SURVEY SAYS: 71% of home builders report decreases in sales
While home builders continue to cut base prices and offer incentives in an effort to stimulate housing sales, the demand for single-family homes continues to fall.
According to the monthly HomeSphere/BTIG builder survey, 71% of builders reported year-over-year (YOY) decreases in sales (vs. 16% in November 2021).
Traffic also remained slow with only 8% of builders reporting YOY traffic increases, while 69% saw YOY declines (vs. 70% last month). Just 7% of respondents saw traffic as better than expected, a survey-record low.
“Conditions deteriorated for the third month given higher mortgage rates, fear of falling real estate values, and poor confidence among consumers,” BTIG analyst Carl Reichardt said.
Reichardt added that he believes the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), which measures home builder confidence and is expected to be released on Dec. 19, will come in lower than the current Factset consensus expectation of 35.
The prior month's reading was 33 and one of the lowest readings on record. Since the start of the year, the HMI has declined for 11 straight months.
But despite shaky conditions, 2023 sales expectations were “less negative than we had anticipated,” according to Reichardt.
Here is a summary of findings from the monthly report:
- Sales and traffic trends remain soft: Only 8% of builders reported higher YOY sales vs. 57% in November 2021. 71% saw a YOY decrease in orders vs. 71% last month and 16% in November 2021. Only 8% reported an increase in YOY traffic vs. 11% last month. 69% saw a decline, compared to 70% last month.
- Sales and traffic relative to expectations are also very weak: 10% of respondents saw sales as better than expected, while 50% saw sales as worse than expected. A survey-record low 7% saw better-than-expected traffic, with 42% seeing worse-than-expected traffic (12% and 45%, respectively, last month).
- Builders continue to cut base prices and use incentives: The number of builders raising prices picked up slightly as 15% of builders raised some, most, or all base prices in November, from 12% last month. However, 39% cut some, most or all base prices vs. 47% last month. Incentive use decreased slightly but remained elevated.
- In response to a special question about sales expectations for 2023, 51% of respondents believe new contracts will decrease next year from 2022. 33% of builders believe new contracts will be up in 2023 and 16% believe business will remain flat.
BTIG conducts an electronic survey of approximately 50-100 small to mid-sized home builders that sell, on average, 50-100 homes per year throughout the nation.
Builders are asked about sales, traffic, and cost trends on a year-over-year and month-over-month basis.
Additionally, residential construction firms are asked about their expectations and whether field trends are ahead of, in line with, or below those expectations.
Respondents range from CEOs of builders to operations managers, depending on the firm. The survey has been conducted since October 2017.
