Slow Sales/Traffic Trends Lowers Builder Expectations
October 19, 2023
In the latest HomeSphere/BTIG State of the Industry Report sales and traffic trends remained sluggish and builders lowered their expectations.
As the market enters the final months of the year, builders continue to report sluggish sales and traffic trends and report both as worse than expected. In addition to higher interest rates, builders also noted low lot inventory as issues they are currently experiencing. BTIG noted private builders tend to build homes at a higher price point compared to public builders, contributing to low demand brought on by higher interest rates.
Sales increased slightly to 28% from 26% in August, however 44% of builders reported a decrease. Additionally, builders saw a slight change to traffic trends. Builders reported a 21% increase in traffic, and 39% saw a decrease compared to 21% and 40% in August. Builders lowered expectations as a results. Nineteen percent of builders saw sales as better than expected, however 30% saw sales as worse than expected.
A question about housing starts expectations in 2024 relative to 2023 was added to this month's survey, which gave a little lift to the current situation. Nearly half of respondents plan to increase starts in 2024, while the other half expect flat starts or plan to decrease starts in the new year.
The latest NAHB/Wells Fargo Housing Market Index (released Oct. 17, 2023) came in at 40, another drop as demand trends continue to decline.
Highlights from the latest State of the Industry Report
Sales trends remain consistent with August; traffic trends improve. Both remain sluggish. 28% of respondents reported year-over-year increases in sales orders per community vs. 26% last month and 7% in September 2022. 44% saw a year-over-year decrease in orders vs. 44% last month and 63% for the same month last year. 27% reported an increase in year-over-year traffic at communities; 39% saw a decline vs. 21% and 40%, respectively, last month.
Sales and traffic performance relative to internal expectations were worse than August. 19% of respondents saw sales as better than expected; 30% saw sales as worse than expected (negative spread of -11). Last month, 28% of respondents saw sales better than expectations and 25% saw worse (positive spread of +3). 24% of builders saw traffic as better than expected, while 31% of builders saw traffic as worse than expected (negative spread of -7). This compares to 19% and 20%, respectively, last month (negative spread of -1).
Builders pricing activity and the use of incentives remains mixed. 20% of builders reported raising either "most/all" or "some" base prices vs. 21% last month. 24% lowered "most/all" or "some" base prices vs. 26% last month. 28% reported increasing "most/all" or "some" incentives vs. 31% last month, while 5% reported decreasing "most/all" or "some" incentives vs. 5% last month.
Roughly half of builders expect to increase starts in 2024. 47% of respondents plan to increase starts in 2024, with 25% planning to grow starts >10%. Conversely, 20% of respondents believe that starts activity will decrease in 2024, with 7% believing starts will decrease by >10%. 33% of builders believe activity will be flat year-over-year.
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.
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