New home sales rose in October; Completed inventory increased

on Estimated risk per 23.11.2022 10:39:00

Today in the Calculated Risk Real Estate newsletter: New home sales rose in October; Completed inventory increased

Short excerpt:

The following graph shows the months of deliveries by construction stage. “Months of delivery” is the inventory at each stage divided by the sales level.

active inventoryThere are 1.2 months of completed deliveries (red line). This is approaching the normal level.

The inventory of new houses under construction is 5.7 months. (Blue line). This increased level of homes under construction is due to restrictions in the supply chain.

And a record 111,000 homes were never launched. – about 2.1 months of supply (gray line) – about twice the usual level. Developers are likely to delay building some homes until they have a better idea of ​​prices and demand.

First, as I said two months ago, the Census Bureau inflates sales and understates inventories when bounce rates rise, see: New Home Sales and Cancellations: Net and Gross Sales. So, treat the sales headline with a lot of skepticism – the actual negative impact on home builders is far greater than the headlines would suggest!

A large number of homes are currently under construction and this suggests that we will see a sharp increase in completed inventory in the next few months, which will put pressure on new housing prices.

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