Builders Report No Sizable Impact on Sales From Interest Rates in January

The majority of builders surveyed for the latest State of Industry Report, compiled by HomeSphere and BTIG, indicated that rising interest rates did not have a measurable impact on sales in January. Meanwhile, builders did report rising prices, likely due to higher material costs and a shortage of available homes.  

In our special question, 66% of builders said they have yet to see a measurable impact from interest rates, while 21% noted a negative impact and, interestingly, 12% noted a positive impact. 

The number of builders reporting price hikes jumped to the highest level seen since June 2021, with 64% of respondents reporting that they raised "most/ all" base prices compared to 50% last month. 

In sales and traffic, numbers remained stable from December to January, but year-over-year order increases were down dramatically. Sales and traffic relative to expectations also decreased to the lowest levels since September 2021.  

As noted in the report, “The demand environment remains healthy, but we are closely watching consumers’ response to both higher interest rates and builder price increases, especially as the ‘traditional’ U.S. new home spring selling season starts after the Super Bowl.” Based on responses, BTIG analysts predicted the NAHB Housing Market Index would come in below last month’s reading of 83, which was confirmed by the latest NAHB/Wells Fargo Housing Market Index released this week, coming in at 82.  

Highlights from the latest State of the Industry Report

Sales and traffic. Sales and traffic indicators were relatively consistent with December, but much lower than one year ago. 41% of respondents reported order increases year-over-year compared to 42% in December and 70% in January 2021. 42% reported an increase in traffic year-over-year versus 43% in December and 66% in January 2021.  

Expectations. Both sales and traffic relative to expectations decreased to the lowest levels since September 2021. 28% reported sales as better than expected versus 38% for December, while 32% saw traffic as better than expected compared to 40% the in previous survey.  

Pricing and incentives. The number of builders raising prices increased in January and is at the highest level since June 2021, while the use of sales incentives remained limited. 93% of builders raised some, most, or all base prices in January compared to 83% in December — down from the peak of 100% in May 2021. 8% of builders increased “most/all” or “some” incentives, unchanged from December, compared to 13% last year.  

Interest rates. A special question was asked this month about the impact of higher interest rates on sales/traffic since the beginning of the year. 66% of builders have yet to see higher rates having a measurable impact on business, while 21% of respondents believe higher rates have had a negative impact (i.e., a decrease in sales or traffic or increase in order cancellations) and 12% of respondents believe that higher rates have had a positive impact (i.e., an increase in sales or traffic as potential buyers attempt to “beat” future interest rate increases).  

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: