Builders FirstSource, a leading supplier of building materials, reported that the current residential construction climate is worse than publicly stated by major homebuilders. CEO Peter Jackson suggested that while earnings reports seem optimistic, signs indicate a slowdown in housing starts. Factors like inventory levels and market conditions are causing builders to slow their construction pace. Unsold inventory of new single-family homes is rising significantly since the end of the Pandemic Housing Boom, with June 2024 showing the highest figure yet at 119,000 unsold homes, particularly affecting the Sun Belt region.
Peter Jackson emphasized to analysts that many public homebuilders presenting earnings had painted a more positive outlook than the actual slowing trends in residential construction. He stated, 'There were a lot of public homebuilders that have released [earnings] over the past couple of weeks [that reported relatively more positive pictures], versus kind of our signal here that it's a bit worse than what people are thinking.' This suggests a disconnect between the perception of the housing market and the reality Builders FirstSource is witnessing.
Jackson articulated concerns about the housing start rates, highlighting how builders are adjusting to the current market conditions. He observed, 'Our sense is builders are slowing on the start side... to manage those completed home inventory levels.' This reflects a purposeful reset in planning to prevent oversupply.
The unsold completed inventory of new single-family homes has notably increased, signaling a downturn in housing demand post-Pandemic Housing Boom. The figures illustrate a troubling trend, with June 2024 showing 119,000 unsold homes, up from 69,000 in June 2023.
The rise in unsold inventories, especially in the Sun Belt region, is indicative of a broader market slowdown. Builders FirstSource's insights point to a challenging landscape, as Jackson mentioned, 'what we're hearing about the takedowns and the contracts' indicates builders are facing a tough environment.
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