Homebuilders Buy Time With Huge Pandemic Backlogs
As the pipeline empties, lower costs and mortgage rates should kickstart a new wave of construction in 2023, even if it requires uncomfortable price cuts.
Homebuilders can afford to wait — for a little while.
Photographer: Luke Sharrett/BloombergThe housing market has fallen off a cliff, but for now, homebuilders are biding their time. As bad as things look, odds are they will want to ramp up their production at least somewhat in a few more months.
The key to the outlook in 2023 is the huge order backlogs that builders accumulated when mortgage rates were still at rock bottom and sales surged during the pandemic. When the housing market slowed earlier this year, that backlog bought homebuilders time to wait out the slump. Though sales have been weak for months, a large chunk of the new homes and earnings builders will deliver in 2023 are based on orders banked in the first half of 2022.