Wednesday, September 26, 2012

Historic lows in new home sales activity and inventory

In my write up for today's new home sales numbers, I noticed that inventory and new home sales are at very low numbers. I didn't realize just how low, however.

I went in and looked at the historical data back to 1973, which is when the Census Bureau began publishing new home sales data for regions of the United States.

What I discovered is that the new home inventory is at the lowest point ever recorded, and that new home sales are near all-time lows in nearly forty years of data.

The first graph shows new home sales for the West region of the United States. The 1970s featured a fairly significant increase and collapse in homebuilding, which ended with the fairly-severe 1982 recession. The 1990s-2000s cycle was much larger, however. In absolute numbers, homebuilding in the US West region is at low levels comparable to the lows seen during the learly 80s and briefly during the mid 70s. Keep in mind though that population in the West is much larger now, so on a per-capita basis, homebuilding in the West is almost certainly at an all-time low right now, at least for the post-WWII period.

The second graph shows the new home inventory since 1973. The inventory, as calculated here, is the difference between new homes sold and the number for sale each month. The graph shows inventory at an all-time low since 1973.

Inventory headed up as the economy worsened in the late 1970s and declined again in the late days of the 1982 recession. It hit an all-time low (at that time) at the end of the dot-com boom and then hit all-time highs as national fiscal and monetary policy encouraged unprecedented homebuilding. In the aftermath of the bubble, however, the inventory has hit a 40-year low. Inventory in existing home sales is also very low, so this ongoing scarcity in inventory will continue to contribute to rising single-family home prices in the near term.