As Traffic Increases, Builders Begin Raising Prices Again

Industry News,

Originally Published by: HBS Dealer — May 17, 2023
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More home builders are seeing traffic rise and are returning to raising prices.

The results of the latest monthly HomeSphere/BTIG survey revealed a noticeable improvement in performance relative to expectations. 

Nearly twice as many builders saw sales as better-than-expected (38%) than worse-than-expected (20%) and nearly three times as many builders saw traffic as better than expected (42%) as opposed to worse-than-expected (15%), compared to the prior month.

Results of the latest HomeSphere/BTIG survey Nearly twice as many builders said sales are better-than-expected.

Home builders reporting decreases declined to 34% compared to 40% in March. 

Pricing firmed up in April compared to March, but remains mixed with slightly more builders raising prices and increasing sales incentives than those reporting decreases, BTIG reported.

“New home demand momentum has continued to accelerate throughout the spring season, which is in-line withanecdotal public builder commentary,” BTIG analyst Carl Reichardt said, “With comparisons for both sales and traffic beginning to ease meaningfully, we expect results should become stronger on a year/year basis next month.”

Released yesterday, the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) saw a five-point increase in builder confidence for May.

Additionally, the latest housing starts report (released today) saw a 2.2% increase in total starts as single-family homes increased 1.6% above the prior month.

Here’s a breakdown of key findings from this month’s Homesphere/BTIG builder survey.

Other highlights from the monthly report (attached):

  • Sales and traffic trends continue to pick up sequentially: 31% of builders reported higher YOY sales vs. 27% in March and 32% last year. 34% saw a YOY decrease in orders vs. 40% last month and 27% in April 2022. 34% reported an increase in YOY traffic vs. 29% last month. 27% saw a decline, compared to 29% last month.
  • Sales and traffic relative to expectations encouraging: 38% of respondents saw sales as better than expected vs. 38% last month, while 20% saw sales as worse than expected, vs. 18% last month. Traffic was also up - 42% saw better-than-expected traffic, with 15% reporting worse-than-expected traffic (compared to 34% and 13%, respectively, last month). 
  • Builders increased prices sequentially, but both pricing activity and the use of incentives remains mixed:
    • 30% of builders raised some, most, or all base prices in April, from 21% last month. 
    • 17% cut some, most or all base prices vs. 22% last month. 
    • 22% of builders reported increasing some, most or all incentives vs. 27% last month, while 7% reported decreasing some, most or all incentives vs. 10% last month. 

The survey is conducted electronically with approximately 75 to 125 small- to mid-sized homebuilders participating who sell, on average, 50-100 homes per year throughout the nation.