Demand for New Homes Levels Out as the Summer Season Begins

June 22, 2023

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As summer approaches, trends for mid-market, private builders seem to be leveling out, as reported in the most recent HomeSphere/BTIG State of the Industry Report. This outlook diverges from the latest NAHB/Wells Fargo Housing Market Index (which came in at 55), suggesting it's possible that large, public builders are seeing more strength in demand due to aggressive pricing activity.

From the report, builders reported a 34% year-over-year increase in sales orders, while 39% saw a decline—a 5% decrease from the prior month. Year-over-year traffic was also flat with builders reporting a 30% increase in traffic and 38% decline, compared to 34% and 27% in the previous month.

Source: HomeSphere, BTIG Research
Source: HomeSphere, BTIG Research

Sales trends flattened in May. While the number of builders reporting year-over-year growth in new contracts slightly increased, the number of builders reporting a year-over-year decline in new contracts increased as well. It was noted that the percentage of builders reporting year-over-year growth was the highest since March 2022 and stronger results for this month were expected given the easing comparisons and positive anecdotal public builder feedback.

Source: HomeSphere, BTIG Research
Source: HomeSphere, BTIG Research

BTIG analysts will be watching this month's activity closely to see how it compares to national builder data, and if results are more in line with each other or continue to diverge.

Highlights from the latest State of the Industry Report

Sales trend flattens and traffic trend decreases sequentially. 34% of respondents reported yr/yr increases in sales orders per community vs. 31% last month and 19% in May 2022. However, 39% saw a yr/yr decrease in orders vs. 34% last month and 53% for the same month last year. 30% reported an increase in yr/yr traffic at communities; 38% saw a decline vs. 34% and 27%, respectively, last month.

Sales and traffic performance relative to internal expectations weakened in May. 37% of respondents saw sales as better than expected; 26% saw sales as worse than expected (positive vs. negative spread of +11). Last month, 38% of respondents saw sales better than expectations and 20% saw worse (pos. spread of +18). 35% of builders saw traffic as better than expected, while 23% of builders saw traffic as worse than expected (pos. spread of +12). This compares to 42% and 15%, respectively, last month (pos. spread of +37).

Builders pricing activity and the use of incentives remains mixed. 33% of builders reported raising either "most/all" or "some" base prices vs. 30% last month, while 19% of builders lowered "most/all" or "some" base prices vs. 17% last month. 27% of respondents reported increasing "most/all" or "some" incentives vs. 22% last month, while only 3% reported decreasing "most/all" or "some" incentives vs. 7% last month. We note that no builder reported decreasing "most/all" incentives in May.

HomeSphere/BTIG State of the Industry Report

HomeSphere partners with the global investment bank 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 2,700+ 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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