We’ve seen the data from the Census Bureau about the downturn in the market for new houses: surging inventories – 11 months’ supply in July, highest since the worst days of Housing Bust 1 – exploding construction costs that home builders are facing, though some of those cost spikes are now abating; and plunging sales (-30% across the US, -50% in the West). The National Association of Home Builders reported a dismal traffic of prospective buyers. And we’ve seen how home builders reacted: construction starts of single-family houses plunged 18% year-over-year, though construction starts of multi-family buildings jumped.
So here are the home builders themselves, in their own words. John Burns Real Estate Consulting’s Home Builder Survey summarizes feedback from over 300 home builders in over 80 metro areas. The survey results are limited to paying clients. But Rick Palacios Jr., Director of Research at John Burns, when he noted today that the August results were in, posted in his Twitter account some quotes from 21 home builders. These are boots-on-the-ground thoughts and observations from those in the thick of it.
#Austin builder: “A lot of spec inventory to work through. August was a very poor month for sales across the board. Cancellations spiked from July and buyers showed no sense of urgency.”
#Baltimore builder: “Jumbo loan rates below 5% are helping buyers move forward in that segment.”
#Boise builder: “Construction cycle time has improved over the last 30 days.”
#Charlotte builder: “Sales were fairly strong in August. Increased incentives to help with closing costs and a buy-rate appear to be helping.”
#Cleveland builder: “Build cycle times have been improving over the last 4 or 5 months. Appointments have completely dropped off and traffic is very sparse at the models.”
#Dallas builder: “The slowing of starts is helping front end (foundation/framing) issues. Build cycle time is down and will go down further as material becomes more available.”
#Harrisburg builder: “When mortgage rates dropped in early August, we saw a big uptick in buyer activity. This aligned with a large incentive and price reduction rolled out at same time. Took a big hit on margin to generate sales.”
#Houston builder: “We have slowed starts significantly, as have other builders, and we are confident this will enable us to bring our build cycle times down. Slowing starts are providing some relief to labor disruptions.”
#Jacksonville builder: “Frame material and labor have stabilized. Garage door delivery times also more predictable.”
#KansasCity builder: “Most of our build cycle challenges are starting to ease. Subcontractors on the front end of the building process are starting to call and ask for work.”
#Louisville builder: “Build times are getting better. One of our biggest delays is getting through the municipal permitting process.”
#Ogden builder: “With reduced sales and moderation of starts, build time on the front end has dropped significantly.”
#OklahomaCity builder: “Builders are now fighting for the same customers and systematically reducing prices.”
#Philadelphia builder: “A slowdown in sales helped to relieve the pressure on labor and supply issues.”
#Phoenix builder: “Incentives continue to grow, with some communities pushing 20% in total discount packages. The positive is there’s light at the end of the tunnel for improving build cycle times. The negative is there won’t be customers on the other side of said tunnel.”
#RaleighDurham builder: “Largest schedule constraint is not having electrical power from our local public utility. We’ve built everything with generators over the last 24 months! We have closings held up on finished homes due to not having power.”
#RiversideSanBernardino builder: “The amount of material shortages experienced 6 months ago have started to dissipate, however the current shortage of electrical switch gear has added weeks to our schedule on every project.”
#Sacramento builder: “No urgency in buyers. Large public [builders] with significant spec inventory are winning more of the sales with very large incentives (discounts and closing costs).”
#Tampa builder: “Big spec builders are slashing prices on their inventory homes that will close in 2022. If interest rates get to 6.5% the waters will get very choppy.”
#WashingtonDC builder: “Starts have declined drastically. The new environment is going to cause trades to drop their costs significantly and we expect that to make its way through all of supply chain.”
#WestPalmBeach: “So far, we still haven’t seen what most of America is experiencing [slowing]. Anything under $450K is still selling well.” THE END
Founder, Wolf Street Corp, publisher of WOLF STREET.
In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China.
Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He has a BA, MA, and MBA (UT at Austin).
In his prior life, he worked in Texas and Oklahoma, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland, that almost swallowed him up.
wolfstreet.com
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