D.R. Horton CEO Paul Romanowski highlighted concerns about rising inventory affecting sales, particularly in Florida and Texas, during a recent earnings call. According to the Burns Homebuilder Survey, builders in Florida and Texas are significantly increasing spending on sales incentives, with Florida averaging 10% of the sales price to move inventory compared to just 3% in the Northeast. Overall, homebuilders are adapting to market conditions to sustain sales volumes rather than significantly lowering production. This trend reflects a broader strategy of maintaining market presence while addressing inventory challenges effectively.
"Some of the [recent] buildup we've seen in inventory has had some impact on [our] sales when you look at portions of the Florida market and as well isolated to some of the Texas markets where they saw a significant run-up in valuations," Romanowski responded.
According to John Burns Research and Consulting's Burns Homebuilder Survey for December, which was published this month, homebuilders in Florida and Texas are spending the most on sales incentives, while homebuilders in the Northeast and Southern California are spending the least.
Indeed, just last month Lennar CEO Stuart Miller told analysts: "We're going to adjust to market [when and where needed]. We're going to maintain [sales] volume."
In Florida, homebuilders are spending 10% of the sales price on incentives to help move unsold inventory. On a $500,000 home, that would come out to spending $50,000 on incentives.
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