by Calculated Risk on 11/23/2022 10:39:00 AM
Today, in the Calculated Risk Real Estate Newsletter: New Home Sales Increased in October; Completed Inventory Increased
The inventory of new homes under construction is at 5.7 months (blue line). This elevated level of homes under construction is due to supply chain constraints.
And a record 111 thousand homes have not been started – about 2.1 months of supply (grey line) – about double the normal level. Homebuilders are probably waiting to start some homes until they have a firmer grasp on prices and demand.
First, as I discussed two months ago, the Census Bureau overestimates sales, and underestimates inventory when cancellation rates are rising, see: New Home Sales and Cancellations: Net vs Gross Sales. So, take the headline sales number with a large grain of salt – the actual negative impact on the homebuilders is far greater than the headline number suggests!
There are a large number of homes under construction, and this suggests we will see a sharp increase in completed inventory over the next several months – and that will put pressure on new home prices.
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