It suddenly looks like there are too many homes for sale. Here’s why that’s not quite right

by | Jul 9, 2024 | Business

Anyone out shopping for a home today knows there is still precious little for sale.The housing market is just beginning to come out of its leanest few years in history. Inventory of both new and existing homes is finally rising, but there is something suddenly strange in the numbers: The supply of newly built homes appears to be way too high.The numbers, however, are deceiving due to the unprecedented dynamics of today’s housing market, which can be traced back two decades to another unprecedented time in housing, the subprime mortgage boom.All of it is precisely why home prices, which usually cool off when supply is high, just continue to rise.The supply scenarioThere is currently a 4.4-month supply of both new and existing homes for sale, according to the National Association of Home Builders, or NAHB. Months’ supply is a common calculation used in the market to measure how long it would take to sell all the homes available at the current sales pace. A six-month supply is considered a balanced market between a buyer and a seller.Supply was already low at the start of this decade, but pandemic-driven demand pushed it to a record low by the start of 2021 at just two-months’ supply. That shortage of homes for sale, combined with strong demand, pushed home prices up more than 40% from pre-pandemic levels.Now supply is finally beginning to climb back, but the gains are mostly in the new home market, not on the existing side. I …

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[mwai_chat context=”Let’s have a discussion about this article:nnAnyone out shopping for a home today knows there is still precious little for sale.The housing market is just beginning to come out of its leanest few years in history. Inventory of both new and existing homes is finally rising, but there is something suddenly strange in the numbers: The supply of newly built homes appears to be way too high.The numbers, however, are deceiving due to the unprecedented dynamics of today’s housing market, which can be traced back two decades to another unprecedented time in housing, the subprime mortgage boom.All of it is precisely why home prices, which usually cool off when supply is high, just continue to rise.The supply scenarioThere is currently a 4.4-month supply of both new and existing homes for sale, according to the National Association of Home Builders, or NAHB. Months’ supply is a common calculation used in the market to measure how long it would take to sell all the homes available at the current sales pace. A six-month supply is considered a balanced market between a buyer and a seller.Supply was already low at the start of this decade, but pandemic-driven demand pushed it to a record low by the start of 2021 at just two-months’ supply. That shortage of homes for sale, combined with strong demand, pushed home prices up more than 40% from pre-pandemic levels.Now supply is finally beginning to climb back, but the gains are mostly in the new home market, not on the existing side. I …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]
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