Jul 23, 2021 - Economy

One homebuilding giant is turning down orders due to red-hot demand

Construction workers surrounding house on top of pile of money

Illustration: Trent Joaquin/Axios

Red-hot demand for houses sounds like great news for homebuilders. But builders aren’t as thrilled as you might expect, and one builder is actually turning down orders.

Why it matters: Home prices have surged as low mortgage rates and the pandemic-era demand for more space sent buyers flooding a market that had limited supply.

  • In June, existing-home sales rose in all major U.S. regions. The median price of a home sold was a record-high $363,300.

Driving the news: U.S. homebuilding giant D.R. Horton announced on Thursday that its quarterly revenue and earnings growth beat expectations thanks to demand.

  • But new orders unexpectedly tumbled 17% to 17,952 homes from 21,519 a year ago. Analysts surveyed by Bloomberg were expecting an increase to 22,385.
  • “[W]e have slowed our home sales pace to more closely align to our current production levels,” company chairman Donald Horton said.

The big picture: "Builders are contending with shortages of building materials, buildable lots and skilled labor as well as a challenging regulatory environment," NAHB chief economist Robert Dietz said on Monday after reporting a deterioration in homebuilder sentiment.

Yes, but: After its well-publicized surge, framing lumber prices have crashed all the way back to normal levels.

But, but, but: Framing lumber is just one of many lumber products used to build a house. Oriented strand board (OSB) is another, and the NAHB reports prices for OSB are still up nearly 500% since April 2020.

  • Overall, the changes in prices for these softwood lumber products since April 17, 2020, have added $29,833 to the price of an average single-family home as of July 8, the NAHB estimates.

The bottom line: Soaring prices may sound great for business, but they don’t mean much when costs are too onerous and you don’t have the labor or inventory.

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