Builders Say Demand Picked Up February as Spring Selling Season Begins

More builders reported sales and traffic above last year than in January in our latest State of the Industry Report, compiled with BTIG. Similarly to January, builders said they have yet to see higher interest rates having a measurable effect on business, though 25% did report that they believe rates had a negative impact in February.  

The survey also revealed some pricing moderation, with a smaller percentage of builders raising prices in February despite higher material costs and a shortage of available homes. This is a positive as it decreases the risk of “negative feedback loop” in which builders reduce price and potentially depress, rather than increase, demand.  

As the report states, the bottom line is that demand appears to be healthy as builders enter the spring selling season, though builder pricing activity, higher interest rates and potential impact from the war in Ukraine will continue to be closely watched.  

Highlights from the latest State of the Industry Report

Sales and traffic. Sales and traffic indicators saw a pickup in February. 44% of respondents reported year-over-year increases in sales compared to 41% for January and 65% in February 2021. 24% saw a year-over-year decrease in orders compared to 26% for January and 8% for the same month last year. Meanwhile, 47% reported an increase in year-over-year traffic at communities, while 21% saw a decline. This compares to 42% and 20%, respectively, for January. 

Expectations. Both sales relative to expectations and traffic relative to expectations increased in February. 39% of respondents saw sales as better than expected versus 28% last month, while 10% saw sales as worse than expected compared to 14% last month. 38% saw traffic as better than expected versus 32% last month, while 10% of builders saw traffic as worse than expected compared to 11% last month. The better-minus-worse expectations ratio for both indicators continues to be positive and the gap increased to nearly 4x more positive than negative in February. 

Pricing and incentives. The number of builders raising prices decreased in February, while the use of sales incentives remained limited and was relatively unchanged from January. 85% of builders raised some, most, or all base prices in February from January (89% last February). This is down from 93% last month and the peak of 100% of builders in May 2021. 9% of builders increased "most/all" or "some" incentives versus 8% last month and 3% last year. 

Interest rates. Builders were once again asked about the impact of higher interest rates on sales/traffic since the beginning of the year. Results were similar to January as 62.5% of builders have yet to see higher rates have a measurable impact on business versus 66% last month. 25% of respondents believe higher rates have had a negative impact (i.e., a decrease in sales or traffic/increase in order cancellations) versus 21.7% last month, while 12.5% of respondents believe that higher rates have had a positive impact (i.e., an increase in sales or customer traffic as potential buyers attempt to "beat" future interest-rate increases) versus 12.3% in January. 

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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