The following article discusses both new and existing home supply. Here is a short excerpt on new homes … From Robbie Whelan at the WSJ: Supply of Homes Set to Grow Home builders … are stuck with thousands of acres that are prone to lose value as the market struggles. Many will build homes on the land, rather than write off its value and wait for the market to improve. … “They’re discounting the homes, they’re making very small profit margins, but they’re building homes.” [said Brad Hunter, chief economist at Metrostudy] … Other indicators also point to builders preparing to increase home construction, despite lagging sales. The number of finished vacant lots, or parcels of land that have been developed and readied for building, stands at about 1.2 million nationwide, according to Metrostudy, or just 5% below the peak in late 2008. In some communities with excess supply, home builders are competing with the distressed sales by building smaller homes.

Read more here – Home builders to start building more homes?