Looks like the home builders are hitting a wall with pricing power. A survey of 273 builders by John Burns Real Estate Consulting found that sales of new home declined by 4% in August, typically a month seeing a slight gain from July. What’s more interesting is the percentage of new home builders which were able to raise prices in August, 47%. Slightly more builders held prices steady while 5% lowered them. A Garland Texas agent had this to say about the current market:
“The price increases are crazy,”…..“I’ve seen some builders that have raised their prices $100,000 over a three-month period. That has a big impact on people buying new construction.”. The Dallas area real estate agent also said that many of her clients have suspended their searches for a new home to see if prices and/or interest rates come back down.
K Hovnanian CEO Ara Hovnanian joked that he wished their quarter ended in June rather than July so that the company could have reported better sales numbers. As it were, the company saw it’s quarterly and year-to-date net contracts numbers take a turn south.
“To put this slowdown into perspective,” he said, “we were well ahead of our internal year-to-date budgets for net contracts going into July, and we are now slightly behind our year-to-date internal budget for net contracts at the end of August.” Among the reasons: “significant home price increases, higher mortgage rates, and a little lower consumer confidence.”
Burns noted that the survey covered Aug 29 to Sept 3 and reflected roughly 16% of new-home sales in the U.S.