Ive here. Not a pleasant photo. But how concentrated is new home construction in the hot market?

Author: Wolf Richter, Editor wolf street. Originally published on wolf street

Homebuilders are on a frantic journey, plagued by material and supply shortages, near-perpetual lead times, soaring construction costs, hiring difficulties and struggling projects. Inventory for sale is piling up with homes still under construction and unfinished due to shortages.

Inventory of single-family homes for sale in all stages of construction surged throughout 2021, reaching 403,000 (seasonally adjusted) in December, up 58% year over year and the highest level since August 2008.This accounts for about a 6 month supply, depending on the date from Census Bureau today:

According to the construction stage, a large supply is in preparation.

The number of single-family homes still under construction for sale jumped to 263,000 in December, the highest level since August 2007 (red line in the chart below).

The number of homes for sale that has not yet started held at 101,000 in December. The past three months have each exceeded 100,000 units, the highest level in the data, and have slightly surpassed the previous high in April 2006 (purple line). But the number of homes for sale throughout 2021 has been rebounding from record lows as builders face shortages that prevent them from completing homes. These shortages range from windows to appliances. Once homes are completed – if they haven’t sold in previous stages – they will sell quickly. In December, 39,000 completed homes were for sale (green line).

Construction costs have soared the most in at least 50 years.

Construction costs for single-family homes surged 17.5% in December from a year earlier, according to separate data from the Census Bureau today. This is the worst in the data since 1970. Compared with two years ago, construction costs have risen by 23.5%.these construction costs exclude Land costs and other non-construction costs:

The median price fell sharply as the mix changed.

The median single-family home price plummeted to $377,700 in December from $416,100 in November. That trimmed year-on-year price gains, which had been in the 23% to 32% range since July, to just 3.4%.

Median prices are volatile and are influenced by changes in the mix of low- and high-priced homes sold during the month. December also saw a bit of an uptick in the number of homes priced between $200,000 and $299,000 while the number of homes priced in the $400,000 and above category fell, changing the mix.

Total new home sales and by stage of construction.

Sales of new single-family homes (all stages of construction combined) rose in December from November, but were still down 14% from a year earlier to a seasonally adjusted annual rate of 811,000 units. Sales are still well below the boom years of 2002-2006.

This does not include apartment buildings and condo buildings, nor does the huge boom in multifamily construction in urban centers over the years. This is just the sale of new single-family homes:

Of these total sales:

Sales of Completed Homes The seasonally adjusted annual increase of 187,000 units in December was still down 31% from December 2020 and December 2019, as the inventory of completed homes hovered near historic lows and there were not many available for sale.

Completed homes as a percentage of total sales fell to 23.1%:

Home under construction for sale In December, a seasonally adjusted annual rate of 393,000 units was the highest in a year, as more buyers who couldn’t find completed homes ended up buying homes still under construction.

Homes under construction as a percentage of total sales retreated to 48.5% from a record high in November:

Home sales that have not yet started – Customers buy homes, then home builders build for them – Seasonally adjusted annual growth of 231,000 units.

Unconstructed housing as a percentage of total sales jumped to 28.5%, just shy of the median since 2021:

These graphs show the results of massive distortions that have spread across the economy. Distortions include interest rates that are still well below inflation (now soaring); artificially stimulated demand for all kinds of goods, leading to shortages and shipping chaos; and labor shortages of the type we’ve never seen. So there’s a huge supply of new homes right now, but the supply is picking up, and most of it is still stuck there.