Sluggish sales pushing prices down for builders
The U.S. homebuilding scene is not exactly booming right now, but there are bright spots depending on where you look.
According to the monthly BTIG/HomeSphere survey -- which culls data from approximately 75 to 150 small- to mid-sized homebuilders who sell roughly 25 to100 homes per year throughout the nation -- overall homebuilding conditions weakened in July, though business varied widely across states.
According to the report, sales performance remained steady from last month. Thirty-two percent of respondents reported year-over-year increases in sales in July. However, 38 percent saw sales as worse than expected -- BTIG/HomeSphere's "weakest reading" since January 2023 and up considerably from 23 percent who shared the same sentiment last month.
Overall, that data reveals that pricing cooled, and incentive use increased. The number of respondents raising some, most or all base prices dropped to 20 percent, which is the lowest level of the year. Meanwhile, the percentage of builders increasing some, most or all sales incentives reached 28 percent, the highest level of the year.
Despite plenty of negative sentiment to go around, there are bright spots. South Carolina and Indiana reported the strongest conditions, and Arizona's data skewed positive. Florida, however, lagged behind.
BTIG’s Carl Reichardt says: “The Florida market is struggling, but some builders reported renewed activity due to lower interest rates.”
Reichardt points out that "volatile interest rates and seasonal slowdowns" may signal more mixed results ahead.
More highlights from the report include:
July sales and traffic trends weakened compared to June.
Thirty-two percent of respondents reported year-over-year increases in sales. However, reported increases were up from 24 percent in June 2023.
Thirty-six percent saw year-over-year decreases in orders vs. 30 percent last month and 42 percent for June 2023.
Thirty-one percent reported a year-over-year traffic increase, and 34 percent saw a decline, compared to 37 percent and 26 percent last month and 30 and 31 percent in July 2023, respectively.
Sales and traffic performance relative to expectations declined, especially in sales.
A quarter of respondents saw sales as better than expected vs. 27 percent in June, while 38 percent saw sales as worse than expected vs. 23 percent last month.
Twenty-six percent of builders saw traffic as better than expected vs. 30 percent in June, while 34 percent reported that traffic was worse than expected, up from 22 percent last month.
Fewer builders increased base prices in July, while increased incentives reached the highest level year-to-date.
Just 20 percent of builders surveyed raised “most/all/some” base prices, the lowest reading this year and a 3 percent drop from last month. Meanwhile, 17 percent lowered “most/all/some” base prices vs. 16 percent last month.
Twenty-eight percent increased incentive use, and 2 percent decreased use, compared to 26 percent and 5 percent last month.
South Carolina builders were almost uniformly positive, while Florida builders reported "fragile" conditions. Indiana and Wisconsin skewed positive, while Illinois and Virginia builders were largely negative.
