Builders Focus on Pricing Strategies As Demand Dips
June 26, 2024
In the most recent HomeSphere/BTIG State of the Industry Report, the demand for new homes experienced a slight decline. As the traditionally slower summer season approaches, more builders are turning their attention to pricing strategies to maintain competitiveness and stimulate sales.
The percentage of respondents reporting year-over-year increases in sales orders per community decreased to 33% from 35% in April. However, this is only a slight drop from the 34% reported in May 2023. Conversely, the percentage of respondents reporting a decrease in orders rose to 26% from 24% in April, but it remains significantly lower than the 39% seen in May 2023.
In addition, the percentage of builders reporting an increase in year-over-year traffic at communities fell to 35% from 38% in April, yet it is still higher than the 30% reported in May 2023. The percentage of builders noting a decline in traffic increased slightly to 26% from 25% in April, but it is a marked improvement from the 38% seen in May 2023.
May saw a notable shift in pricing activity, with more builders lowering base prices while fewer increased them compared to April. The need to offset high raw material costs and adapt to fluctuating interest rates is driving flexible pricing and incentive strategies. As the market moves into the slower summer months, these trends highlight the importance of ongoing market vigilance.
The latest NAHB/Wells Fargo Housing Market Index (released June19, 2024) came in at 43.
Highlights from the latest State of the Industry Report
Sales & traffic. May sales and traffic indicators inched slightly lower compared to April. 33% of respondents reported yr/yr increases in sales orders per community vs. 35% last month and 34% in May 2023. 26% saw a yr/yr decrease in orders vs. 24% last month and 39% for the same month in 2023. 35% of builders reported an
increase in yr/yr traffic at communities and 26% saw a decline vs. 38% and 25%, respectively, last month and 30% and 38%, respectively, in May 2023.
Sales & traffic relative to expectations. Business compared to expectations is balanced. 27% of respondents saw sales as better than expected; 26% saw sales as worse than expected — a better minus worse spread of just +1. Last month, this spread was +10. 27% of builders saw traffic as better than expected, and 27% saw traffic as worse than expected (a better minus worse spread of 0). This compares to 28% and 20%, respectively, last month (spread of +8).
Base pricing & incentives. Base pricing activity weakened in May from April; incentives were mixed with more builders both increasing & decreasing them. 32% of builders reported raising either "most/all" or "some" base prices, down from 40% last month but 19% reported lowering "most/all" or "some" base prices vs. just 7%
in April 2024. 24% reported increasing "most/all" or "some" incentives vs. 21% last month; 9% reported decreasing "most/all" or "some" incentives vs. 6% last month.
Regional color. While the relatively small number of responses per state make us normally reticent to reach conclusions about specific markets, BTIG notes that North Carolina, South Carolina and Washington builders were the most uniformly positive on their markets, with Missouri and Colorado builders the most negative. Florida — a state much in the news for a build-up of existing home inventory plus high insurance costs slowing housing demand — saw mixed results among our survey respondents. Georgia — which had been seeing weaker conditions in recent surveys — improved in May.
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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