(Click on image to enlarge)

New home sales from Census Department, chart by Mish

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.

New home sales from Census Department, chart by Mish

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.

Housing data from Commerce Department, chart by Mish

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

Existing-home sales courtesy of the National Association of Realtors via the St. Louis Fed

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.

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