Home Builders Expect a Solid 2021, Modest Shift in Entry-Level Mix

Home builders are expecting a solid 2021 according to our latest State of the Industry report, composed by the research firm BTIG. In fact, more than one in five forecasted growth over 20 percent, while more than half expect at least 10 percent growth.  

These numbers are in line with 2020 expectations, which featured similarly high hopes. In all, 80 percent of respondents expect positive sales growth, while only about six percent expect sales to be down.  

Our survey, which featured 87 respondents, also indicated builders expect to somewhat shift their mixes, on average, to lower price points. Twenty-eight percent suggested their entry-level mix will grow either “substantially” or “modestly.” At the same time, 18 percent expect to offer “substantially” or “modestly” more move-up or luxury products.  

When it comes to costs, builders indicated that the biggest input cost challenge will be materials over land or labor.  

Toward that, lumber prices were one reason the NAHB/Wells Fargo Housing Market Index, which measures builder confidence, fell three points to 83 this month. However, that number still represents a strong confidence level — the survey high was 78 pre-2020.  

Highlights from the latest State of the Industry Report

Sales and traffic. While sales and traffic are above 2019 levels, they fell in December to the lowest levels since May 2020. Fifty-five percent of builders reported year-over-year increases in sales orders, down from 63 percent in November. Meanwhile, 46 percent reported an increase in year-over-year traffic, down from 62 percent in November. Some builders indicated they’ve been purposefully slowing sales due to extended backlogs which could impact survey results as well.   

Expectations. Forty-five percent of builders saw sales as better than expected in December compared to 57 percent in November. Thirty-six percent reported better traffic than expected compared to 44 percent in November.   

Pricing and incentives. More builders raised prices in December, with 74 percent raising some, most or all base prices, compared to 68 percent from November to December. Only 38 percent of builders raised prices in December 2019. Incentive use remains low, and anti-seasonally so. Only 10 percent of builders increased some, most or all sales incentives in December compared to 28 percent in December 2019.  

Input costs. More builders reported material cost increases in December after a dip the previous month. Eighty-five percent of respondents reported rising material costs compared to 67 percent in November. For month-over-month increases in labor and land, 50 percent and 44 percent reported rising costs, respectively. That compares to 39 percent and 48 percent in November.  

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: