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New home construction fell modestly, 1.6% in September from the prior month, but the year-to-date activity is solidly higher by 17% compared to 2020 and by 23% compared to the pre-pandemic year of 2019. More housing inventory will therefore steadily emerge. Newly constructed homes are generally larger in size and more expensive than existing homes, and not geared toward first-time buyers. Nonetheless, more supply of these homes allows trade-up buyers to make their move and in the process place their previous homes on the market. In addition to construction, more inventory will appear as the mortgage forbearance program is winding down. The current mortgage default rate of at least three months is running high at 3.5% compared to less than 1% before the pandemic. However, foreclosures have been at historic lows so far due to the forbearance support. The default rate will certainly fall as long as the economy continues to generate jobs, but the end of the federal support program inevitably means some homeowners will need to sell. This will be another source of housing inventory.
The listing count across the country is still below one year ago and near record lows. Based on increased home construction and from the ending of the mortgage forbearance program, more inventory will appear next year compared to this year.
