January 2023 New Home Sales & Construction Update

The January numbers are out for residential construction and residential sales. I’d say we’re still moving along in a marginally “Category 2” state - sales declining, but with a backlog of homes under construction that is still bloated. I think we are still, more or less, in the condition where there have been some declines in home prices that mostly reflect a return to demand that isn’t above capacity, so the inflationary pressure on residential inputs has receded somewhat, allowing builders to reset prices a bit. But, we have a long way to travel across Category 3 to get to a truly slack condition that would lead to the sort of systematic decline in home prices that we saw in 2007-2012.

More details below the fold.