Home builders

Homebuilders could be a home run once supply issues ease

Home builders have struggled to meet the increased demand for homes that the pandemic helped spark.


Photo:

Jeff Lautenberger for The Wall Street Journal

If only lumber had been all that kept home builders from selling more homes.

The Commerce Department reported on Friday that 740,000 new homes were sold in August, at a seasonally adjusted annual rate. It was above the 729,000 in July, but it’s not close to the 977,000 homes sold in August of last year.

The lingering problem is that builders have struggled to meet the increased demand for housing that the pandemic helped spark. This struggle was compounded by their difficulties in obtaining materials and labor. Many builders have delayed bringing homes to market to balance their inventory levels with demand and have taken other steps, such as limiting the number of buyers who can customize the homes.

One of the first indications of the severity of builders’ supply chain problems came when lumber prices began to climb last year. But many issues affecting lumber supply have since been resolved, and lumber futures prices are now down more than 60% from their May high. Yet building a home requires more than lumber, and builders are dealing with a myriad of other materials that are in short supply, from garage doors to vinyl siding.

On Monday, Lennar said that in its fiscal quarter ended Aug.31, it delivered fewer homes than expected, accusing “unprecedented supply chain challenges.” Also on Monday, Dr Horton said he plans to close fewer homes in its fiscal quarter ending this month than he previously thought. He also spoke of supply chain issues, as well as difficulties in finding workers. KB Home on Wednesday reported fiscal third quarter home deliveries that were below expectations and said disruptions to its supply chain intensified as the quarter progressed.

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Even so, it is a particularly profitable time to be a home builder. The Commerce Department said the median price for a new home in August was $ 390,900, down from $ 325,500 a year earlier, and falling lumber prices are now giving them a boost. DR Horton said he expects the gross margin on his home sales in the current quarter to be 26.5% to 26.8%, for example, compared to his previous forecast of 26.8%. , 0% to 26.3%.

It would be nice to have assurances on when OEM supply chain issues will be resolved, but so far – and understandable given the uncertainty of the environment – They don’t give them away. If and when they are able to build enough houses to meet the demand, they could earn money.

The US mortgage market involves some key players who play an important role in the process. Here’s what investors need to understand and what risks they take when investing in the industry. WSJ’s Telis Demos explains. Photo credit: Martin Barraud / Getty Images

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Write to Justin Lahart at [email protected]

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Appeared in the September 25, 2021 print edition under the headline “Builders Could Be A Lot Busier Than They Are”.


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