Why the Supply of Homes for Sale Didn’t Really Explode
The rationale behind U.S. housing’s rising prices has been nothing if not consistent. The tale has been all about the supply/demand imbalance—a textbook example that makes perfect sense for everyone with a smattering of free-market economics. For those who have been tracking the number of Costa Mesa listings, that’s why last Thursday’s release from the Census Bureau seemed to make no sense at all.
In housing markets from coast to coast, house hunters have consistently grumbled about the meager number of homes for sale. ‘Inventory shortage’ was the term that kept appearing, often preceded by modifiers like ‘growing’ and ‘acute.’ ‘Housing shortfall’ was another. Typical was the National Association of Realtors®’ January press conference, which included Chief Economist Danielle Hale’s observation, “The housing market began 2022 with demand outpacing an all-time low number of unsold homes.” That gelled nicely with the Yahoo!finance.com finding that “this January’s inventory level was down 28.4%.” It’s nice when everybody agrees.
But then came Thursday’s Census Bureau release, which blithely announced a rise in the “months of supply” of new homes: up to 6.1 months from 5.6months a month earlier.
What th!!!???
As Mortgage News Daily squawked,
“Almost anyone in the housing/mortgage market (and especially those who’ve been house hunting) would have the same incredulous reaction: something to the effect of, ‘there’s no way there’s a 6+ month supply of new homes on the market!”
And really! Claiming that “a month earlier” there had already been a supply of new homes of more than five months! Tell that to all the house-hunters!
However, it turns out that calm was quickly restored, ending the head-spinning that might have resulted from the Census Bureau’s calculations. MND commentator Matthew Graham suggested “digging a bit deeper” into the numbers—which clarified matters considerably.
The “6 month’s supply” was for new homes only—not including existing homes for sale, which usually account for at least two-thirds of the market. And the figure was for the “supply of new homes for sale.” Builders sell new homes that are not yet completed; in fact, they can be “on the market” before construction has even begun! Seventy-five percent of new homes are evenly split between those not yet started and those under construction.
In January, the number of new homes for sale not started was 106,000. Using that logic, if you have a box of Bisquik in the cupboard, your supply of pancakes might be more than 100 (they’re just not quite cooked yet).
For area house hunters checking the Costa Mesa listings, the actual market is largely consistent with what they’ve been expecting, Census Bureau counts notwithstanding. Likewise, a reliable way to maximize your odds of making a great deal in today’s market is equally unchanged: call us!
We are built on a philosophy of Heritage & Hustle. The L3 is a full service real estate agency with a regional office located in the heart of #CostaMesa, offering a wide-array of custom services to meet their clients’ needs with roots in the community since 1976. It’s L3 mission is to provide trusted, convenient, responsive service to ensure clients enjoy their real estate experience. The L3 was originally formed to offer personal, concierge-level service as an alternative to the large, nationally based real estate companies. From its small beginnings of only two employees, The L3 has grown to a full staff of 25 serving over 300 clients a year. The L3 is not limited to serving just its clients; it is also committed to serving the community. Not only has The L3 donated hundreds of hours to many area charities, they have also received the prestige of being named one of the #toprealestatecompaniesinCostaMesa If you’re interested in #buyingorsellinginOrangeCounty, turn to the experts. Turn to The L3 and let them help you make your real estate buying or selling dreams come true. For more information or to get started on finding or selling your home contact The L3 today at 714-444-4663 or email us at info@thel3.com
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