New home inventories remain very low   

The absolute inventory of new homes continues to fall and is now at 157 thousand (seasonally adjusted); lower than inventory levels in the 1960's. Seasonally adjusted new home inventories remain near 6 months of supply in December the lowest level since March 2006. The average months of supply over the last 48 years is 6.2 so even by this measure the housing picture is improving. Any recovery in the rate of sales would quickly deplete the low absolute inventory level and lead to a significant increase in housing starts (and freight) and perhaps we are nearing a point where this is possible. The vertical bars in the graphs represent recessions.