Sales of new homes fell in September; Completed inventory increased

by Risk calculated on 26/10/2022 10:52:00

Today, in the Calculated Risk Real Estate Newsletter: Sales of new homes fell in September; Completed inventory increased

Brief excerpt:

The following graph shows months of supply by construction stage. “Months of supply” is the inventory at each stage divided by the rate of sale.

1.1 month supply ended (red line). This is about two-thirds of the normal level.

The stock of new homes under construction is at 6.0 months (blue line). This high level of housing under construction is due to supply chain constraints.

And a record 105,000 homes have not been started – about 2.1 months supply (grey line) – about double the normal level. Homebuilders are likely waiting to start some homes until they have a better understanding of price and demand.

First, as I explained last month, the Census Bureau overestimates sales and underestimates inventory when cancellation rates increase, see: New Home Sales and Cancellations: Net Sales and Gross Sales. So take the sales figure with a big grain of salt – the actual negative impact on homebuilders is greater than the headline figure suggests!

There are a large number of homes under construction, suggesting that we will see a sharp rise in completed inventory over the next few months – and this will put pressure on new home prices.

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