Builders Still Seeing Demand Environment, Pricing Power Remains

Builders are still seeing demand for new homes as their pricing power remains remarkably strong according to our latest State of the Industry report, compiled with BTIG. At the same time, all respondents reported increased materials costs for the second consecutive month.  

When it came to pricing, a record high number of builders, at 80 percent, reported that they had raised most or all base prices. Meanwhile, 100 percent of respondents reported widespread material, labor and land costs, noting month-over-month increases. 

Still, sales and traffic trends remained strong, notably in comparison to 2020 when COVID-19 operational shutdowns were severely impacting results.  

Our findings continue to align with the NAHB/Wells Fargo Housing Market Index, which came in at 83 for May, holding steady from April. As NAHB found, building materials were a top concern even as builders remain confident thanks to a lack of resale inventory, low mortgage rates and a growing pool of prospective buyers.  

Highlights from the latest State of the Industry Report

Sales. In April, 72 percent of respondents reported year-over-year increases in sales compared to 70 percent for March and 22 percent for April 2020. Only 12 percent saw a decrease in sales. Meanwhile, a survey record high of 76 percent reported an increase in year-over-year traffic.  

Traffic. A survey record high of 76 percent reported an increase in year-over-year traffic, compared to 67 percent for March. Six percent reported a year-over-year decline compared to 12 percent for March. Better quality of traffic on a year-over-year basis also increased to 67 percent in April from March and 36 percent from 2020.  

Expectations. Both sales relative to expectations and traffic relative to expectations decreased from March, likely from heightened expectations due to strong demand. Fifty-five percent of builders reported sales as better than expected, down from 60 percent for March. Fifty-six percent reported traffic as better than expected, down from 62 percent for March.  

Pricing and incentives. The number of builders raising prices continues to be robust, while the use of incentives continues to drop. In April, 94 percent of builders raised some, most or all base prices from March. That’s one percentage down from the number of builders who bumped at least some bases sequentially for March. For the fifth straight month, no builders reported lowering most, all or some base prices. No builder reported increasing more or all incentives for the seventh straight month.  

Costs. All builder respondents reported rising material costs, holding steady from last month’s report. Elevated material costs still appear to be largely due to lumber prices. Sixty-four percent of builders reported month-over-month increases in labor costs, while 69 percent reported month-over-month increases in land. That compares to 79 percent and 66 percent, respectively, for March. For lots, 29 percent of respondents reported increased availability of acceptably priced lots on a year-over-year basis compared to 20 percent for March. It’s possible that higher home prices in the first quarter of the year is allowing a few more land deals to pencil.  

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 2,700+ 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: