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New Home Inventory Keeps Sinking

October 27, 2011 by Rob Wheelock

New Home Supply Sep 2010 - 2011Home builders continue to sell homes and work through inventory.

According to data from the Census Bureau, the number of new homes sold in September jumped 6 percent from the month prior, beating analyst expectations. On a seasonally-adjusted, annualized basis, buyers nationwide closed on 313,000 newly-built homes last month.

It’s the highest reading since April and a major reason why the available number of new homes for sale is shrinking. 

As compared to September 2010, there are 19% fewer homes for sale nationwide. At today’s sales pace, the complete new home inventory would be “sold out” in 6.2 months – the quickest sell-out pace since the April 2010 federal home buyer tax credit expiration.

It’s no wonder builder confidence is rising.

After averaging 15 through the first 9 months of the year, homebuilder confidence jumped 4 points for October, carried by low mortgage rates and the expectation for a strong winter/spring selling season.

For buyers , this could be construed as a housing market-shifting signal. As builder confidence rises, it becomes more difficult to negotiate for upgrades and price reductions on a new home. “Great deals” get scarce.

Furthermore, it’s unlikely that mortgage rates will sustain their current, ultra-low levels into 2012. Rising rates lead to higher housing payments on a month-to-month basis. 

If you’re in the market for a newly-built home, in other words, today’s homes may represent your best value of the year.

Filed Under: Housing Analysis Tagged With: Census Bureau, New Home Sales, New Home Supply

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