Observing trends and results in the sale of stick-and brick-homes can frequently give some clues as to what to expect in the coming year for all home sales including factory-built homes. The Wall Street Journal shares with MHProNews some observations and predictions they have made from analysis of fourth-quarter results from some of the nation’s largest home-builders. There is much emphasis placed on entry-level or first-time homebuyers.

1. New home sales will make big strides in 2015.

Lennar, based in Miami, posted a heady gain of 22% for sales contracts signed in its fourth quarter ended Nov. 30, over the same period a year earlier. In addition, KB Homes posted a 10% increase in sales contracts for its fourth quarter.

According to the WSJ article, “This, along with results from other builders, has led economists to hope that sales of new homes will make big strides in 2015. Some have made bullish predictions for home construction. Part of that is based on the assumption that entry-level buyers will make a comeback.”

2. Home prices are not escalating at a rapid rate.

WSJ cites that “Lennar’s average price on finalized deals increased by 7.2% to $329,000 in its fourth quarter compared with a year earlier. That’s a marked slowdown from the previous year when its average closing price increased by 17.6%.”

The article predicts that “A slowdown in new-home prices is welcome news for buyers, and price appreciation will slow as builders shift to constructing a larger number of less-expensive homes to cater to the entry-level market.” It is noted that many entry-level buyers have been sidelined in recent years by sluggish job growth, high home prices, student debt and stringent mortgage-qualification standards. “Now job growth has picked up and credit conditions are starting to ease. Lennar said Thursday it anticipates building more entry-level communities this year,” according to WSJ.

3. Incentives Lure First-Time Buyers

Another factor that may influence first-time buyers is that Lennar and other builders are rolling out more promotions such as free upgrades and financial assistance with closing costs to spur sales.  WSJ observes that “such enticements, called incentives, tend to dent builders’ profitability, but they’re a boon for home buyers.”

Lennar’s incentives in its latest quarter marked a rare increase from a year earlier, amounting to $23,100 per home, or 6.6% of the builder’s home sales revenue. A year earlier, they were $20,600 per home, or 6.3%. Other builders, namely D.R. Horton, Inc., and KB Homes, also recently reported boosting their use of incentives.

Nationally, builders have been more likely to increase their use of incentives since mid- 2013 than earlier in the recovery, according to a monthly survey of 150 home-builder sales representatives conducted by Wells Fargo Securities. That eased a bit in the fourth quarter.

4. Home sales still booming in Houston, the strongest U.S. market.

Economists, builders and investors have kept a close watch in recent months on home sales in Houston specifically, and Texas in general, concerned that the steep decline in oil prices will sap the strongest U.S. housing market.

However, builders such as KB Homes and Taylor Morrison Home Corporation say they haven’t seen a falloff in Houston yet.  However, Lennar said Thursday it has seen a slight impact in Houston, and that factored into its projections indicate that its gross margin will recede a bit this year.

“We haven’t seen a significant change in that market condition,” said Lennar president Rick Beckwitt. “We’ve seen a little, at the higher end, of a pullback. We’ve anticipated…that there will be further reconciliation in that marketplace.”  ##

(Photo Credit: Lennar Homes)

Article Submitted by Sandra Lane to – Daily Business News- MHProNews.