Survey: Record High Pricing and Traffic, but Backlogs Are Brewing
March 25, 2021
In our latest State of the Industry report, compiled with BTIG, a record high 89 percent of builders reported raising some, most or all base prices in February as compared to January. Material, labor and land costs all remain elevated, and a growing number of builders are reporting that finding acceptably priced lots is difficult.
Also at record highs: traffic. A survey-record high 75 percent of builders reported an increase in year-over-year traffic at communities.
Builders were also asked this month about the impact of higher mortgage rates. It seems higher rates have not yet meaningfully impacted business but, combined with elevated input costs, could threaten builder optimism in the future.
Overall, builder business remains very strong, but it's likely that builders may purposefully slow sales due to extended backlogs, leading to slower order growth in the second quarter of 2021. This month’s survey included responses from 72 builders located throughout the U.S.
Highlights from the latest State of the Industry Report
Sales. 65 percent of respondents reported year-over-year increases in sales orders per community compared to 70 percent in January and 62 percent in February 2020. Only eight percent saw a year-over-year decrease in orders versus six percent in January and eight percent for the same month last year.
Traffic. While 75 percent of builders reported an increase in year-over-year traffic at communities, eight percent saw a decline. This compares to 66 percent and 12 percent, respectively, for January. Quality of traffic also improved: those reporting better quality increased to 68 percent in February versus 63 percent for January.
Expectations. Forty-three percent saw sales as better than expected versus 61 percent for January, while only four percent saw sales as worse than expected (compared to three percent for January). A survey-record high (tied with September 2020) of 58 percent saw traffic as better than expected compared to 54 percent in January. Six percent saw traffic as worse than expected compared to three percent for January.
Pricing and incentives. The number of builders raising prices continues to rise and the use of incentives continues to drop. Eighty-nine percent of builders raised some, most or all base prices in February from January compared to 85 percent bumping bases sequentially in our last report and only 48 percent last February. For the third straight month, no builders reported lowering “most/all” or “some” base prices, and no builder reported increasing “most/all” incentives for the fifth straight month.
Costs. Costs remain elevated, although fewer builders reported labor and land cost increases than last month. Ninety-five percent of builders reported rising material costs vs. 94 percent for January and 64 percent last year. Sixty percent and 58 percent of respondents reported month-over-month increases in labor and land, respectively, compared to 65 percent and 60 percent for January.
Interest rates. When builders were asked if higher mortgage rates had impacted business over the last few weeks, 64 percent said no, while 19 percent reported a negative impact. Seventeen percent saw a positive impact. Of those reporting a negative impact, 18 percent reported a “modest” negative impact from rates. Only one percent noted a “significant” negative impact.
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.
How to get the monthly report
If you are a builder and would like to participate and receive the monthly report for free, request an invitation below: