New Home Cancellations increased Sharply in Q3
by Calculated Risk on 11/09/2022 10:29:00 AM
Today, in the Calculated Risk Real Estate Newsletter: New Home Cancellations increased Sharply in Q3
A brief excerpt:
First, a few quotes from some homebuilders:
“During most of the year, demand for our homes was strong. Beginning in June and continuing through today, we have seen a moderation in housing demand caused by significant increases in mortgage interest rates and general economic uncertainty.” [Donald R. Horton, Chairman of the Board, said] …The Company’s cancellation rate (cancelled sales orders divided by gross sales orders) for the fourth quarter of fiscal 2022 was 32% compared to 19% in the prior year quarter. D.R. Horton
“In response to the significant shift in market conditions in 2022, we have slowed the pace of our housing starts, have increased sales incentives, and are taking additional pricing actions in many of our communities.” Pulte Group
New Orders decreased 15%, while the average sales price of New Orders increased 3% in the third quarter of 2022 compared to the third quarter of 2021. New Orders were negatively impacted in each of our reportable segments by the significant increase in mortgage interest rates during the quarter, which resulted in a decline in affordability and in turn, led to lower absorption rates and to an increase in the cancellation rate quarter over quarter. NVR
Here is a table of selected public builders and the currently reported cancellation rate (I’m still gathering data).
Disclaimer: the cancellation rates are from SEC filings only, and while deemed to be reliable is not guaranteed.
In general, cancellation rates doubled or tripled in the most recent quarter compared to 2021.
There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/