The imbalance between the supply of new home for sale and current demand is high and rising.
Building as Fast as They Can
I received an interesting response to my previous post New Home Sales Plunge 17.3 Percent, Largest Decline Since July 2013
“They’re building them as fast as they can. The operable phrase is ‘as they can’. Regulations. 2025 should be lit!“
Yes, they are building as fast as they can and that’s a problem.
378,000 homes are started or completed. This represents a builder commitment that’s very hard to stop no matter what happens to buyer demand.
Supply of Homes
The supply of homes for sale (not yet sold) is in a rarified atmosphere. The chart is a bit bogus because it counts vacant lots.
Matters are much worse for builders as the lead chart shows.
True Supply
- There are 378,000 homes started or finished for sale. This is the most homes for sale since 390,000 in May of 2008.
- There are 113,000 completed homes for sale. That is the most since 118,000 in August of 2009.
- The trend of started plus completed vs current sales is ominous.
Mortgage rates are near 7.0 percent. To keep sales up, builders are doing mortgage rate buydowns and building smaller homes.
Consumers pay for that in one of many ways: Reduced quality, smaller lots, fewer rooms, or less amenities.
Where Are the Buyers?
October 7: Government Employment Rose by an Amazing 785,000 in September
BLS math is often peculiar. This month is a real doozie. Four charts.
November 3: Excluding Government, Year-Over-Year Employment Is Negative 9 Straight Months
I did a deep dive into the latest jobs report this weekend. Here are some interesting numbers.
November 20: Quarterly QCEW Data Provides More Evidence of BLS Jobs Overstatement
Hard evidence from QCEW report suggests more negative revisions coming for BLS nonfarm payroll report.
My prior comparisons and advance calls suggest we see negative revisions in nonfarm payrolls from 2023 Q2 to 2024 Q2 of well over one million. My initial stab is about 1.2 million to the downside.
Builders can pretend to make things affordable, but smart consumers find themselves saying: This is all I get for $500,000?!
The Fed predicts an immaculate soft landing, I don’t.