Builders Report Intentionally Slowing Business, See Homebuyer Pushback on Pricing

While builders reported in our latest State of the Industry Report, compiled with BTIG, that they are continuing to push on price, absolute sales trends took a drop in May, though they remain favorable.  

A survey record high of all respondents said they raised some, most or all base prices last month, even as builders are starting to report that rising prices are becoming a drawback for homebuyers. The increase in prices is partly to cover widespread material, labor and land costs. At the same time, the ability to find acceptably priced lots also decreased from a bump up in April.  

Numerous respondents also reported deliberately slowing business so they can match demand with production capacity.  

Still, builders continue to report solid-to-strong core demand, and it’s likely builders will begin moderating price increases now.  

Highlights from the latest State of the Industry Report

Sales. In May, 48 percent of respondents reported year-over-year increases in sales compared to 72 percent for April and 47 percent for May 2020. Only 15 percent saw a year-over-year decrease compared to 12 percent in April and 27 percent in 2020.  

Traffic. Sixty-seven percent of builders reported a year-over-year increase in traffic while 12 percent saw a decline. That compares to 76 percent and six percent, respectively, for April. Builders reporting better quality of traffic also decreased year-over-year to 54 percent in May from 67 percent in April.

Expectations. Both sales relative to expectations and traffic relative to expectations decreased from April. Thirty-seven percent of respondents saw sales as better than expected compared to 55 percent for April, while 17 percent saw sales as worse than expected compared to three percent for April. Thirty-eight percent of respondents reported traffic as better than expected in May compared to 56 percent in April.

Pricing and incentives. All builders raised some, most or all base prices in May from April compared to 94 percent bumping at least some bases sequentially last month. No builder, for the sixth straight month, lowered some, most or all base prices, while no builder, again, increased most or all incentives for the eighth straight month. 

Costs. Ninety-eight percent of builders reported rising material costs, slightly down from all builders in April. It still appears that elevated material costs are centered largely on lumber. Seventy-seven percent and 62 percent of respondents reported month-over-month increases in labor and land compared to 64 percent and 69 percent, respectively, in April. Only 17 percent of respondents reported increased availability of acceptably priced lots year-over-year compared to 29 percent in April and 11 percent in May 2020.  

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: