Story by Vince Golle and Michael Sasso
(Bloomberg) -- The inventory of new US homes stands at the highest since the bursting of the housing bubble more than a decade ago, raising the risk that builders will dial back production in a market longing for cheaper borrowing costs.
The total number of one-family homes for sale rose to 481,000 in May, the highest since 2008, according to fresh government data released Wednesday. Nearly 100,000 of those have already been completed and are still awaiting a buyer, the most in more than 14 years.
At the current sales rate, it would take 9.3 months — the longest since 2022 — to exhaust total inventory. As the industry and potential homebuyers anxiously await cheaper borrowing costs that would help improve affordability, these figures pose a risk to the outlook for residential construction.
The Commerce Department’s latest data on new building activity showed beginning construction of single-family homes has already started to shift into a lower gear. An annualized 982,000 one-family houses were started in May, the slowest pace since October.
“I would expect builders to slack off noticeably on new building going forward, as the pipeline of new home inventories is getting bloated,” Stephen Stanley, chief economist at Santander US Capital Markets LLC, said in a note. “Builders were positioning for a vigorous spring selling season this year, and the actual performance, while not disastrous, has failed to meet those aggressive expectations.”
The scope for the broader economy is that home construction will subtract from gross domestic product. The Federal Reserve Bank of Atlanta’s GDPNow forecast, as of June 20, sees residential investment declining an annualized 1.3 percentage points in the second quarter.
