From Inman News:
The housing market continues to show signs of slowing, but very little evidence of the “bursting bubble” that has been predicted for more than three years by some prognosticators. One sign of slowing is the level of unsold new homes.
There are now nearly 200,000 more unsold new homes under construction than there were just five years ago. Rapidly rising sales have masked the surge in construction.
Most analysts focus on the months of new-home supply, which is shown below. Since hitting a low of 3.5 months of supply in the summer of 2003, this number has gradually increased to its current value of 4.9 months, its highest value since December 1996.
While 4.9 months of supply is not concerning because the figure remains so low by historical standards, the months of supply calculation is held down by the high level of sales. If sales slow even a little, the months of supply figure will surge, as it did in 1990. The total number of unsold new homes is shown in the purple line below. There were 503,000 unsold new homes in November 2005, compared with 305,000 in November 2000.
Take it with a grain of salt as it comes from a real estate news service. However, with exising and new home inventories breaking records almost daily, I can’t believe that the situation is still being described as “slowing”.
Demand is already declining quickly, as it does so ‘months supply’ will begin to skyrocket to levels seen in the early nineties.