Demand Continues to Normalize, While Builders Purposefully Limit Sales

Sales and traffic trends decreased in September after showing some signs of stabilization in August, according to the latest State of the Industry Report, compiled with BTIG. Almost half of builders (at 47%) continued to indicate that they are also purposefully limiting sales, citing overwhelming supply constraints and uncertainty.  

Builders are also continuing to take a more cautious approach to pricing than the first half of the year, though most are still pushing some prices. Only 67% raised some, most or all base prices in September, which is significantly down from the peak of 100% of respondents in May 2021.  

While optical demand is softening from earlier in the year, more builders are modestly seeing positive rather than negative growth despite difficult year-over-year order comps, which will likely remain challenging until the second half of 2022. Still, there’s a generally orderly transition to a more normal demand environment and results suggest the next Wells Fargo/NAHB Housing Market Index will come in slightly below last month’s reading of 76. 

Highlights from the latest State of the Industry Report

Sales. For September, 34% of respondents reported year-over-year increases in sales orders per community, compared to 49% for August and 67% in September 2020. Meanwhile, 25% saw a year-over-year decrease in orders compared to 19% in August and 6% for 2020.  

Traffic. For traffic, 39% reported an increase in year-over-year numbers while 19% reported a decline (which compares to 44% and 18%, respectively, for August.) 

Expectations. Both sales relative to expectations and traffic relative to expectations dropped. 24% of respondents saw sales as better than expected versus 33% in August, and 16% saw sales as worse than expected compared to 13% in August. 29% saw traffic as better than expected compared to 36% for August. Meanwhile, 9% of builders saw traffic as worse than expected compared to 14%. 

Pricing and incentives. The number of builders raising prices saw a drop-off for the third straight month, although only a slight one, while the use of sales incentives continues to be sporadic, with only 8% of builders increasing “most/all” or “some” incentives. The percentage of builders who reported raising some, most or all base prices in September (67%) compares to 69% in August and 75% last September.

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.

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