One of the most active homebuilders in the Lone Star State is getting cold feet about the housing market.
“Most homebuilders I’ve spoken to have said they want to close out their inventory by year-end,” Sean Chandler, president of Chesmar Homes’ Central Texas division, told the San Antonio Business Journal on Friday. “The best time to buy a home will be in the next three months.”
Chesmar Homes, which was bought by Japanese home builder Sekisui House for $514 million this summer, is currently attached to several master-planned communities throughout Texas, including Evergreen in The Woodlands and Trinity Falls, Johnson Development’s 2,000-acre community north of McKinney. Both developments are poised to add thousands of new single-family homes to their respective markets.
“A year ago, we were selling homes as fast as we could build them, and prices were going up all the time — 90 days ago, that came to a screeching halt,” Chandler says. Since the pandemic started, the cost of housing in San Antonio has ramped up an average 39 percent across the city to a median $385,340.
“Every builder is going to have to find the right price a home will sell at,” he added. “We’re going to discount the heck out of them.”
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Texas home buyers are getting cold feet
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Homebuilder sentiment takes historic hit
Uncertainty has spread like wildfire in the homebuilding industry and now even the biggest players are scrambling to adapt.
“Builders will only discount the base price of a home as a final measure,” says Keith Hughes, a director at the real estate research firm Zonda. Hughes says that builders will typically try to incentivize a homebuyer first — typically with strategies aimed at curbing mortgage rates — to try and move inventory before cutting into the base price.
Dallas-based Builders FirstSource, one of the nation’s biggest home building-supply companies, recently announced it would pull back many of its operations to focus on acquisitions.
“Our industry is clearly experiencing pockets of deceleration; we’ve all seen mortgage rates rising, single-family starts forecasts coming down in the back half of this year and cancellation rates increasing,” FirstSource CEO Dave Flitman told investors during an August earnings call.
Miami-based Lennar, another major player quite active in Texas, reportedly sent out an email last month instructing its agents to offer price reductions up to $12,500. The email obtained by SABJ put forward juiced-up commission rates up to 6 percent — a steep jump from the 1 percent to 2 percent builders were offering at the height of the buying frenzy between 2021 and early 2022. During an earnings call, Central Texas was named as one of the few markets where Lennar had applied both price cuts and agent incentives but was still unable to shift its inventory.
“Have you ever seen Halloween candy at the store on November 1?” Hughes asked. “It’ll be interesting to see what happens to home prices in January.”
— Maddy Sperling