New home inventory at highest since 2008 amid stalled projects, construction costs rise

alexsl/iStock via Getty Images

Amid shortages of materials, supplies and labor that have bogged down construction projects and grapple with a historic spike in costs, homebuilders have amassed 406,000 single-family homes for sale (seasonally adjusted ) at all stages of construction, according to Census Bureau data today. This is the largest unsold stock since August 2008, up 69% from a year ago, representing 6.1 months of supply:

new single-family homes


Massive procurement underway, by stage of construction

Under construction: The number of homes for sale in January that were still under construction was essentially unchanged from December, at 263,000, and both were the highest since August 2007. About 46% of homes sold in January fell into this category; More on that in a moment.

house for sale, under construction


Construction not started: The number of homes for sale that have not yet started construction jumped to 106,000 in January, the highest in data dating back to 1963, as homebuilders – seeing a hot market – pile up new construction projects development. Nearly 30% of homes sold in January belonged to this category.

houses for sale, construction not started


Completed houses: The number of completed homes for sale has reached 37,000 homes, still rebounding from the lowest levels in data dating back to 1963, as homebuilders complain of shortages of all kinds that are blocking projects and preventing them from complete the houses. When unsold homes are finally completed, they sell quickly. Only about 24% of homes sold fell into this category:

Houses for sale, construction completed


Sales of new homes, in total and by stage of construction

Total new home sales in January fell at a seasonally adjusted annual rate of 801,000 homes, down 19% from January 2021 but up 6% from January 2020. Sales are much lower to the boom years of 2002-2006.

Multi-family buildings and towers have seen a construction boom over the past decade, but they are not included here.

new single-family homes sold annual rate


Sales of houses under construction fell at a seasonally adjusted annual rate of 368,000 homes in January, from December’s level, which was the highest since April 2006 (green line in chart below). As a percentage of total sales, homes under construction fell to 46%.

Sales of houses whose construction has not yet started – which the homebuilder will build for the client – jumped to a seasonally adjusted annual rate of 237,000 homes (purple line). Their share of total sales has risen to 30%, around the middle of the range for the past decade.

Completed home sales fell at a seasonally adjusted annual rate of 196,000 homes (red line), down 29% from two years ago, as inventory for sale remained near record highs and there were not many completed homes for sale. The share of completed homes as a percentage of total sales fell to 24%.

Note how sales of homes that were still under construction now dominate (green) as builders face eternal delays getting what they need to finish their homes, from windows and bricks to garage doors through devices.

new home sales construction stage


The mega-spike in construction costs

Single Family Home Construction Costs – excluding the cost of land and other non-construction costs – rose 1.1% for the month and 16.8% year over year, according to separate Census Bureau data today . Those year-over-year cost spikes in January and December were the worst in data dating back to 1964.

construction cost index


Passing on mega-spikes in construction costs, plus a few…

The median price of single-family homes sold in January reversed most of December’s mixed decline and, at $423,000, was up 13% year-over-year. And as big as that increase seems, it’s down from increases in the 20% to 23% range that prevailed last year through November.

Thanks to homebuyers’ willingness to pay what they can afford, homebuilders are able to pass on soaring construction costs, plus a few, to reap massive profits: the largest home builder, DR Horton (NYSE: DHI)posted a massive $4.2 billion record profit in 2021, up 162% from its 2019 net profit. Soaring median prices at high sales volumes show how:

median price of new single-family homes sold


Original post

Editor’s note: The summary bullet points for this article were chosen by the Seeking Alpha editors.