Land is the most important yet least transparent part of homebuilding. To help, here’s commentary from land brokers across the country per our July survey. Top themes: 1) Builders going further out for deals. 2) Bigger land deals are back. 3) Development delays & lot shortages.
#SaltLakeCity land broker: “You can't get all the lots you need even when you overpay.”
#SanAntonio land broker: “Getting a vaccine approved took less time than getting land entitled.”
Doing monthly review of our macro housing/econ 350+slide deck. Ten charts grabbing my attention for July:
1/10: Percentage of banks easing credit standards for HELOCs (home equity line of credit) now highest ever post-housing induced 2007-2009 recession.
2/10: Acceleration in residential electric customers (proxy for household formations) has subsided. Ties directionally to some of the normalizing we're seeing in for-sale housing market.
3/10: Home builder labor shortages get a ton of attention lately (rightly so), but more of a structural issue than cyclical/transitory. Builders reporting elevated labor shortages goes all the way back to 2013 coming out of last housing downturn.
Analyzing June new home sales & pricing figures from our monthly builder survey. As one builder noted: “It’s not fun to be a builder anymore.” Lumber relief is nice but pick your poison on other issues. Market commentary from across the country to follow...
#Richmond builder: “It's not fun to be a builder anymore. Cost pressure is killing us. Not only will builders like myself who take 12-24 months to build a house lose margin from increases, but the affordability is becoming a major issue.”
#Atlanta builder: “Costs have driven up prices & we’re no longer preselling. We will not sell a home until frame stage, so our sales numbers are off for June while awaiting framing stage.”
Here's a housing🧵to chew on over weekend. Mid-June update from 100+home builders across country. 1) rumblings of price ceiling. 2) slightly shrinking pool of qualified buyers. 3) some home releases not selling out immediately. 4) normal summer slowing as vacations take priority.
#Austin builder: “Some interest lists are shrinking & others are not. Seeing buyers who are no longer able or willing to afford the monthly payment. Definitely seeing attrition here. Frustration that prices continued going up without an opportunity to purchase.”
#Dallas builder: “Interest lists are definitely shrinking because of pricing. Some drop off is happening due to price. But the re-sale market is still so tight it hasn’t dropped substantially. Extremely concerned about pricing going forward.”
New home sales fell in May, Y/Y & M/M. Theme of the month was sales decline by builder design. Few comments on demand slowing or skittish buyers, even w/new home prices +18% Y/Y nationally (survey record). Builder commentary from across the country per our survey to follow...
#Nashville builder: “Gapped out. Sales resume in June as new communities & phases start to open. By moving ability to contract on inventory homes later to finished drywall stage (window installation stage previously), expect sales to show continued decline. Decline by design.”
#Charlotte builder: “Paused sales from mid-May to mid-June in all communities & will selectively release homes for sale in the last 2 weeks of June & coming months. Sales look lower vs. last month but was capped due to limited lot availability & no inventory.”
Some fresh home builder commentary for top #Texas markets. In general, buyer interest lists aren’t shrinking much, and if a few drop-off, builders are easily backfilling. Drumbeat a bit louder on prices getting too high. Demand still pretty nuts.🧵to follow...
#Houston builder: “Buyer interest lists are shrinking slightly. Likely too much price pressure, it’s out of hand.”
#Houston builder: “We’ll be metering sales again in June.”
Here's May mid-month home builder channel check I hinted at earlier. Builders are pushing prices w/little pushback, though some starting. Some builders are using price escalators & highest/best offer. Many limiting pre-sales, shifting to spec, & pricing home later in build cycle.
#Dallas builder: “Not selling build jobs in May, starting specs only, and not selling until drywall. Costs are too out of control for us to take the inflation risk on build jobs. So sales are way down.”
#SanAntonio builder: “Only selling specs at Sheetrock stage. Last month, it was frame stage.”
I did an April home builder commentary 🧵last week, switching to building material dealers this week (companies making/selling products to home builders). We asked, “What worries you the most, regarding your business & the remainder of 2021?” Here’s what followed…
“Material cost volatility degrading margins for the duration of the year; labor availability is a close second.”
“Continued supply chain disruptions and product availability.”
Here’s on the ground local home builder commentary from across the country per our April survey. A lot of builders are pressing the pause button &/or slowing things down until construction costs moderate & they can catch up with sales. Worries about buyer price ceilings too...
#Chicago home builder commentary: “We sold all of the homes we had in early 2021 & haven’t started anything new, & may not due to the cost of construction. Can’t hold pricing for clients longer than 45 days with rising material pricing.”
#Nashville home builder commentary: “Pray for lower lumber prices.”
Some interesting housing color from mid-April around the country home builder channel check. Bunch of market commentary to follow...will try to hit most top markets.
#SaltLakeCity home builder mid-April color: “Still have 10x buyers to available homes to buy. Went to 'highest/ best' offer system March 1st & offers over asking price are shocking. Most offers are 10+% over ask, that's after raised base prices $10K to $20K+ with each release.”
#Austin home builder mid-April color: “Super high demand. Volume controlled with release process, otherwise would be unbearable. Some price increases are $100K between releases.”