More Good News for Homebuilders

First, a few positive nuggets for homebuilders:

Rick Palacios Jr, Director of Research at John Burns Real Estate Consulting, pointed out that cancellation rates are “normalizing”. As I noted earlier, the Census Bureau overestimates sales, and underestimates inventory when cancellation rates are rising, see: New Home Sales and Cancellations: Net vs Gross Sales. This might be reversing now since cancellation rates have started to decline. When a previously cancelled home is resold, the home builder counts it as a sale, but the Census Bureau does not (since it was already counted).

Rick Palacios Jr.@RickPalaciosJr

@conorsen Builder cancellation rates normalizing as of February should help as well (chart below). It'll be interesting to hear what $LEN has to say tomorrow on the trend.

5:16 PM · Mar 14, 2023

---

9 Reposts · 48 Likes

And Odeta Kushi, Deputy Chief Economist at First American, pointed out that the lack of existing home inventory is a positive for homebuilders (linking to an article by chief economist Mark Fleming:

Odeta Kushi@odetakushi

From 2000 until the pandemic, new homes on avg made up ~11% of total inventory. In the Jan 2023 report, that share of new homes reached 27%. When existing homes for sale are nearly non-existent, a new home at the right price may be an attractive option.

blog.firstam.com

Why Home Buyers May Find More Opportunities with New Homes this Spring

1:51 PM · Mar 21, 2023

---

7 Reposts · 25 Likes

Here is a graph from the First Am article. The historically low levels of existing homes inventory is a plus for home builders.

And Ali Wolf, Chief economist at Zonda, wrote yesterday:

Ali Wolf@AliWolfEcon

Notable improvements in how long it takes to build a home. Getting *closer* to pre-pandemic times for many builders

3:44 PM · Mar 22, 2023

---

5 Reposts · 27 Likes

Last October I wrote: Some "Good News" for Homebuilders

I noted:

[T]he good news for the homebuilders is activity usually picks up quickly following an interest rate induced slowdown (as opposed to following the housing bust when the recovery took many years).