Some of the best-performing stocks in America this year are those of large, national homemakers — strong consumer demand, limited competition from the current home sales market and an improved supply chain have boosted their outlook.
On Monday, homebuilders’ confidence moved into positive territory for the first time in nearly a year, while Census data on new residential construction showed housing starts rose 21.7% from April, and 5.7% from May 2022 to 1.63 million . In fact, the number of units currently under construction in the United States is close to 1.69 million, the highest level recorded in the last 50 years.
But btig,home areaThe latest survey of small and medium-sized homebuilders casts a shadow over this bright overview. The monthly BTIG survey shows that construction activity among small homebuilders eased slightly from April to May, although sentiment remains high compared to last year.
The survey solicits the perspectives of approximately 75-125 small and medium-sized homebuilders nationally regarding sales, customer traffic and pricing trends (117 responses this month).
Sales and traffic trends were mixed in May. Following a big jump in sales trends since the winter slump, the number of builders reporting year-on-year growth stood at 34% in May, up from 31% in April 2023. Traffic was down slightly, with 30% of builders reporting high community traffic year-over-year compared to 34% in April 2023. Both the metrics are much better than May 2022. Meanwhile, 39% saw a drop in orders, compared to 34% in April and 53% in May 2022.
“Our survey shows that the pace of new home demand slowed in May. Carl Reichardt, an analyst at BTIG, commented, “We expected strong results this month, as the ease of comparison and positive real public builder commentary … May’s hike in 30-year mortgage rates may also have influenced trends.” ”
Sales and traffic also weakened slightly relative to expectations, with 37% of respondents seeing sales better than expected, compared to 38% last month. Meanwhile sales of 26% were worse than expected, compared to 20% last month. On traffic, 35% saw better traffic than expected, 23% reported worse traffic than expected (compared to 42% and 15% respectively last month).
Builder pricing activity remained mixed. One-third of builders reported raising either “most/all” or “some” base prices, which was more than 30% in April. And 19% builders reduced “most/all” or “some” base prices, compared to 17% in April. According to the survey, 27% of respondents reported an increase in “most/all” or “some” incentives, compared to 22% in April. Only 3% reported a reduction in “most/all” or “some” stimulus, compared to 7% in April. No builders reported reductions in “most/all” incentives in May.
“We believe builders carefully monitor pricing and incentives as they monitor traffic and buyer interest during the key spring sales season (typically February to May),” Reichstedt wrote. “We believe this is especially true for private builders, who focus more on mid-level price points as opposed to low-end, volume-oriented public builders, who we believe is that they’ve generally been very aggressive on pricing/incentives.”
