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06/13/2022

Home builders see sizeable demand decreases

The monthly BTIG/Homesphere Home Builder Survey shows just 20% of builders reported year-over-year traffic growth.
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Demand trends continued to decline sharply in May, according to the latest BTIG/HomeSphere Home Builder survey.

About  53% of builders saw a year-over-year decrease in sales, the lowest in the 56-month history of the BTIG/HomeSphere survey. And, for the second straight month, year-over-year increases in traffic dipped. 

The survey solicits the perspective of approximately 50-100 small and mid-sized tract homebuilders nationally about sales, customer traffic, and pricing trends. The latest survey includes data from 86 respondents.

Just 20% of builders reported year-over-year traffic growth, the lowest level since April 2020 and near the start of the COVID-19 pandemic. Comparably, 33% of builders saw traffic jump in April 2022 and 67% in May 2021. 

Cancellation rates have yet to increase significantly, however.

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BTIG Homesphere May survey results

BTIG analyst Carl Reichardt anticipates that demand is likely to remain slow in the coming months.

Reichardt believes the NAHB Housing Market Index, measuring home builder sentiment and set to be released on June 15, is likely to come in lower than the current Factset consensus expectation of 68. The drop could be significant, according to Reichardt.

Other highlights from the BTIG/Homesphere monthly report include:

  • Sales dropped significantly in May, with only 19% of respondents reporting YOY increases in sales v. 32% in April and 48% in May 2021. 
  • Positive traffic trends slowed considerably, as noted above. Additionally, 43% of builders saw a decline in YOY traffic compared to 27% in April.   
  • Sales and traffic relative to expectations fell sharply, and the ratio of the better-minus-worse expectations for both flipped negative this month. 15% of respondents saw sales better than expected vs. 20% last month, while 34% saw sales as worse than expected. Just 19% saw better traffic than expected vs. 28% in April 2022, while 28% of builders saw traffic as worse than expected (22% last month). 
  • 60% of builders raised some, most or all base prices in May, down from 76% last month and the peak of 100% in May 2021. Incentive use increased slightly; 16% of builders increased "most/all" or "some" incentives vs. 9% last month.
  • For the second consecutive month, a special question was asked regarding order cancellation rates. 67% of builders reported cancellations rates remained constant.  Only 6% reported seeing “significantly higher” cancellation rates.

For more information on the survey, click here.