Every month the Census Department lists the number of new homes for sale. It’s a bogus number. What’s the real number and what does it mean? 
Huge Thud in New Home Sales
Earlier today I noted a Huge Thud in New Home Sales, Down 12.2 Percent in November
I also posted this comment.
Fictional Homes For Sale
- Of the allegedly 451,000 homes for sale only 78,000 are completed.
- 106,000 of the 439,000 homes for sale have not even broken ground.
- Based on fictional sales and a fictional number of homes for sale, the Census Department calculates the fictional supply of new homes at 9.2 months. This is a seldom exceeded fictional number.
In response, a question came up regarding inventory.
What’s the True Inventory of New Homes for Sale?
A very strict definition would be the 78,000 homes that are actually completed. But a better definition would include firm builder commitments to actually finish a home.
The lead chart is a new one. I added homes under construction to finished homes to arrive at true inventory.
Inventory Numbers
- Completed: 78,000- Close to the pre-pandemic high
- Completed Plus Under Construction: 345,000 – Not a record, but very high and well above the pre-pandemic high
- Under construction: 267,000 – A relatively high number
- Not Started: 106,000 – This is a new record. It represents a land commitment but not a commitment to build any time soon. Builders could sit on this land for years.
- New Homes for Sale: 451,000 – This is a totally bogus number because it includes 106,000 homes that might not be built for years.
How Much Builder Speculation?
As measured historically by the sum of completed plus under construction, it’s high.
Builders are counting on falling interest rates to sell this inventory. However, consumers may have it a brick wall.
New Home Sales
Home builders finally ran out of incentives or consumers finally got fed up with what they are getting for their money. Here’s the result in pictures.
As discussed above, the 451,000 new homes for sale is bogus. 345,000 is a much better number to go by.
The pressure on builders to reduce price amplifies once a home is finished. That number is 78,000 and rising.
Builders are not at all prepared for a recession or even a slowdown based on these numbers.
Housing Starts Jump 14.8 in November
Housing starts jumped 14.8 percent in November led by single family construction, up 18 percent. Revisions were negative.
In contrast to new home sales Housing Starts Jump 14.8 Percent but Permits Sink 2.5 Percent
This makes today’s new home sales report more interesting.
Existing Home Sales
In November, Existing Home Sales Rose 0.8 Percent, Only the Third Increase in 22 Months
The National Association of Realtors chief economist, Lawrence Yun, eyes a “marked turn“.
I am more than a bit skeptical of major turn because prices and mortgage rates are still too high. However, we are likely in a bottoming process IF the economy holds up.
See the above link for discussion of my thoughts vs Yun.
Home sales big picture don’t make any sense because there are handful of dense screwed up markets that skew the entire market. Take those out in blue cities and the housing market is fine. Many sub-markets are booming.
I own several properties in a sub market of a major city. Nothing is wrong here. Homes are being renovated, built, sold, bought. Same thing happened in the 08′ crash. No impact on this market which are the majority of housing markets.
The housing market is fine. It’s only screwed up in some larger regional markets like Austin, LA, SF. Even those will fix themselves over time. The free market will make them move prices and if they don’t buyers will move somewhere else.
My largest customer who sells to National home builders in Southern California just told me to expect for him to increase 20%.
New Homes for sale completed (green) is the one to watch. In recessions they pile
up. They are rising to the 2019 level despite all the incentives. Once they cross
81, but still below 194 ==> the home builders are getting in trouble. Home builders try to liquidate completed homes before the banks will move in.