New Home Sales Slow as Inventory Begins Upward Climb

New home sales in June were at a seasonally adjusted annual rate of 590,000, down 8.1% from the revised May rate of 642,000 and 17.4% below the June 2021 estimate of 714,000, according to the CalculatedRisk Newsletter. While new home sales are now below pre-pandemic levels, total months of supply increased in June to 9.3 months from 8.4 months in May.

The inventory of homes under construction is still historically high at 306,000 units, but more homes are being completed as sales slow nationwide. Inventory of completed homes for sale is up to 41,000 from a record low of 32,000 in 2021, but new home sales are down 13.4% year-to-date compared with the same period in 2021.

The inventory of new homes under construction is at 6.22 months (blue line) - well above the normal level. This elevated level of homes under construction is due to supply chain constraints. This is the all-time record; above the previous record set in 1980.

And a record 110 thousand homes have not been started - about 2.24 months of supply (grey line) - more than double the normal level. Homebuilders are probably waiting to start some homes until they have a firmer grasp on prices and demand.

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