It suddenly looks like there are too many homes for sale. Here's why that's not quite right
Why is the supply of newly built homes considered too high?
The supply of newly built homes is considered too high due to a combination of factors, including recent swings in mortgage rates and the aftermath of the subprime mortgage boom. The current nine-month supply of newly built homes for sale is nearly three times that of existing homes, making it difficult to evaluate the current market inventory by examining either new or existing home inventories in isolation.
How did the pandemic affect the housing supply and prices?
The pandemic affected the housing supply and prices in several ways. Initially, it caused a housing market slowdown due to lockdown measures. However, as the pandemic continued, demand for housing surged, driven by record-low mortgage rates, a shift towards remote work, and increased desire for more living space. This surge in demand, coupled with a pre-existing housing shortage, led to a rapid increase in home prices and a decrease in inventory, creating a highly competitive housing market.
Why is the supply of newly built homes unusually high?
The supply of newly built homes is unusually high due to a combination of factors, including roller-coaster mortgage rates, a surge in demand during the pandemic, and the need for builders to buy down mortgage rates to keep sales higher. Additionally, the current supply-demand imbalance and economic forces, such as the subprime mortgage boom and the Great Recession, have played a role in the high supply of newly built homes.