A record of 109,000 new homes have not yet been started.
New Home Sales Down -23.1% in October 2021, Down a Whopping -23.1% y/y
The US Census Bureau and Department of Housing and Urban Planning indicated that new single-family home sales in October came in at 745,000. This 745,000 is +0.4% above revised September rate BUT -23.1% below the estimate of 969,000 in October 2020.
Such estimates of new home sales continue declining year-over-year since new home sales soared during the first few months immediately following the pandemic onslaught.
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Months of Supply
The months of supply of new single-family homes in October was 6.3 months or an estimated 389,000. The 6.3 months of supply was up from 6.1 months in September.
The all-time record high was 12.1 months of supply in January 2009 while the record low was 3.5 months in September 2021.
New Home Inventory
The Census Bureau began breaking down new home inventory into three categories in 1973: not started, under construction and completed.
The number of completed new homes for sale in October 2021 came in at 38,000, just above the record low of 33,000. Turns out this number of 38,000 completed homes for sale is approximately 50% of the normal number of completed homes. However, when combining the total number of completed and under construction new homes, the combined number is close to normal.
The “not started” category hit a record of 109,000, about 1.8 months of supply, which is almost double the normal level. The assumption is that homebuilders are waiting to start the construction of new homes until they have a more firm idea on pricing.
Pricing
According to the Census Bureau, the median sales price of new houses sold in October came in at $407,700. The average sales price was $477,800.
During 2009 and forward, builders built smaller, less expensive homes to compete with all the distressed sales. Once the housing industry started to recover, builders moved to higher price points in order to maximize profits. Prices rose substantially during the pandemic.
October’s average new home sales price of $477,800 soared +21% y/y. The median price in October 2021 of $407,700 was a record, an increase of +18% y/y.
Only 1.7% of all new home sales had a price tag under -$200,000 in October 2021. (Essentially, the under $200,000 bracket is disappearing.) Under half of new homes (45% in October 2021) are in the $200,000 to $400,000 price range. The fastest growing price segments over the past 2 years have been the $400,000+ ranges.
Bottom Line
Supply chain disruptions and uncertain pricing are seen as the primary reasons that homebuilders are seeing limited sales and delayed starts. There is some light beginning to creep into this tunnel as some costs, unspecified at this time, have recently fallen. The hope is that supply chain issues “should resolve in time.”
Thanks to the US Census Bureau and Department of Housing and Urban Development.
