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What's the True Supply of New Homes For Sale?

Let's dive into builder speculation and the true supply of new homes .
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New Homes For Sale By Stage of Construction 2021-10

New Home Sales Did Not Really Rise, They Fell Nearly 7 Percent

Yesterday, in New Home Sales Did Not Really Rise, They Fell Nearly 7 Percent, I noted Inaccurate and misleading headlines on new home sales. 

Census Bureau Report Details 

  • Sales: New Home Sales Sales of new single‐family houses in October 2021 were at a seasonally adjusted annual rate of 745,000. This is 0.4 percent above the revised September rate of 742,000, but is 23.1 percent below the October 2020 estimate of 969,000.
  • Sales Price: The median sales price of new houses sold in October 2021 was $407,700. The average sales price was $477,800.
  • For Sale Inventory: The seasonally‐adjusted estimate of new houses for sale at the end of October was 389,000.
  • Supply: This represents a supply of 6.3 months at the current sales rate. 

For Sale Inventory

The "For Sale" inventory is reportedly 388,000 not adjusted, (389,000 seasonally-adjusted). 

As one of my readers also noted, those homes are not really available. 

True Inventory 

  • 388,000 Total 
  • 245,000 Under Construction
  • 106,000 Not Started
  • 34,000 Finished 

The true supply is 34,000 but if you want to be liberal, then add in those under construction.

245,000 homes under construction is a historically high number. So is the total, but the total is misleading.

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Builder Optimism

New Homes For Sale Excluding Not Started 2021-10

What builders are prepared to do and what they are actually doing are two very different sets of numbers. 

The number of completed homes actually ready to sell is very low. Add to that those under construction (a seemingly high number), to get the true picture.

282,000 homes completed or under construction is the true measure of builder optimism. At best, it's a very middle of the road number. 

Perhaps it's due to labor shortages, supply shortages, or expectations of falling lumber prices, but builders are not that rampantly speculative historically speaking.

 Thanks for Tuning In!

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