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November 16, 2022 By Peter Boockvar

The builder incentives are picking up

The November NAHB home builder survey deteriorated further, falling to 33 from 38 and 3 pts below the estimate. This index has fallen every single month this year, is down by 36 pts over the past 6 months and is just 3 pts from matching the Covid low. Present conditions fell 6 pts m/o/m to 39 and the Future outlook was lower by 4 pts to 31. Prospective Buyers Traffic dropped another 5 pts to just 20 vs the Covid low of 13 and compares with the 71 level it stood as we entered 2022.

We’re now at the point of such faltering demand that the incentive push is really picking up. The NAHB said “To bring more buyers into the marketplace, 59% of the builders report using incentives, with a big increase in usage from September to November. For example, in November, 25% of builders say they are paying points for buyers, up from 13% in September. Mortgage rate buy-downs rose from 19% to 27% over the same time frame. And 37% of builders cut prices in November, up from 26% in September, with an average price of reduction of 6%.” This compares with the 10-12% price cuts in 2008.

Extending the problem for builders is the squeeze on profit margins, “Even as home prices moderate, building costs, labor and materials – particularly for concrete – have yet to follow.” As I said the other day, this is one of the risks for many companies in other industries that have been solely relying on inflation in driving sales, rather than volumes. The profit margin squeeze will continue.

NAHB

Prospective Buyers Traffic

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About Peter

Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.

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Disclaimer - Peter Boockvar is an independent economist and market strategist. The Boock Report is independently produced by Peter Boockvar. Peter Boockvar is also the Chief Investment Officer of Bleakley Financial Group, LLC a Registered Investment Adviser. The Boock Report and Bleakley Financial Group, LLC are separate entities. Content contained in The Boock Report newsletters should not be construed as investment advice offered by Bleakley Financial Group, LLC or Peter Boockvar. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction or investment strategy. The views expressed in this commentary should not be taken as advice to buy, sell or hold any security. To the extent any of the content published as part of this commentary may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. No chart, graph, or other figure provided should be used to determine which securities to buy or sell. Consult your advisor about what is best for you.

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