New home sales for August posted at a seasonally adjusted annual rate (SAAR) of 740,000 units. That was slightly better than expectations. New home sales were 1.5 percent higher for the month, but still down 24.3 percent from August of last year. The median price of a new home in August was $390,900. The average price checked in at $443,200.

Census figures showed 6.1 months of new home inventory. Unadjusted figures show 6.2 months of supply. Anyone shopping for a new home understands those headline figures are complete bullocks. Looking into the composition of new homes available for sale we get a better picture of what’s really happening.

Unadjusted data show that only 9 percent (35,000 out of 383,000) of the homes supposedly available for sale are completed homes. A full 106,000 or 27.7 percent have not even been started! Good luck moving into those. That leaves the bulk of the supposed 6 months of inventory under construction in some phase or other. With all of the supply chain issues builders are currently experiencing, it’s a safe assumption many are not even close to completion.

Completed homes in inventory aren’t the only thing in short supply. Affordable homes priced under $399,000 are also disappearing. New homes priced under $200,000 are almost non-existent now. The share of homes in the $200,000 to $299,999 price segment fell 27 percent from August of last year. Builders either can’t or won’t build affordable new homes in this current inflationary environment.

With the Federal Reserve still pumping $120 billion per month in liquidity into the financial system every month it’s hard to blame them. Low mortgage interest rates have continued to fuel housing demand. The average 30-year fixed rate mortgage was only 2.84 percent in August according to Freddie Mac data. That helped to offset nosebleed prices for new homes.

The damn of affordability has already been breached in North Texas. That’s why closed sales of new construction were down 48 percent from August of last year. Pending sales of new homes in the DFW area were 35 percent lower. Overall new home prices are at record highs. Median & average new home price per square foot were up 21 percent and 23 percent respectively in August. New home buyers continue to get squeezed with shrinkflation. MLS data showed less than 3250 new homes for sale last month, down 39 percent from the same time a year ago. That translates to just 2.1 months of new construction supply.

The Fed has made another fine mess in the housing market, with rampant inflation across the supply chain. Massive amounts of central bank liquidity have made things really good for existing homeowners…and really challenging for those trying to buy a new home.

Fed Assets Treasuries & MBS Sept 15 2021