The August increase of the pace of new home sales pushed the months’ supply measure of inventory to its lowest level in more than a year.
According to estimates from the Census Bureau and HUD , on a nonseasonally adjusted basis the inventory of for-sale newly built homes stood at 206,000 in August. This was a slight increase from the July estimate of 202,000.
Of this total, 48,000 homes were completed, ready-to-occupy residences. Another 37,000 were for-sale units that had not yet begun construction. The largest component of inventory, homes under construction, came in at 121,000 in August.
In August, the median months-for-sale time for new single-family homes fell to 3.3 months. This is higher than the 2.9 months registered a year ago.
In terms of months’ supply (the time required for the existing inventory to be sold at the current pace of sales), the inventory of new single-family sales fell to 4.8 months (on a seasonally adjusted basis). Due to the increase in the August rate of sales, this is a notable drop from the 5.6 months’ supply reported in July and is the lowest measure of supply since June 2013.
These numbers counter claims made last week that home builders are constructing new homes faster than they can be occupied. Single-family construction is occurring at a pace about half of the normal, sustainable rate determined by population growth and the need for replacement of older housing.
While vacancy rates for some kinds of single-family housing remain elevated, newly built homes offer multiple benefits over older housing, including lower maintenance and upkeep costs and cost saving green and energy efficiency features. Comparing new homes with vacant, older homes, likely in need of repair/modernization or located in areas with lower levels of job creation, is comparing apples with aging bananas.