New-Home Inventory at Three-Year Low as Sales Outpace Construction

The historic margin of new-home sales versus construction starts from the end of summer are continuing to affect overall new-home inventories. The National Association of Home Builders says the monthly growth rate of newly built single-family homes has slowed even more this fall after a jump in new-home sales during July and August. Inventories for new homes are now at a three-year low. In order to catch up, NAHB says an increase in starts and a slowing of sales is needed. October new-home sales slightly dipped from September, possibly beginning the start of flattening, or even declining, sales.

Despite recent flat growth conditions, the October sales rate was 42% higher than a year ago, as housing demand continues to be supported by low interest rates, a renewed consumer focus on the importance of housing, and rising demand in lower-density markets like suburbs and exurbs. Sales are up 20.6% on a year-to-date basis for 2020 thus far.

Looking back to the spring, the April data (570,000 annualized pace) marks the low point of sales for the current recession. The April rate was 26% lower than the prior peak, pre-recession rate set in January. Sales have mounted a historic growth rate since that time.

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