Demand Trends for New Homes Stay Mixed for Private Builders

August 22, 2023

08-2023 August BTIG Image

In the latest HomeSphere/BTIG State of the Industry Report demand trends for new homes continue to be mixed for private builders.

Builders are reporting a decrease in sales orders, however 31% remain optimistic and reported sales expectations are better than expected, opposed to 24% reporting expectations are worse than expected. This is in comparison to the prior month, 30% respondents saw sales better than expectations and 31% saw sales worse than expected.

Meanwhile, traffic trends are consistent from June. Thirty percent of builders reported year-over-year increases in traffic and traffic expectations fluctuated slightly. It was noted in the report that the use of virtual sales tools have likely improved the quality of traffic, as customers are coming in more prepared with pricing information and needs already determined.

Pricing continues to be mixed with more builders raising prices in July from June than June from May. Thirty-one percent of builders reported raising pricing, compared to 23% last month and 26% last July. In addition, incentive use is mixed, but is somewhat elevated. Twenty-nine percent of builders reported increasing incentives compared to 22% in June. BTIG notes builders have likely kept a careful eye on prices and incentives as they track traffic and builder interest during the key spring selling season.

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

A special question about major obstacles to greater sales was asked this month. Twenty-nine percent of builders noted that sales were as good as they could have been given the current supply and demand conditions. Other contributing factors include high interest rates and home prices as barriers to sales.

08-2023 BTIG Results - Graph 2

As trends continue to be flat for private builders, BTIG noted private builders tend to operate at higher price points relative to larger public builders who have shifted to lower-end product over the last few years.

The latest NAHB/Wells Fargo Housing Market Index (released Aug. 15, 2023) came in at 50, a dip below June and July numbers, suggesting public builder confidence is waning as we exit prime selling months.

Highlights from the latest State of the Industry Report

Sales trends slower; traffic remains consistent sequentially. 24% of respondents reported yr/yr increases in sales orders per community vs. 27% last month and 17% in July 2022. 42% saw a yr/yr decrease in orders vs. 39% last month and 60% for the same month last year. 30% reported an increase in yr/yr traffic at communities; 31% saw a decline vs. 30% and 34%, respectively, last month.

Sales and traffic performance relative to internal expectations is more positive than negative in July. 31% of respondents saw sales as better than expected; 24% saw sales as worse than expected (positive spread of +7). Last month, 30% of respondents saw sales better than expectations and 31% saw worse (negative spread of -1). 31% of builders saw traffic as better than expected, while 24% of builders saw traffic as worse than expected (pos. spread of +7). This compares to 32% and 26%, respectively, last month (pos. spread of +6).

Builders pricing activity and the use of incentives remains mixed. 31% of builders reported raising either "most/all" or "some" base prices vs. 23% last month, while 15% of builders lowered "most/all" or "some" base prices vs. 15% last month. 29% of respondents reported increasing "most/all" or "some" incentives vs. 22% last month, while only 6% reported decreasing "most/all" or "some" incentives vs. 6% last month.

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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