Builders are only selling spec homes... why?

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Real Estate

This is from Rick Palacios, Jr, Director of Research at John Burns Real Estate Consulting.  

Here are some recent responses that he's seen from the builders when he's asked them about the market:

#SanJose builder: “Doing highest bidder approach at two communities. Seeing $100K over asking at one of them. Buying lumber sooner now, but may push out starting more units with the anticipation of lumber prices coming back down. Costs are eating up all price increases.”

#Riverside builder: “We sell out within a week of release. If sales volume drops it’s a result of no inventory. Banging prices each week. Scary high. Costs are stupid high. I’m not saying we’re out of buyers but sales team is telling me that their buyer list is getting smaller."

#Tampa builder: “We’re closed for the first half of May. Working on catching up to what we already have. We will significantly limit sales for the next several months.”

#Indianapolis builder: “Not selling/pricing spec inventory until late in the construction process, to account for rising costs. We continue to raise prices on contract builds but have not added escalation clauses.”

#Chicago builder: “Many builders are putting everything on hold or putting foundations in the ground and not going any further until they see where costs are headed. Trim, windows and doors supplier says they are starting to feel a slowdown and are preparing for a bigger one.”

#Atlanta builder: “Locking in costs with purchase orders at time of foundation. Cannot sell a home until foundations go in. Costs are crazy. We are hitting the top of the market in some places and can't push prices. We are seeing margin compression.”

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