Housing Bubble Getting Ready to Pop: Unsold Inventory of New Houses Spikes by Most Ever, to Highest since 2008, with 9 Months’ Supply, Sales Collapse at Prices below $400k

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Stocks of homebuilders swoon amid worst inflation in construction costs, shortages, and spiking mortgage rates that take buyers out of the market.

Sales of new single-family houses in April plunged by 16.6% from March and by 26.9% from a year ago, to a seasonally adjusted annual rate of 591,000 houses, the lowest since lockdown in April 2020, according to the Census Bureau today. Sales of new houses are registered when contracts are signed, not when deals close and can serve as an early indicator of the overall housing market.

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By region, sales plunged the most in the South:

  • South: -19.8% for the month, -36.6% year-over-year.
  • Midwest: -15.1% for the month, -25.5% year-over-year
  • West: -13.8% for the month, -12.4% year-over-year.
  • Northeast: -5.9% for the month, +17.1% year-over-year

Unsold inventory of new houses spiked in a historic month-to-month leap of 34,000 houses, and by 127,000 houses from April last year, to 444,000 unsold houses, seasonally adjusted, the highest since May 2008.

By region, unsold inventory spiked the most in the South, and dipped in the Northeast. Percent increase year-over-year:

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  • South: +53%
  • Midwest: +39%
  • West: +8.4%
  • Northeast: -4%

The supply of unsold new houses spiked in a historic month-to-month leap from an already high 6.9 months supply in March to a dizzying 9.0 months supply in April, having nearly doubled from a year ago:

The bottom fell out under $400,000. At the top end, things weren’t so bad: sales were flat year-over-year in the $400,000 to $750,000 range, though they fell on a month-to-month basis. But you cannot maintain a housing market by just selling to the wealthy.

In the price categories below $400,000, the bottom fell out. The drop in sales year-over-year:

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  • $300k to $400k: -42%
  • $200k to $300k: -71%
  • $200: dead.

Collapse in sales below $400K changed the mix, skewing the median price…..

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Continue reading this article at Wolf  Street.

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