Record Number of Homes Under Construction, the Alleged Shortage Will Vanish – Mish Talk

July 27, 2022

Housing units under construction data from Census Department, chart by Mish

1.7 Million Homes Under Construction

Several people commented today that the falloff in new home sales will exacerbate the housing shortage.

The above chart screams “really?”

There are 1.7 million homes under constriction. This is a series record. And those are real numbers, not annualized numbers.

Homes under construction included homes “for sale” as well as homes already “sold”.

The people who bought those homes will vacate the premises where they currently live, so the pending new supply really is 1.7 million.

New Homes for Sale by Stage of Construction

New Home Sales data from Census Department, chart by Mish

It’s important not to confuse new homes for sale under construction with homes under construction.

Supply of Homes Under Construction Seasonally Adjusted

New Homes For Sales Under Construction: 306,000
Homes Under Construction: 1,680,000

Homes already sold under construction = 1,680,000 – 306,000 = 1,374,000

This is a record supply.

Meanwhile, existing homes sales are crashing.

Existing Home Sales Last 25 Years

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Existing home sales courtesy of Trading Economics

On July 20, I noted Existing Home Sales Dive Another 5.4 Percent in June, Down Fifth Month

Key Points

Total housing inventory registered at the end of June was 1,260,000 units, an increase of 9.6% from May and a 2.4% rise from the previous year (1.23 million).
Unsold inventory sits at a 3.0-month supply at the current sales pace, up from 2.6 months in May and 2.5 months in June 2021.
Individual investors or second-home buyers, who make up many cash sales, purchased 16% of homes in June, unchanged from May and a slight increase from 14% in June 2021.

Individual investors and second-home buyers have been buying like crazy. That will slow to a trickle if not reverse entirely as the wealth impact of a falling market and rising mortgage rates takes a toll.