Homesphere/BTIG home builder survey sees traffic decline

The latest HomeSphere/BTIG Builder Survey revealed the weakest demand trends in the 59-month history of the study.

According to the monthly HomeSphere/BTIG builder survey, sales continued to dive in September, with 63% of builders reporting year-over-year decreases in sales. Traffic also remained slow — just 12% of builders reported year-over-year traffic increases, while 61% saw year-over-year declines compared to  53% in the prior month.  

The survey also reveals that builders continue to compensate by moderating pricing activity and increasing sales incentives.  About 47% of builders lowered some base prices in September, in comparison to 37% last month, while 44% increased sales incentives on at least some homes (vs. 38% last month). 

“Business conditions are deteriorating at an accelerating rate due in our view to higher mortgage rates, fear of falling real estate values and weaker economic conditions among consumers, a lag in some builder reactions to negative conditions, and to some extent seasonality,” said BTIG analyst Carl Reichardt.

Reichardt also notes that the NAHB/Wells Fargo Housing Market Index, measuring home builder confidence and expected to be released on Oct. 18, is very likely to come in lower than the current Factset consensus expectation of 45.

Builder confidence has fallen for nine straight months this year.

Other highlights from the monthly report (attached):

• Sales and traffic trends weakest in survey history: Only 7% of builders reported higher YOY sales vs. 17% last month and 34% in September 2021. 63% saw a YOY decrease in orders vs. 61% last month and 25% in September 2021. Only 12% reported an increase in YOY traffic vs. 17% last month, while 61% saw a decline, compared to 53% last month.

• Sales and traffic relative to expectations also continue to weaken. A survey record-low 10% of respondents saw sales as better than expected, while a survey-record high 48% saw sales as worse than expected. Just 13% saw better than expected traffic, with 40% seeing worse than expected traffic. 
• The number of builders raising prices decreased slightly, while sales incentive use continued to increase. 24% of builders raised some, most or all base prices in September, from 29% last month. 33% cut some, most or all base prices vs. 24% in August. 34% of builders increased "most/ all" or "some" incentives vs. 31% last month.
• 10 of the 111 respondents are based in Florida. However, no particularly negative responses due to hurricane impacts were noted.

The monthly report is based on an electronic survey of approximately 50-100 small to mid-sized home builders that sell, on average, 50-100 homes per year throughout the nation.

The latest New Residential Construction Report, featuring housing starts and permits data for September, will be released on Oct. 19.