January a “Giant” Month for Home Builders

The latest State of the Industry Report, compiled by BTIG in partnership with HomeSphere, is clear on one thing: January was a terrific month for home builders. The number of builders who reported higher year-over-year sales and traffic quality set new survey records.

At the same time, however, builders reported burgeoning cost pressure in labor and materials, in addition to a decrease in acceptably-priced lots.

Moving forward, input costs are likely to continuing rising as builder inventories have been worked through, and it’s likely builders will be cautious with price pushes as a result of price- and rate-sensitive customers. However, as long as interest rates remain low, BTIG researchers see little sign that anti-seasonal fourth quarter strength has “stolen” demand from 2020.

Highlights from the latest State of the Industry Report

Sales and traffic. In January, 62 percent of builders reported year-over-year increases in sales orders versus 47 percent in December and 29 percent in January 2019.

Expectations. Despite order strength through the typically slow fall and winter, more builders reported sales and traffic above expectations than behind by over a 3-1 ratio. Forty-eight described sales as better than expected (another survey record) versus 15 percent noting worse-than-expected sales.

Pricing and incentives. There was some seasonal improvement in pricing, though the changes were modest, and there was a sizable decrease in sales incentive use. Sixteen percent of builders raised “most/all” base prices in January from December.

Input costs. Labor and material cost headwinds increased with 35 percent of builders seeing subcontractor costs rise month-over-month versus 30 percent in December. Fifty-five percent of respondents reported rising month-over-month material costs compared to 37 percent in December. Additionally, acceptably-priced lot supply dwindled and overall lot costs rose.

HomeSphere/BTIG State of the Industry Report

HomeSphere partners with the research firm 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 2,600 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: