It’s no secret that throughout most of the country, the continuing shortfall of homes for sale—the U.S. inventory—has continued to strengthen real estate values in 2023. With the total U.S. ‘active inventory’ (the combined total of existing plus new housing units) shrinking a further 6.4% from last July’s levels, it would be noteworthy if that hadn’t had the inevitable effect on Carmel real estate as well.
New construction plays a sizable role in how housing performs. Whereas many owners of existing homes still hesitate to list their properties because a sale would mean losing their current home loan interest rates, first-time buyers of newly built houses have no such concerns. So any decline in the rate of new construction is more likely to be caused by factors like inflation and supply-chain snags. Those are very real stumbling blocks to the delivery of newly built houses, so they would be expected to exert downward pressure on total housing inventories—but that picture is not so simple. As Realtor.com found, “Builders continued to ramp up construction” last month “aiming to supply new home options for buyers made weary” by hard-to-find properties.
The question is, if builders intend to ramp up their activity, why had the actual supply of new homes fallen three months below that from a year earlier? In July 2022, there was more than a ten-month supply; this July that figure had fallen to 7.4 months).
One explanation could be inferred from the statistics published by the U.S. Census Bureau and graphically summarized in last week’s Realtor.com research report. Those figures show that of the “New Homes for Sale” total, only 16% were actually completed. A full 60% were listed as “Under Construction” and—shown in bold red numbers—24% were “Not Started.” It would seem to follow that those supply chain issues (which have been largely forgotten by the media) might be keeping a cork on the actual supply of housing. The effect of inflation could contribute, too—but its effect would be more apparent in the number of closings.
For a current rundown on how our local Carmel real estate activity has been performing, call anytime!