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Unfinished Houses for Sale Pile Up, Total Inventory Highest since 2008, amid Material Shortages & Worst Spike in Construction Costs since 1979

Sales of new single-family houses fall 24% from a year ago. The lower end has died.

By Wolf Richter for WOLF STREET.

Sales of new single-family houses in August were down by 24.3% from August last year, to a seasonally adjusted annual rate of 740,000 houses, according to the Census Bureau this morning.

Sales of single-family houses remain far below their peak during the years of 2002 through 2007, in part due to the large-scale construction boom since then in multi-family buildings, such as condo towers and apartment towers:

Ballooning inventories: A record 90.5% of the houses for sale are either not started or unfinished, as total inventory piles up. Homebuilders are complaining about material shortages and labor shortages and surging costs and all kinds of other issues that prevent them from starting construction or completing construction.

Inventory for sale by stage of construction. The number of:

  • Not-started houses for sale jumped to 105,000 (up from 60,000 in August 2019);
  • Under-construction houses for sale jumped to 237,000 (up from 185,000 in August 2019).
  • Completed houses for sale, at 36,000, were far below August 2019 (81,000).

Total inventory for sale, from not-started to completed houses, rose to 378,000, the most since October 2008:

Supply of new houses has been above 6 months for the fourth month in a row, at the top end of the pre-pandemic range except for 2018, when surging mortgage rates triggered a slowdown in sales, and therefore an increase in months’ supply:

The median price, at $390,900, was unchanged from July and May and was up 20% from a year ago.

The median price is heavily skewed by the ongoing shift in mix to more expensive homes, with the low end dying out completely:

  • Almost no homes with a price of under $200,000 were sold. This category has died.
  • Under-$300,000 homes accounted for only 29% of total sales, down from 35% in August 2020 and down from 42% in August 2019.
  • $300,000 to $400,000 homes accounted for 19% of total sales.
  • Over-$400,000 homes accounted for 51% of sales, up from 31% in August 2020, with the over-$500,000 homes, which is where the money is, accounting for 31% of sales.

Construction costs spiked the most since 1979, amid all kinds of shortages and price spikes of materials. According to separate data by the Commerce Department, construction costs for single-family houses, excluding the cost of land and other non-construction costs, spiked by 12.8% in August compared to a year ago, the fastest year-over-year surge in construction costs since 1979:

Lumber has come off its ridiculous spike, but Chicago lumber futures, now rising again and at $650 per thousand board feet, are still 70% higher than they’d been in August 2019. Steel prices have continued to surge. Futures of Polyvinyl Chloride, the material for PVC pipes, have surged 65% year-over-year. Costs have surged across the board.

There are anecdotal reports coming out of the homebuilder industry of shortages of all kinds: Shortages of windows and doors – the glass shortage is apparently behind the WOLF STREET beer mug shortage – steel beams, insulation, appliances, roofing materials, copper wiring, fasteners, plumbing fixtures…. And prices of materials are responding in the most monstrously overstimulated economy ever, and these costs are getting passed on.

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