Record Drop in Home Inventories
by Tony Crescenzi
The number of unsold new homes fell by 34,000 in November, the most ever. There are now 372,000 unsold new homes for sale, significantly below the peak of 570,000 in June 2006. The level is approaching normal.
The supply problem is in the existing home market, but the underbuilding of homes relative to population growth will inevitably result in the filling up of those homes, whether through sale or rental -- humans need shelter. I would expect inventories to decline at least 500,000 to 750,000 in 2009 because of the population/underbuilding issue. At least 500,000 will disappear from underbuilding and a further 250,000 (at least) will be sold due to low mortgage rates and incentives from President Obama to spur home buying (4.5% mortgages or tax credits or both).
The math on why this is happening is simple: The construction of new homes has fallen below that...
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