Builders Report Sales Bounce-Back and Record-Level Pricing Power

February 23, 2021

Builders Report Sales Bounce-Back and Record-Level Pricing Power

Our latest State of the Industry Report, which tracks home building trends from the perspective of small to mid-sized home builders across the U.S., indicates sales and traffic bounced back after some deceleration at the end of 2020. Also notable, pricing power came in at record levels, with most respondents reporting raising prices.  

In fact, 85 percent of respondents (of which there were 69 for this report), reported that they raised some, most or all base prices in January from December. That’s tied for the survey record high from December 2017.  

When it came to sales, 70 percent of respondents saw positive year-over-year sales growth, which is up from 55 percent in December and 62 percent in January 2020. Meanwhile, 66 percent of builders reported positive year-over-year traffic, up from 46 percent in December and 53 percent one year ago.  

Overall, results point to a very strong demand environment and are particularly encouraging following the moderation in trends at the end of last year. It’s likely results could have been even better, but some builders have purposefully slowed sales due to extended backlogs. The results are again consistent with the NAHB/Wells Fargo Housing Market Index, which came in at 84 for February, up one point from January.  

Highlights from the latest State of the Industry Report

Sales and traffic. In addition to the figures above, a survey record-low six percent reported year-over-year decreases in sales orders, compared to 11 percent in December and 15 percent in January 2020. Twelve percent of builders reported a decline in traffic on a year-over-year basis, which compares to 18 percent in December. More builders also reported a better quality of traffic in January (with 63 percent seeing an improvement year-over-year) versus December (at 51 percent).  

Expectations. Sixty-one percent of builders saw sales as better than expected compared to 45 percent in December, while 54 percent saw traffic as better than expected. That compares to 36 percent in December.  

Pricing and incentives. Pricing power improved from December, in which 74 percent of builders reported raising most, all or some base prices (compared to 85 percent in January). Some price increases were likely to offset high input costs, while others could be an attempt to purposely slow sales to match sales with production capacity. Meanwhile, incentive use was anti-seasonally low.  

Input costs. More builders reported rising costs, including materials, land and labor, in January than December. Ninety-four percent of respondents reported increases in materials costs compared to 85 percent in December and 55 percent in January 2020. When it came to labor and land, 65 percent of respondents and 60 percent, respectively, reported increased costs. That compares to 50 percent and 44 percent, respectively, in December.  

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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