Survey: 22% of Builders Lowered Prices in April

Filed in Disaster Response, Economics by on May 20, 2020 12 Comments

In recent weeks, there has been anecdotal evidence about builders lowering home prices in the wake of the COVID-19 pandemic, but the latest NAHB/Wells Fargo Housing Market Index (HMI) survey provides factual data: Nationally, about 22% of builders cut home prices in April 2020 in order to bolster sales and/or limit cancellations.

Regionally, builders in the South (26%) and Midwest (23%) were the most likely to have reduced prices, compared with much smaller shares in the West (13%) and Northeast (12%).

Historically, the 22% of builders reducing home prices in April 2020 is less than half the share who cut prices during the last housing recession: 52% in May 2007 and 49% in March 2008 (Figure 1).

Builders who did reduce home prices in April 2020 cut them by an average of 5%. That discount is smaller than the average price cuts in both May 2007 (7%) and March 2008 (8%).

Only 12% of builders think price discounts are “very effective” in bolstering sales/limiting cancellations. A majority of builders — 58% — believe they are “somewhat effective,” and 17% report they are “not at all effective.” The remaining 13% are not sure about the effectiveness of home price reductions.

NAHB economist Rose Quint provides additional analysis in this Eye on Housing blog post.

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