79 Homebuilders Discuss Latest Industry Trends and Concerns in BTIG Survey

In its monthly Homebuilder Survey, BTIG/HomeSphere asked 50-100 builders across the country about sales, customer traffic, and pricing trends in the industry. 79 respondents shared their insights on what they’ve found in the month of October for 2021.

HOMEBUILDING INDUSTRY OCTOBER REPORT RESULTS

Sales and Traffic

Sales indicators improved, while traffic indicators declined in October. Forty-two percent of respondents reported yr/yr increases in sales orders per community, compared to 34% last month and 76% in October 2020.

Almost one-fourth (23%) saw a yr/yr decrease in orders vs. 25% last month and 7% for the same month last year. Over a third (37%) reported an increase in yr/yr traffic at communities, while 22% saw a decline. This compares to 39% and 19%, respectively, last month.

Expectations

Both sales relative to expectations and traffic relative to expectations increased after dropping for two months. Forty-one percent of respondents saw sales as better than expected vs. 24% last month, and 15% saw sales as worse than expected vs. 16% last month.

Over a third (38%) saw traffic as better than expected compared to 29% last month, while 8% of builders saw traffic as worse than expected vs. 9% last month. The better-minus-worse expectations ratio for both indicators continues to be positive, and the gap widened compared to September 2021.

Pricing and Incentives

The number of builders raising prices continues to be at lower levels than the first half of 2021, while the use of sales incentives continues to be sporadic. Most builders (67%) raised some, most, or all base prices in October from September, the same reading as last month (though that number was at 76% in October 2020). This is down significantly from the peak of 100% of builders in May 2021.

Incentive use increased slightly as 11% of builders increased ‘most/all’ or ‘some’ incentives vs. 8% last month. However, BTIG expects to see incentives increase somewhat seasonally in the fall and winter months.

Special Question

Each month BTIG asks respondents a unique question. This month, they asked respondents about investor and single-family operator activity and, specifically, what percentage of homes were being sold as investment properties as opposed to a traditional consumer.

Most (68%) builders reported minimal activity and responded that either ‘0%’ or ‘1-10%’ of sales were to investors. However, 10% of respondents answered that ‘41%+’ of sales were to investors. Eleven percent were unsure of the number of sales to investors.

THE BOTTOM LINE

Overall, this month’s survey found that builders continue to take a more cautious approach to price increases than in 1H21. This doesn’t mean that most builders aren’t still pushing some prices, though. This biggest takeaway from October’s report is that demand is not as robust as earlier in 2021, but the operating environment remains healthy.

BTIG’s survey finds that builders are generally more optimistic than pessimistic, and that investors may be helping demand more than large public builders are letting on.

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