NAHB: Builders turn to price reductions

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NAHB: Builders turn to price reductions

By HBSDealer Staff - 05/20/2020
Research by the National Association of Home Builders (NAHB) points to more builders lowering home prices.

Data from the most recent NAHB/Wells Fargo Housing Market Index (HMI) found that the COVID-19 crisis has pushed roughly 22% of builders to cut home prices in April. According to the NAHB, builders are making the move to boost sales and limit cancellations.

By region, 26% of builders cut prices in the South while 23% went with reductions in the Midwest. The shares are smaller in West and Northeast where just 13% and 12% dropped prices.

But in historical terms, the 22% who lowered their prices in April is less than half who cut prices during the housing recession. Then, 52% shaved prices in May 2007 and 49% in March 2008.

Builders who did reduce home prices in April 2020 cut them by an average of 5%, the NAHB reported. The discount is smaller than the average price cuts in both May 2007 (7%) and March 2008 (8%).

Only 12% of builders think price discounts are “very effective” in bolstering sales/limiting cancellations, according to HMI survey findings. A majority of builders — 58% — believe they are “somewhat effective,” and 17% report they are “not at all effective.” The remaining 13% are not sure about the effectiveness of home price reductions.

The research arrives just days after the NAHB reported that builder confidence showed modest gains in May.