Report: Nearly Half of All Builders Affected by Interest Rate Hikes

April 21, 2022


Although demand has remained steady, rising mortgage rates have begun to negatively impact the housing market, according to the latest State of the Industry Report, compiled by HomeSphere and BTIG. Approximately 42% of builders said interest rates had a negative impact on sales and traffic for March. That compares to January, when only 21.7% believed interest rates were negatively affecting their business. 

The percentage of home builders who have said interest rates have had no measurable impact has steadily decreased since January. For March, 34.2% said rates have had a modestly negative impact, up from 19.4% for February. Still, only 7.6% indicated that rates have had a significantly negative impact, up from 5.6% for February. Interestingly, 8.9% also reported that rates have had a positive impact. This could be because buyers are attempting to beat even higher future rate increases.

Graph showing whether interest rates are impacting home builder business
Source: HomeSphere, BTIG Research

While builders continue to benefit from a short supply environment, BTIG analyst Carl Reichardt expects demand to slow if rates do not lower. As a result, Reichardt accurately predicted the NAHB/Wells Fargo Housing Market Index would come in around 77 for April, slightly below February (79). 

Highlights from the latest State of the Industry Report

Sales and traffic. Sales picked up slightly, with 46% of respondents reporting year-over-year increases in sales versus 44% for February. Traffic decreased slightly, with 44% reporting an increase in year-over-year traffic compared to 47% for February.  

Expectations. Overall sales relative to expectations dropped, while traffic remained in-line with last month. 34% saw sales better than expected versus 39% for February, and 17% of respondents saw sales worse than expected, compared to 10% for February. Though traffic remained static, the overall ratio of “better than expected” and “worse than expected” continues to skew to “worse.” 

Pricing and incentives. Despite price sensitivity among consumers, 86% of builders raised some, most or all base prices in the past month. This is down substantially from 95% in March 2021. The use of sales incentives remained limited and was relatively unchanged from February.  

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:

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