According to the Census Bureau, the current pace of new home sales, which fell -48.2% from last year (and -10.2% from last month) to 309,000 at a seasonally adjusted pace, is the lowest on record going back to 1963. This despite the fact that there are over 100 million more Americans today than there were in 1963.
Additionally, while the inventory of unsold new homes declined by -3.1% from last month to 342,000, the month's supply of housing soared to a 13.3 month supply. The month's supply of housing is the relationship between the supply and demand for real estate and is the leading predictor of future property values. The current 13.3 month supply is up 35.7% from last year and 9.0% from last month, this is an indication that the new home market continues to lag behind the existing home sales market. And considering the existing home sales market is still years away from a recovery, it doesn't bode well for the future of new home builders.
Contrary to popular opinion, the reason why these numbers continue to be alarming for the broader economy is because of the GDP that is associated with new home construction. Jobs are created, materials and supplies are purchased, and tax revenues are produced for municipalities. And the last time I checked, all of those things were important to the American economy.
The problem though is that until the foreclosed existing home inventory is cleared out, new home construction will continue to contract. And the problem with clearing out the foreclosed inventory is that nothing the government is doing to stimulate demand is working. And the reason why nothing that the government is doing is working is because they are not providing Americans with any tax incentives to invest in real estate.
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