Builder Sentiment Improves as Traffic Increases, but Conversion Rates Remain Low
February 27, 2025
In the latest BTIG State the Industry Report, January's housing market showed signs of resilience as builders reported stronger sales and traffic trends compared to December. While buyer interest picked up, conversion rates did not follow suit, highlighting ongoing challenges despite seasonal momentum. Regional performance varied, with some states thriving while others faced headwinds.
In January, builders reported improved year-over-year sales and traffic trends compared to December, with 31% seeing sales increases (up from 28%) and only 22% reporting declines (down from 29%). Traffic was notably stronger, with 46% reporting higher traffic and just 21% seeing declines, compared to 31% for both metrics last month. While sales relative to expectations slightly declined, traffic exceeded internal expectations, mirroring January 2024 trends.
Base price increases continued for the fifth straight month, while sales incentives fell to 15% from 27%, as builders anticipated seasonal buyer interest. Regionally, IN and NC showed strong performance, MO and PA were weaker, FL had mixed results, SC and GA were flat, and TX trended negatively. Overall, builders were encouraged by January's traffic but did not see corresponding increases in conversion rates, consistent with last year’s pattern.
The latest NAHB/Wells Fargo Housing Market Index (released February 15, 2025) fell to 42.
Highlights from the latest State of the Industry Report
Sales & traffic. Overall, builders reported better sales and traffic trends relative to December. 31% of respondents reported yr/yr increases in sales orders, up from 28% sequentially, and 22% saw a yr/yr decrease in orders in January vs. 29% in December. 46% of builders reported an increase in yr/yr traffic at communities while 21% saw a decline vs. 31% and 31%, respectively, last month.
Sales & traffic relative to expectations. Business relative to expectations improved somewhat in January compared to December. 29% of respondents saw sales as better than expected (31% in December), and 15% saw sales as worse than expected vs. 22% last month resulting in a change in the better-minus-worse spread to +14 from +9 and the highest spread since March 2024. 36% of builders saw traffic
as better than expected, and 15% saw traffic as worse than expected (a better minus-worse spread of +21), the highest since February 2024. This compares to 31% better and 20% worse last month (a spread of +11).
Base pricing & incentives. The level of builders who decreased base prices in January compared to December was higher; builders who increased incentives fell month-over-month. 34% of builders reported raising either "most/all" or "some" base prices, up from 23% last month; 19% reported lowering "most/all" or "some" base prices, up sequentially. 8% reported decreasing "most/all" or "some" incentives, the highest level since May 2024.
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 IN and NC builders were almost uniformly positive on their market. MO and PA builders reported weaker conditions.
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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