A brief note on housing

Where the incentives roam

• price cuts and incentives galore

• the housing glut continues to build

• the regional skew

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A brief note on housing

A somewhat distant corollary to the observation that the labor force isn’t growing all that much is the fact that demand for shelter isn’t growing all that much, either.

Unsurprisingly (to Random Walk), homebuilders are still turning to incentives and discounts more and more, in order to move inventory:

Wells Fargo

~39% of builders are cutting prices, and ~65% are using some kind of incentive, both of which are at- or -near the series highs.

That incentives climb higher, even as mortgage rates come down (slightly), should give you a general sense of the supply-demand dynamic, at least where home sales are actually taking place.

A housing surplus

There is obviously no housing shortage.

Builders have built supply to meet demand—where it is, at prices it can pay—and now they’ve built so much, you might even say there’s a moderate surplus building.

• Unsold new homes are approaching the series high:

• Even “months supply” of existing homes has crept above pre-pandemic levels:

The supply of new-homes is definitely getting into ‘surplus’ territory. The supply of existing homes is back to “normal” if normal is defined as “before the ‘housing bubble’ popped-off.

To be fair, there is still a heavy regional skew, such that most of the “surplus” is in the South and West (which is also where both supply and demand have gained the most), but pretty much every market has more supply than last year:

Other than Chicago (which is breakeven), every market has climbing inventory relative to last year.

The Acela corridor still has far fewer listings than before the pandemic, but there was the massive “pull forward” of demand early-on, and there just haven’t been that many sales since (or that many net-new arrivals).

There is still only one sure-fire fix to the “affordability crisis.” Everything else is cope.

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Previously, on Random Walk

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