August Brings Modest Improvement in Builder Activity Amid Lower Mortgage Rates
September 19, 2024
Overall, builders reported that business conditions in August were slightly firmer than in July for the HomeSphere/BTIG State of the Industry Report. While 29% of builders saw year-over-year sales rates increase in August (down from 32% in July), only 23% experienced a decline, a notable improvement from 36% in July.
Additionally, 25% of builders reported worse-than-expected sales, down from 38% the previous month. Traffic also saw gains, with 37% of builders reporting a year-over-year rise in August, up from 31% in July.
The number of builders raising base prices fell to the lowest point this year (15%), while the percentage increasing sales incentives hit the second-highest level of the year (27%). When asked about the effect of lower mortgage rates (down 53 basis points to 6.20% over the past six weeks), 44% of builders reported a "modestly positive" impact, 9% saw a "strongly positive" effect, while 40% noted no impact, and 7% observed a "negative" impact, as some customers expect further rate declines and are delaying purchases.
Regionally, business conditions were strong in Ohio and Oklahoma, but more pessimistic in Georgia. Florida remained sluggish, and Texas and Arizona showed mixed results. In summary, while lower rates have modestly boosted activity, the improvement follows a soft July. The latest NAHB/Wells Fargo Housing Market Index (released September 17, 2024) came in at 41, up from 39 in August.
Highlights from the latest State of the Industry Report
Sales & traffic. August sales showed less softness than July. 29% of respondents reported yr/yr increases in sales orders vs. 32% in July, but 23% saw a yr/yr decrease in orders in August vs. 36% in July. Traffic improved. 37% of builders reported an increase in yr/yr traffic at communities while 23% saw a decline vs. 31% and 34%,
respectively, last month.
Sales & traffic relative to expectations. Business compared to expectations improved in August compared to July. 26% of respondents saw sales as better than expected (26% in July as well), but 25% saw sales as worse than expected vs. 38% last month resulting in a material change in the better-minus-worse spread to +1 vs. -12. 23% of builders saw traffic as better than expected, and 24% saw traffic as worse than expected (a better-minus-worse spread of -1). This compares to 26% better and 34% worse last month (spread of -8).
Base pricing & incentives. Fewer builders increased base prices in August compared to July; builders who increased incentives reached the second highest level YTD (highest level in July). 15% of builders reported raising either "most/all" or "some" base prices, down from 20% last month; 18% reported lowering "most/all" or "some" base prices vs. 17% in July 2024. 27% reported increasing "most/all" or "some" incentives vs. 28% last month; 5% reported decreasing "most/all" or "some" incentives vs. 2% last month.
Regional color / interest-rate drop impact. While the small number of responses per state often makes us reticent to reach conclusions about specific markets, we note that OH builders were almost uniformly positive on their market. GA builders reported weak conditions. We also note 53% of respondents said lower rates in the
last month had at least a modestly-positive impact on sales and traffic.
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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