Homebuilders sold more new homes in the United States last month than in June. But the biggest news could be that builders have more homes to sell.
The Commerce Department said on Tuesday that 708,000 new single-family homes sold in July at a seasonally adjusted annual rate, slightly more than the 700,000 economists had forecast. Better yet, June new home sales were revised to 700,000 from the previously reported 676,000. This gives a clue that the decline in new home sales this year is starting to reverse.
One reason could be that builders have started putting more homes on the block. There were 367,000 seasonally adjusted new homes on the market at the end of July, enough supply for 6.2 months of sales at last month’s rate, up from 348,000 in June. This is important because last year’s rush for new homes seriously depleted inventory. There were only 3.5 months of supply last October, matching a record level previously seen in 2003.
The imbalance between supply and demand has led many home builders to restrict their sales in an attempt to increase inventory levels, which may have been the main factor behind the weakening sales. This year. The difficulty in securing both labor and materials only made matters worse.
There is, however, a competing theory that rising new home prices, driven in part by rising labor and material costs, have put new homes out of reach for too many people. potential buyers. It’s not something the public housing builders themselves have said – in recent earnings calls, instead, they have highlighted how strong the demand is – but that doesn’t mean it can’t be in effect. part true.
The recovery in the number of new homes available for sale should determine which theory is correct in the months to come. If manufacturers are slowing down sales in order to build up inventory, sales should increase considerably in the coming months. If prices are the problem, sales could stay in the doldrums. The house builders built it. Now it’s a matter of waiting to see if the buyers come.
Write to Justin Lahart at [email protected]
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Published in the print edition of August 25, 2021.