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Industry & Trends

New Home Building Cancellation Rates Drop, Signaling More Demand

The U.S. housing market remains challenged but new information from two of the biggest home builders in the country suggests demand for new homes is picking up.

Even as the market for new homes in the country is still below the past few years, D.R. Horton and PulteGroup – two of the nation’s biggest home builders – both are reporting significant drops in their cancellation rates for new construction.

The new information, released in the two company’s most recent financial reports, suggests that the housing market has stabilized and may in fact be rebounding as we enter the middle of 2023. Fortune magazine reports that D.R. Horton’s cancellation rate for the first quarter of 2023 was 18%, down by a significant margin from the 27% rate the previous quarter. PulteGroup had an even bigger drop, with only 13% of its buyers canceling their home contracts in the first quarter of 2023, well below the 32% rate in the prior quarter.

Fortune, citing a John Burns Research and Consulting report from March, said the industry had an aggregate cancellation rate of 9%. “That’s far below the peak of 24.6% hit in October, and just slightly above the 8% hit at the height of the pandemic housing boom in March 2022,” it reported.

Jeffrey Mezger, CEO of big homebuilder KB Home, told investors in March that “As we entered the spring selling season we began to see an increase in [housing] demand. Although there are still considerable interest rates and economic uncertainties, we are encouraged by this progression.”

For those in the construction industry and companies supplying building materials like wood, the news is encouraging even as higher mortgage rates and lack of supply continue to hinder the housing market.

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