Homebuilders struggle to find buyers as cancellations by developers rise: ‘The build-for-rent market is going to become increasingly important’
It’s a tough time to be selling a home. That’s also true for home builders, who are seeing canceled orders and dwindling interest among would-be buyers.
Confidence among home builders dropped for the 10th month in a row in October to a 10-year low , according to the National Association of Home Builders. Traffic among prospective buyers, one of the components that measures confidence, fell significantly, the association said, as buyers look at mortgage rates above 7%.
As a result, builders have had to get more creative with incentives, including rate locks, rate buydowns and upgrades on kitchen appliances, Lovallo said. Additionally, builders who offer spec homes built in advance of orders or homes that first-time buyers can move into quickly can better “compete with the existing stock in the market,” he said.
Home builder stocks are trading at a fraction of book value, Lovallo said, at about five times earnings. Constraints on labor, along with bureaucratic red tape related to land and permits, all bog down the process of building homes, he added. — John Lovallo, UBS analyst “There has to be some kind of change that’s brought to this industry,” Lovallo said. “But I would argue that 10 years from now, we’re going to be building homes very differently than we are today.”
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