Builders are nervous... this feels familiar.
Home builders are encountering rising cancellations of contracts as buyer's confidence plummets, what does this mean for the wider market? Builder concessions have risen by 50% over the last six months, many of which are late adjustments to the original contract. While this is the case, they're far from the panic of late 2008.
As seen below (these graphs compare sales of newer 2250-2500sf homes in Chesterfield, Henrico and Hanover in 2006-2008 vs. 2020-2022), the volume of new construction prior to the housing collapse averaged above 10 months, however, currently the housing supply is around 1 month of inventory. Similarly, in the rising collapse concessions rose 500% over the course of 6 months. In summary, we're currently 10x's more healthy than in 2008 in the new construction market.
With that being said, the first six months of 2023 are likely to be similar to slightly worse than the last six months of 2022 - stable to minor declines depending on sub-markets. This will be affectedaffect by jobless rates, mortgage rates, and macro factors (recession, global destabilizing forces) which could dramatically effect this trend to the positive or negative.