washes, etc. Twice the cost for the privilege of living rural, what a deal.
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Captain Ahab
Captain Ahab
4 years ago
Reply to  MPO45
It is not about the number of cars, but the number of Democrats per square mile…
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Siliconguy
Siliconguy
4 years ago
Reply to  MPO45
You are the one who wants a work truck and an EV or hybrid. If you don’t need the work truck then don’t get one.
When I retired I did the opposite, sold the commuter car and kept the truck. As you pointed out, the cost of registration and insurance on the second vehicle exceeds, even now, the cost of the extra gas for the truck to make the low cargo runs into town. And the commuter car can not pull the camper, or even the 14 ft fishing boat.
Besides I have a motorcycle for three season runs to town for things that fit into a saddlebag.
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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  Siliconguy
500cc BMW with a sidecar.
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billybobjr
billybobjr
4 years ago
Reply to  MPO45
I live in a Rural/suburban area and my costs are very low , you are going to pay higher prices for everything plus you have to pay for transportation rental cars when needed and less freedom in my opinion . How about the elevated taxes , rent or condo payment ect . I have a half acre of space around me for quiet and buffer from people . I have freedom to jump in my car and run anywhere when I need to or want to . Everything will cost more so the car thing is a cost but you are going to pay more for everything and it is not even close . Your transportation is not free you are paying for all of it directly or indirectly . I have done the numbers and good luck if you need to run to HD or some other place I can run down there and pick up what I need and swing by the grocery store and be back in 30 minutes try that on the public transportation system .
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MPO45
MPO45
4 years ago
Reply to  billybobjr
Do the math, if you are intellectually honest with yourself, you will know I am right about the car but your point to “my costs are very low.” I have no doubt but I also know that you likely have zero access to museums, libraries, concerts, top notch restaurants, artists events, plays, operas, massages, and high end luxury goods. Essentially, you have a mono-culture in rural areas and that’s not for me. Clearly you live in a rural area and you have no problem with any of that and that’s fine but not everybody wants to live that way. I have millions of neighbors and they have made me a better person. how many of your neighbors have made you a better person?
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effendi
effendi
4 years ago
Reply to  MPO45

Many people owning F150s don’t need F150s, I might want that expensive penis extension but I don’t need it. I drive a 4 cylinder Subaru Outback AWD. I’m 6’ and wear3xl work gear, carry my tools in the back with a German Shepard and timber on the roof rack. If need be I can hook up a trailer on the tow bar. So a cheap car to buy and to run. Laugh when I see guys spending $200 at the pump weekly when that much petrol gets me a 1000 miles.

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JRM
JRM
4 years ago
Reply to  MPO45
You mean you believe the Marxist MSM instead of the Census Bureau???
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Flyoverstate
Flyoverstate
4 years ago
Reply to  MPO45
One of the issues with your thesis is that even though you say you came from a rural area, you’ve now adopted the group think that your food is grown in the store in your city. You can’t pull a planter with a Prius and if the Sh!t ever really hits the fan, and there’s nobody left in the Flyover States where they drive all those big ole F-150’s, you”re gonna be awful hungry in a couple of days when them grocery stores go empty.
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MPO45
MPO45
4 years ago
Reply to  Flyoverstate
The rallying cry of rural people is that they make the food we eat in cities. That’s true up to a point. There are many high rise aqua farming happening now. Once it gains major adaptation, it’ll be the end for the small mom/pop farmer. Say hello to the Farmscraper!
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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  MPO45
That’s much much more funny than your usual funny.
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RonJ
RonJ
4 years ago
Reply to  MPO45
“What happens when cheap fuel isn’t available for those gas guzzling F150
trucks in rural america? Is it feasible to live in a rural area with a
prius?”
I saw a Youtube video the other day. Actress Nicole Kidman was eating a number of different insects. Eating meat is not supposed to be feasable, anymore.
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davebarnes2
davebarnes2
4 years ago
Housing units include both single family houses and multi-unit dwellings.
The “record” is the sum of both and may be as important for a “glut” as you make it out to be.
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Zardoz
Zardoz
4 years ago
Reply to  davebarnes2
If multi unit gets cheap, it drags down sfr.
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