Home Builders: End-of-Year Demand Slows as Pricing Activity Picks Up
January 18, 2022
The latest State of the Industry Report, compiled with BTIG, suggests that while sales and traffic decreased in December, the year concluded with a seasonally healthy demand environment. While builders are continuing to take a more cautious approach to price increases than earlier in the year, half of respondents said they raised "most/ all" base prices compared to 42% for November. Alternately, only 3% reported lowering “some” base prices compared to 1% in August and September.
As stated in the report: “The bottom line is that we might have expected slightly stronger results this month given anti-seasonal strength seen earlier this winter, but the demand environment remains healthy. Builder expectations for 2022 are optimistic despite a tight land, labor and materials market.” Based on the survey results, BTIG analysts predicts the NAHB/Wells Fargo Housing Market Index may remain at or decrease from last month’s reading of 84.
Highlights from the latest State of the Industry Report
Sales and traffic. Sales and traffic indicators decreased, with 42% of respondents reporting order increases year-over-year versus 57% for November and 55% in December 2020. Meanwhile, 43% reported an increase in traffic year-over-year compared to 55% for November.
Expectations. Both sales and traffic relative to expectations decreased after increasing for two straight months. Broken down, 38% reported sales as better than expected versus 47% for November, and 40% reported traffic as better than expected compared to 43% for November.
Pricing and incentives. The number of builders raising prices increased in December and is at the highest level since July. Meanwhile, the use of sales incentives decreased. According to the report, 83% of builders raised some, most, or all base prices in December versus 74% in November — down from the peak of 100% in May 2021. Incentive use decreased as 8% of builders increased “most/all” or “some” incentives compared to 15% for 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.
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