November 20, 2023 - 8:33 am
Led by Lennar, D.R. Horton and the Pulte Group, the top 10 builders in net sales, sold 31 percent more homes during the third quarter this year than their top 10 counterparts in the same three-month period in 2022 — a reflection of how hard hit the new-home market a year ago with rising interest rates.
The latest numbers from Las Vegas-based Home Builders Research President Andrew Smith show the top 10 during the third quarter of 2023 had 2,383 net sales — sales minus cancellations — compared to 1,385 net sales in the third quarter of 2022.
Builders have overcome some of the initial shock of higher interest rates that hit buyers hard between July and September 2022. Interest rates remain elevated but buyers and builders have adjusted.
Mortgage rates continued their decline this week as inflation has slowed and Wall Street has reduced its expectations that the Federal Reserve will raise interest rates.
The average 30-year mortgage fell to 7.4 percent by midweek after being in excess of 8 percent in mid-October, the highest in more than two decades. Lawrence Yun, the chief economist for the National Association of Realtors, predicts interest rates will continue to decline to the 6 percent range by spring. That’s still more than double the 3 percent rates two years ago when mortgages were at record lows.
Interest rates started inching up in the spring of 2022 and approached 6.5 percent by the end of the third quarter of 2022.
“Last year during the third quarter, home sales were slow,” Smith said. “Builders have adjusted their strategies. They have the ability to use in-house financing to offer incentives for new home sales. They can work with buyers on the loans in the way that resales can’t because they own the lending. They also are helped by a lack of resale inventory.”
Smith said if the interest rates fall as the Yun predicts that will be a boost for sales in 2024.
Lennar recorded 456 net sales during the third quarter, a 20 percent increase over the third quarter of 2022 when it had 379 to lead the way among builders.
D.R. Horton recorded 451 net sales during the third quarter, a 51 percent increase over the 299 in the third quarter of 2022.
Both Lennar and D.R. Horton held the top two sports in the third quarter of 2022, which Smith said makes sense since they are two of the biggest builders in the country and are well-positioned in the market.
“It’s not a surprise to see them selling the most homes,” Smith said. “D.R. Horton had a couple of bigger projects that started up recently in North Las Vegas and Cadence in Henderson.”
The Pulte Group, which was fourth a year ago, was third with 413 net sales, an 81 percent increase over the 147 during the third quarter of 2022.
KB Home fell from third to fourth this year with 351 net sales, a 37 percent increase over the third quarter of 2022 when it had 256.
Richmond American, which wasn’t in the top 10 during the third quarter of 2022, placed fifth with 169 net sales this year.
Tri Pointe Homes was sixth with 143 net sales, up from 55 a year ago.
Beazer Homes was seventh with 136 net sales, more than triple the 40 sales a year ago.
Century Communities was eighth with 99 net sales after not being in the top 10 a year ago.
Taylor Morrison was 10th with 78 sales, a 39 percent increase over the 56 net sales during the third quarter of 2022.
Touchstone Living, which was sixth a year ago with 78 sales, fell out of the top 10 along with Toll Brothers, which had 40 a year ago and Shea Homes which had 35 a year ago.
Through the first nine months of 2023, Home Builders Research reports net sales are up 10 percent because cancellations are down 19 percent.
“I think the market is slowing down toward the end of the year as expected, but it’s still in a pretty good spot because of the lack of inventory with resales,” Smith said.
Henderson and the northwest valley have solidified themselves as the more popular new-home destinations during 2023 because of availability in master-planned communities, Smith said. Some 29 percent of the new home net sales in 2023 were in the northwest valley, up from 27 percent a year ago. Henderson recorded 25 percent share, up from 22 percent share a year ago. The southwest valley remains strong as always with a 26 percent market share in 2023, up from 22 percent a year ago. North Las Vegas has an 11 percent market share, down from 17 percent a year ago.
Smith said North Las Vegas has a lot of land available and its percentage should bounce back in 2024 and 2025 when builders put more product on the market.
“They still have land available in North Las Vegas, but there’s not a lot going on at the moment,” Smith said. “I would expect it to come up again.”