Builder Speculation: Supply of New Homes for Sale Surges to 7.4 Months

As sales dwindle and interest rates rise, the number of unsold homes built on speculation has risen sharply.

Mortgage Rates Rising as Speculative Building Increases

Completed Homes for Sale in 2018

Observations

  • Supply of completed new homes has increased from 5.6 months to 7.4 months since January.
  • Current supply is the highest rate since March of 2011.
  • Builders are sitting on 74,000 completed homes built on speculation vs 63,000 in January.
  • On January 4, the 30-year mortgage rate was 3.95%. On November 15 it was 4.94%.
  • The Fed is committed to more rate hikes.

Please note that New Home Sales Dive 8.9% in October, Down 12.0% From Year Ago.

Meanwhile, Trump is committed to a trade war he cannot possibly win.

What can possibly go wrong with this picture?

Mike "Mish" Shedlock

Comments
No. 1-5
Christian dk
Christian dk

Allowing Foreigners to just buy houses/apartments just as an "investment" without actually living in them, or renting them out only drives the real workers further away from the center, creating even more traffic as the low paid workers have to commute 1-2-3 hours OR downsize and move back home to the parents basement. New Zealand is a shocking example of this. In Denmark you cannot buy a house/flat without actually living in it, exempt are some high end luxury condos built for rich expats that dont like hotels but live in Monaco to avoid taxes.

Six000mileyear
Six000mileyear

What I find interesting is the cognitive dissonance by the media. Over the past 4-5 years there has been grumbling that the supply of 5.6 months is too low; however, nobody was complaining in the late '90's / early 2000's the supply was 4 months was too low. In fact, the grumbling in the late 90's was too many houses on the market!

Kinuachdrach
Kinuachdrach

While Barry slept … the Chinese government waged a trade war against the US, resulting in today's unsustainable trade deficit. That gave China lots of Dollars, and individual Chinese with connections started to ship some of those Dollars out of China to feather their own nests, often buying high-end real estate for cash. Unfortunately, a lot of those Dollars went to Canada and Australia.

Maybe there would be an opportunity for the US to make it easier for Chinese citizens to buy real estate in the US while keeping it confidential from the Chinese government? But the usual suspects who pretended for decades that the Chinese were not engaged in a trade war will probably not be interested in helping individual Chinese get some of their Dollars out of China. That is unfortunate, because the real estate market could use the help.

DFWRealEstate
DFWRealEstate

Why would they learn anything when the last boom and bust made so many people so much money. There were no consequences for those who created the last catastrophe, so it's not surprising to see a repeat of something similar...

SMF
SMF

I've been in construction for almost 30 years in California. After the dot.com bubble, I worked on far more residential projects than my prior years. This housing explosion ended in 2007/2008.

During the last few years, we've been involved in even more residential projects than in any prior time period.

Way overbuilt, again. No one learned the lessons of a decade ago.

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