Chart of the Week: New Home Inventory by Stage of Construction

Source: US Census Bureau

While there was a shortage of single-family homes for sale due to underbuilding since the Great Recession, home builders increased production to meet the surge in demand that began 2020-2021, when mortgage rates were at historic lows.

Single-family housing starts averaged 1 million or more in four of the last six years, helping ease some of the pressure on available inventory. The level of newly built single-family homes for sale climbed to a two-decade high, hitting the 500,000-unit mark in 2025. However, these new homes currently account for only approximately a quarter of the for-sale inventory. Existing homes make up the remainder and stood at a little below 1.3 million units to start 2026, still running well below the 20-year average of roughly 2.1 million units for sale.

Between still-challenging affordability conditions driven by elevated home prices and increasing mortgage rates, macroeconomic headwinds, and geographic mismatches of housing supply and demand, both new and existing home sales have remained slow, and we have a glut of unsold new homes in the aggregate, even while existing inventory remains low. A growing share of completed units were unsold, 26 percent of units, and the level at 126,000 units was 10 percent higher than a year ago. Homes under construction accounted for 51 percent, and those for which construction has not been started accounted for 22 percent of unsold inventory. Demand in many markets where higher levels of building occurred has slowed, coinciding with slowing and even declining home price growth. The Northeast and Midwest did not see similar levels of new construction, and existing inventory is also tight, and those markets are still experiencing a shortage of homes for sale, and as a result, higher than average home price growth.

Given this level of unsold new homes, our forecast is for a slight pickup in new home sales as homebuilders continue to offer concessions and reduce prices on these unsold units, primarily in the Sunbelt states. On the other hand, we expect a decline in single-family housing starts in 2026 as homebuilders work through this elevated inventory without adding too many additional units.