Home builder survey says investors are returning

According to the HomeSphere/BTIG October regional builder sentiment report, sales improved, while traffic declined, and builders continued to take a more cautious approach to rising prices.

In the meantime, Investors may also be playing a growing role in contributing to demand and price acceleration.

Only 34% of respondents said they raised "most/ all" base prices vs. 35% last month and 3% reported lowering “some” base prices vs 1% in August and September. 

BTIG analyst Carl Reichardt says, “The bottom line is that demand is not as robust as earlier in 2021, but the environment remains healthy.”

A special question was raised this month about investor activity, specifically what percentage of homes were being sold as investment properties as opposed to a traditional consumer planning to live in the home. 

While 68% of respondents reported either 0% or 1-10% of sales were to investors, 10% of respondents said that 41%+ of sales were to investors. Demand for single-family rentals is soaring as rent prices climb, the report says.

Reichardt said he believes the survey results will align with the NAHB Housing Market index (HMI), to be released 11/16/21, saying: “Our survey results suggest…the HMI should come in at or better than last month’s reading of 80.”

Additional information from the latest report includes:

• Sales: Sales indicators improved, while traffic indicators declined in October. 42% of respondents reported that orders increased year/ year vs. 34% last month and 76% in October 2020. 
• Expectations: Both sales and traffic relative to expectations increased after dropping for two months. 41% reported sales as better than expected vs. 24% last month and 38% reported saw traffic as better than expected vs. 29% last month. 
• Pricing & Incentives: The number of builders raising prices increased slightly, while the use of sales incentives continues to be sporadic. 77% of builders raised some, most, or all base prices in October vs. 67% in September. 
• Special Question; Investor Activity: Respondents were asked what percentage of homes were being sold as investment properties as opposed to a traditional consumer. 10% of builders responded that over 40% of sales were to investors. We believe investors are playing a potentially growing role in both demand and price increases.

The full HomeSphere/BTIG report for October is available here.