High New Home Inventory: What it Means for Home Building
Housing economists typically advise that a balanced market inventory is a five- to six-months’ supply — meaning that is a measure of how many months it would take for that count of home inventory to be sold at the current monthly sales rate.
Inventory larger than a five- to six-month supply would suggest weaker or declining home price growth and home building activity. Lean inventory levels (less than a five- to six-month supply) tend to lead to price growth and gains for home building activity.
In the Census May 2024 newly built home sales data, the current months’ supply of inventory is 9.3. Some analysts have noted that, given the five- to six-month benchmark, that this means the building market for single-family homes is possibly oversupplied, implying declines for construction and prices lie ahead.
However, this narrow reading of the industry misses the mark. First, it is worth noting that new home inventory comprises homes completed and ready to occupy, homes currently under construction and homes that have not begun construction. That is, new home inventory is a measure of homes available for sale, rather than homes ready to occupy. In fact, just 21% of new home inventory in May comprised standing inventory or homes that have completed construction (99,000 homes).
More fundamentally, an otherwise elevated level of new home months’ supply is justified in current conditions because the inventory of resale homes continues to be low. Indeed, according to the National Association of Realtors, the current months’ supply of single-family homes is just 3.6, well below the five- to six-month threshold. The vast majority of homes for sale are in the resale market. It is this lack of inventory that has produced ongoing price increases despite significantly higher interest rates over the last two years.
NAHB estimates that the combined new and existing single-family home inventory is at a 4.4 months’ supply, which qualifies as low. In other words, overall current inventory levels continue to support on a national basis limited gains for home building and upward pressure on home prices.
NAHB Chief Economist Robert Dietz provides an in-depth analysis in this Eye on the Economy post.
Latest from NAHBNow
Oct 09, 2025
3 Ways to Utilize Construction Site Surroundings to Optimize DesignHome design isn’t just about color swatches and backsplashes. Architecturally, building professionals can look toward climate responsive design and ambient design, which both involve using the elements around a home to the client’s advantage.
Oct 09, 2025
Remodeling Market Sentiment Improves in Third QuarterNAHB released its NAHB/Westlake Royal Remodeling Market Index (RMI) for the third quarter, posting a reading of 60, up one point compared to the previous quarter. With the reading of 60, the RMI remains solidly in positive territory above 50, but lower than it had been at any time from 2021 through 2024.
Latest Economic News
Oct 07, 2025
Minority-Owned Residential Building Firms Continue to RiseThe share of minority-owned new residential builders and remodelers has more than doubled since the Great Recession, with noticeable gains from 2017 to 2022. Nevertheless, when compared to the overall U.S. population, minority-owned firms continue to be underrepresented within both housing sectors.
Oct 06, 2025
Shorter Apartment Construction Time in 2024The average time needed to complete construction of a multifamily building after obtaining authorization edged down in 2024, according to the 2024 Survey of Construction (SOC) from the Census Bureau. On average, it took 19.6 months from permit to completion, about 0.3 months shorter than in 2023.
Oct 03, 2025
Supply-Side Cost Pressures Drove Housing as Inflation Leader in 2024Though the rate of inflation peaked in June 2022, consumer prices continued to increase throughout 2023 and 2024 as inflation drove further price growth, according to 2024 CPI review from the Bureau of Labor Statistics.