Business Conditions Are Showing Clear Signs of Improvement
March 16, 2023
The latest HomeSphere/BTIG State of the Industry Report indicates that based on a combination of positive survey results and builder comments, the operating environment is gaining momentum as builders enter into the spring selling season. (Though keep in mind, this data was gathered before a potential fall-out from a bank deposit run contagion.)
For February, 23% of builders reported year-over-year increases in sales orders per community, while 51% saw a decline, which compares to 13% and 54%, respectively, in January.
While the number of builders reporting sequential growth year-over-year in new contracts in February remained weak, the percentage of builders reporting year-over-year growth was the highest since June 2022.
Sales relative to expectations and traffic relative to expectations saw an improvement from January. It was noted that in the first time in 10 months, builders no longer see sales as worse-than-expected versus better-than-expected. Additionally, now more builders see traffic as better-than-expected versus worse-than-expected, which is an important change point.
BTIG analysts believe the NAHB/Wells Fargo Housing Market Index gauging builder sentiment will likely come in higher than the current Factset consensus expectation of 40 (the prior month reading was 42).
Highlights from the latest State of the Industry Report
Sales and traffic trends are still soft year-over-year on hard comps, but are picking up sequentially. 23% of respondents reported year-over-year increases in sales orders per community versus 13% for February and 44% in February 2022. 51% saw a year-over-year decrease in orders versus 54% for February and 24% for the same month last year. 19% reported an increase in year-over-year traffic at communities; 45% saw a decline. This compares to13% and 53%, respectively, for February.
Sales and traffic performance relative to internal expectations see a noticeable change point. For the first time in 10 months, builders no longer see sales as worse than-expected versus better-than-expected. Additionally, now more builders see traffic as better-than-expected versus worse-than-expected. 27% of respondents saw sales as better than expected, while 27% saw sales as worse than expected. In February, 21% of respondents saw sales better than expectations and 38% saw worse. 27% of builders saw traffic as better than expected, while 20% of builders saw traffic as worse than expected (19% and 29%, respectively, for February).
Builders overall continue to cut base prices and use incentives, but some are raising prices and reducing incentives. The number of builders raising prices increased somewhat as 27% of builders reported raising either "most/all" or "some" base prices versus 17% last month. 30% of builders lowered "most/all" or "some" base prices versus 31% last month. Incentive use declined, but remained somewhat elevated as 23% of respondents reported increasing "most/all" or "some" incentives versus 30% for February.
HomeSphere/BTIG State of the Industry Report
HomeSphere partners with the global investment bank 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:
