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Homebuilders in Florida and Texas are spending the most on incentives—Northeast builders are spending the least
D.R. Horton CEO says rising levels of active inventory for sale in Florida and Texas are having "some impact on sales."
Lance Lambert
January 22, 2025
Over the past week, ResiClub PRO members got these 3 additional research articles:
Homebuilders in Florida and Texas are spending the most on incentives—Northeast builders are spending the least
Speaking on their earnings call this week, D.R. Horton CEO Paul Romanowski was asked about different demand trends geographically and if rising inventory in Florida and Texas was impacting the sales of America’s largest homebuilder.
Romanowski responded that: “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. We've seen some moderation there. But generally, as we enter into the spring, we've seen—have been pleased with what we've seen in these first few weeks in our sales offices across our footprint.”
The regional variation described by D.R. Horton is supported by the data.
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.
Broadly speaking, homebuilders have been more willing in recent years to compress margins—which reached historic levels during the Pandemic Housing Boom—and allocate them toward incentives or affordability adjustments to "meet the market" when and where needed, rather than making significant cutbacks in production.
Indeed, just last month Lennar CEO Stuart Miller told analysts that: “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 for incentives on unsold inventory. On a $500,000 home, that would come out to spending $50,000 on incentives.
In the Northeast, homebuilders are spending 3% of the sales price for incentives on unsold inventory. On a $500,000 home, that would come out to spending $15,000 on incentives.
Often, those new construction incentives are baked into the price; however, if a particular community or market shifts quickly, and a builder needs to rapidly increase incentives to keep selling homes, it’s essentially a net effective home price cut.
“And although both new and existing home inventories have increased from historically low levels, the supply of homes at affordable price points is generally still limited. To help spur demand and address affordability, we are continuing to use incentives such as mortgage rate buy-downs, and we have continued to start and sell more of the small -- more of our smaller floor plans,” D.R. Horton CEO Paul Romanowski told analysts this week.
Many regional pockets of the country, where homebuilders are deploying more incentives to move product, are also the very places where active inventory for sale has jumped back to or above pre-pandemic levels.
ResiClub PRO members can access our latest inventory analysis for over +800 metros and +3,000 counties here, and access our latest home price analysis for over +800 metros and +3,000 counties here.
On Wednesday, Divvy Homes CEO Adena Hefets confirmed in a LinkedIn post that the troubled rent-to-own firm is being acquired by Brookfield Properties’ Maymont Homes for $1 billion.
After paying its debts, transaction costs, and the “liquidation preference to preferred shareholders”, Divvy Homes’ Series FF/common shareholders will receive nothing. That’s according to communications sent to shareholders that was viewed by ResiClub.
ICYMI, below is ResiClub’s coverage from last week on the sale of Divvy Homes 👇
