Demand for New Homes Robust as Builders Raise Prices
August 24, 2020
Our latest State of the Industry Report, compiled by BTIG, saw a survey-record high in the number of builders reporting year-over-year sales growth, while more builders indicated increased pricing power and rising material costs due to lumber.
The survey included 99 responses from small to midsized home builders — 73 percent of whom reported year-over-year sales growth, up from 60 percent in June and 51 percent in 2019. Sixty-six percent of builders also reported raising some, most or all base prices in July versus 44 percent in June. Unsurprisingly, 85 percent of builders noted rising month-over-month material costs because of surging lumber prices.
In another record high, 67 percent of builders indicated that the quality of buyer traffic was better than 2019, suggesting buyers are more serious about quickly purchasing a home than they were pre-pandemic.
The survey also included a special question on out-of-state buyers with responses indicating that out-of-state purchases have grown. In 2019, only two percent of builders reported that 50 percent or more of their sales were from out-of-state buyers. That percentage rose to 10 percent this year.
Highlights from the latest State of the Industry Report
Sales and traffic. Sixty percent of builders reported an increase in year-over-year traffic, while 24 percent reported declines. That compares to 48 percent and 31 percent, respectively, in June.
Expectations. A survey record number of builders at 71 percent saw sales as better than expected compared to 56 percent in June. Fifty-six percent saw traffic as better than expected compared to 50 percent in June.
Pricing and incentives. As indicated, builders are raising prices, while only four percent lowered some, most or all prices. That compares to two percent in June. When it came to incentives, 13 percent increased some, most or all sales incentives compared to 12 percent in June and 25 percent in July 2019.
Input costs. Forty-three percent of builders reported rising month-over-month land costs, while 31 percent reported increased labor costs.
HomeSphere/BTIG State of the Industry Report
HomeSphere partners with the research firm BTIG to create a monthly report to provide our builders and manufacturers with exclusive and timely insights about the market.
To compile the report, we survey HomeSphere’s 2,600+ regional and local home builders about sales, traffic, pricing, labor costs and other key industry metrics.
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