by Calculated Risk on 5/21/2021 02:31:00 PM

Some twitter comments from Rick Palacios Jr., Director of Research at John Burns Real Estate Consulting

Here's May mid-month home builder channel check I hinted at earlier. Builders are pushing prices w/little pushback, though some starting. Some builders are using price escalators & highest/best offer. Many limiting pre-sales, shifting to spec, & pricing home later in build cycle.

#Dallas builder: “Not selling build jobs in May, starting specs only, and not selling until drywall. Costs are too out of control for us to take the inflation risk on build jobs. So sales are way down.”

#SanAntonio builder: “Only selling specs at Sheetrock stage. Last month, it was frame stage.”

#Austin builder: “Stopped sales until we pour a foundation. Lumber too erratic to sell prior. I know others have gone to a bid process. I have heard all parties, including that people who win the bid, feel like they have lost.”

#LasVegas builder: “Reducing sales releases in attempt to moderate the impact of labor & material shortages. Homes are priced once a Truss delivery date is confirmed which triggers the lumber lock pricing. We are also considering online auctions, but appraisals are a concern.”

#Denver builder: “Limiting sales at all communities and gapping out on lots. Material availability is becoming more concerning.”

#Phoenix builder: “Metering sales. Could be higher if we released more, but construction can’t keep up & trades are raising costs post start of home, so we are delaying sales releases even further. Delaying release of to-be-built homes & selling only specs deeper in the cycle.”

#SaltLakeCity builder: “Very, very careful with home releases, generally 2 – 4 permits pulled for each subdivision each month. Those homes are not released for sale until the homes are 60-80 days into the construction schedule.”

#Charlotte builder: “No pre-sales as of now. Starting specs and will price at drywall. Sales are still strong but we are starting to see a little bit of a slowdown as we have pushed pricing considerably.”

#Nashville builder: “Prices are starting to flatten out. Sales are down by design as we are not offering presale contracts, & are not writing contracts on inventory homes until they have completed rough ins, with all remaining items confirmed as to availability."

#RaleighDurham builder: “Starting to see some reluctance/concern around home prices balance, to some extent, the buying frenzy that we have seen over the last few months. Continue to raise prices – we get material/labor cost increase notices EVERY SINGLE DAY!”

#Wilmington builder: “Presales are limited & have escalation clause. Not pricing specs until Sheetrock - then they are gone & we wait for next houses to get to drywall. Raising prices across all segments to keep up with cost until the market or appraisal stops us.”

#Atlanta builder: “Locking in costs with purchase orders at time of foundation. Cannot sell a home until foundations go in. Costs are crazy. We are hitting the top of the market in some places and can't push prices. We are seeing margin compression.”

#Birmingham builder: “We have presales turned off in about half our communities to burn through current backlog. We’re holding off sales and using escalation clauses.”

#Charleston builder: “Holding off on selling a home until framing, as that has been our most volatile cost from month to month. We aren't selling to-be-built homes in order to control costs and not commit to a sales price before some of our largest expenses are actualized.”

#Chicago builder: “Many builders are putting everything on hold or putting foundations in the ground and not going any further until they see where costs are headed. Trim, windows and doors supplier says they are starting to feel a slowdown and are preparing for a bigger one.”

#Indianapolis builder: “Not selling/pricing spec inventory until late in the construction process, to account for rising costs. We continue to raise prices on contract builds but have not added escalation clauses.”

#DC builder: “Capping sales by community with few exceptions. We cannot continue to sell further out to future. Limited sales at most communities and raised prices dramatically to keep pace with rising costs.”

#Philadelphia builder: “Holding off opening up some of the new sections until we can catch up to the sales backlog a bit.”

#Tampa builder: “We’re closed for the first half of May. Working on catching up to what we already have. We will significantly limit sales for the next several months.”

#Orlando builder: “Restricting releases to limit quantity of sales while production catches up. Increasing pricing every few sales.”

#Sarasota builder: “Everyone is starting construction on homes after permits are obtained and then quickly hitting unpredictable material shortages, masonry block as one primary example.”

#Jacksonville builder: “Revised all sales contracts, allowing us to adjust base price of home due to cost increases up until time slab is poured. Converting to spec sale program on single-family detached homes as new phases come online this summer.”

#LosAngeles builder: “Waiting to offer homes for sale until we have building permits in hand and can lock lumber pricing.”

#Riverside builder: “We sell out within a week of release. If sales volume drops it’s a result of no inventory. Banging prices each week. Scary high. Costs are stupid high. I’m not saying we’re out of buyers but sales team is telling me that their buyer list is getting smaller."

#SanJose builder: “Doing highest bidder approach at two communities. Seeing $100K over asking at one of them. Buying lumber sooner now, but may push out starting more units with the anticipation of lumber prices coming back down. Costs are eating up all price increases.”

#EastBayCA builder: “Holding back on releasing for sales until we have the phase contracted, so we know what our costs are going to be.”

#Reno builder: “We have gone to ‘Offer & Acceptance’ approach on sales releases where we are able to improve price and terms. This approach has been effective in maintaining our margins and keeping pace with all the increases we are getting." THE END