US Home Building vs Sales: 3Q 2020

The fact that US home sales are outpacing construction starts to this degree indicates additional home building lies ahead.


US home building has staged a dramatic rebound, said the US National Association of Home Builders today. In fact, supported by low mortgage rates, an evolving geography of housing preferences, and favorable demographic tailwinds, housing demand has improved so quickly that the current difference between the pace of newly-built single-family home sales and for-sale single-family construction starts has reached a historic level.

The adjusted data makes clear in the graph above how great the current difference is between sales (red) and starts (blue). This gap is unprecedented in the 20 years of data presented here, and there is no comparable period in the data going back to 1963. Plotting the difference between the monthly rates of for-sale starts and sales yields the following series, which peaks in the most recent data.

US home sales are up 69% compared to a year ago, an incredible jump. 

Months’ supply for new homes is down to a lean 3.3 months, and existing home months’ supply (per NAR data) is at a very tight 2.8. Thus, the third period of separation between for-sale starts and new home sales occurring now is a signal of the degree to which home building will need to play catch-up with current demand.


Low levels of existing inventory, rising resale prices relative to new construction, strong builder confidence, and sales exceeding for-sale starts point to solid levels of US home construction in the months ahead.