New home sales rose by 2.0% in February, compared with January, according to New Residential Sales datatbvxwqvqdqrqdrafwyrvtdqcrzqtbbcdf released by the Census Bureau and the Department of Housing and Urban Development Wednesday morning. This relatively "flat" result for the nation as a whole obscures a significant difference within regions. Sales in the west rose 38.5% while sales in the northeast fell by 24.2% and by 17.9% in the Midwest.
Many homebuilders saw lower traffic pass through their showrooms in February (possibly a reaction to the decline in the stock market), but March traffic has shown an uptick. The quality of traffic has improved, too, meaning that a higher percentage of people visiting builder communities have become purchasers.
Builders nationwide, and especially in Texas, have become more focused on first-time/entry-level buyers. The move-up and luxury niches have seen slightly less momentum, but entry-level sales are rising. D.R. Horton’s Express Homes line has received the most attention in the entry-level segment, but other national builders are targeting this buyer now as well. Lennar is now selling homes in Houston and San Antonio with average selling prices of $130,000-$170,000.
Metrostudy’s data show that single-family construction (and orders) are down by 10-11% in Houston. Dallas and Austin, meanwhile, have been stronger than anticipated.
Incentives have been limited, mostly focused in under-performing markets.
In addition to the increase in entry-level demand, we are expecting significant growth in retiree demand. Every 15 seconds, somebody turns age 55 in the U.S. People in this age group have higher income levels and higher credit ratings than the general population, and our surveys show that they are 13% more likely to prefer a new home to an existing home than the average household. We are monitoring supply and demand conditions, and we are projecting a potential shortfall of 300,000 units suited to retiree buyers nationwide over the next five years. The most severe shortages will likely be concentrated in Texas, Oklahoma, Florida’s Panhandle, Tennessee, Georgia, and Colorado. This presents opportunities for builders and land developers who seek to fill that growing demand.