Quote:
Originally Posted by oceangaia
Sure. But if building the number of homes that are in "demand" were profitable, don't you think there would be somebody building them to earn that profit? Supply almost always rises to meet demand. Is there some special reason why that would not happen in this case? As you say, maybe this "six months" benchmark is no longer needed and by what data do you know it isn't 1/3rd of what it was? Or is that just a gut call? I could see a temporay imbalance because builders may have miscalculate future demand based on last year's lockdowns but people in this thread are talking about an ongoing ten year issue.
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the 1/3 is nothing more than a gut feeling, or a stab in the dark. Trying to consider some other things/think harder ...
Anecdotally, if there were 12 buyers and 12 sellers in a year, and each one was specifically done once per month - then you'd have perfect balance (it would be just-in-time inventory). The problem you immediately introduce is the individuality of the home - location, condition, features - has to meet THAT Buyer's need.
In a micro way, I suppose something around 6 months make sense - "every" Buyer gets to choose from 1 of 6 houses. Or, the pool of Buyers has a pool of homes that allows them to choose from 6. If they're a "picky Buyer" then they take > 30 days to choose and each month = 6 houses to choose from.
Now, on building, I suppose I'd say you actually DO still need a 6 months supply - depending on how the local MLS handles them. In the old days in my market, once a home was put in MLS, the DOM started counting. This led to a LOT of new construction (especially in the 2009-2011 time) to wait until they were almost complete. When "how many DOM?" matters, you don't want to be the builder who's 60 days from finishing anyway and be saddled with 120 DOM .... which is really a statement of how stupid consumers and Realtors can be. What we did was say all new construction = 0 DOM, which is nice, but in itself is a sign of stupid "good intent, poorly-executed". Because a builder might have finished that house 6 months ago and NOT be able to sell it, and that matters too; their DOM shouldn't be 0.
But I digress....
If we assume a new house takes 5 months to build, then I'd say we need AT LEAST 5 months of inventory, if it's entered in MLS in the beginning. Because at any time, you've got Buyers who WANT new, and can wait 5 months, or 4, all the way down to "we've got to move this month!" And in theory you'd have 5 options for closing.