Solid demand, backlog of home orders favors builders in ’22

Dec 16, 2021, 10:28 AM | Updated: 10:45 am

LOS ANGELES (AP) — U.S. homebuilder stocks have outpaced the broader market this year, and analysts are bullish on the prospects for more gains in 2022, despite expectations of continued supply chain woes.

The SPDR S&P Homebuilders exchange-traded fund is up 45% this year. Two of the biggest builders by homes sold, D.R. Horton and Lennar, are up about 52% and 46%, respectively. The benchmark S&P 500 index is on pace for a 23% gain.

The strong gains reflect investors’ confidence in builders’ prospects for capitalizing on a red-hot U.S. housing market that is underpinned by strong demand, still-low mortgage rates and a shortage of homes on the market.

Meanwhile, the supply chain bottlenecks have led big builders to build up a backlog of home orders that they won’t be able to deliver until next year.

“Early returns from the winter suggest reasonable order strength thus far, which bodes well for the 2022 spring selling season,” BTIG homebuilding analyst Carl Reichardt wrote in a research note. He recently raised his 2022 earnings per share estimates for most of the 12 homebuilders he tracks, including KB Home and Lennar, citing expectations that builders will benefit from more sales next year.

The biggest problem homebuilders had in 2021 was being able to build homes fast enough to meet the demand during one of the hottest housing markets in decades.

The global supply chain disruptions, rising inflation and a shortage of skilled labor, led to construction delays and uncertainty that forced many big builders to pump the brakes on the number of homes they put up for sale. As a result, many builders have seen their backlog of home orders they have yet to deliver on swell.

The dynamic has helped dampen sales of new U.S. homes in 2021. In October, new home sales hit a seasonally adjusted annual pace of 795,000, down 23% from a year earlier. In contrast, sales of previously occupied U.S. homes through the first 10 months of this year were up 11% from where they were in 2020, on pace for at least 6 million home sold, which would be the highest number in 15 years.

“If there were no supply chain and no labor shortages we would be growing by double digits in terms of housing construction,” said Ali Wolf, chief economist at Zonda Economics, a real estate industry tracker. “Builders would sell more if they had more.”

Builders are still dealing with supply chain bottlenecks and higher prices for garage doors, windows, plumbing fixtures and other building materials.

During a recent conference call with analysts, builder Taylor Morrison Home said it continues to see random building product shortages across the country and anticipates they may continue next year.

Lumber futures prices soared to an all-time high $1,670.50 per thousand board feet in May, a twofold increase from a year earlier, reflecting strong demand for new construction and home remodeling, and pandemic-related problems limiting production. It then dropped to $456.20 in August, but has been surging since and is now back above $1,100, according to FactSet.

Still, the housing market demand trends, especially the low inventory of homes for sale, bode well for builders heading into next year.

Homes nationally are selling within days of being put up for sale. In October, more than 80% of previously occupied U.S. homes sold after being on the market for less than a month.

“I don’t know how that changes in the near future, so it probably gives homebuilders maybe an extra shot or two on goal with getting buyers that they haven’t had in years past,” said Jay McCanless, a housing analyst at Wedbush Securities.

That’s one reason the analyst is bullish on more stock price gains for the 14 homebuilders he tracks.

“I’m very comfortable and optimistic with the group heading into next year,” he said. “And certainly our price target suggests there’s room for growth above the current prices.”

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


Park Sang-hak, a North Korean defector-turned-activist, holds to release a balloon bearing masks an...
Associated Press

S Korean group floats balloons toward North amid animosities

SEOUL, South Korea (AP) — A South Korea activist said Thursday he launched more huge balloons carrying COVID-19 relief items toward North Korea, days after the North vowed to sternly deal with such activities and made a highly questionable claim they were a source of the virus. South Korean experts doubt North Korea’s moves to […]
22 hours ago
FILE - A house sits in Rock Creek after floodwaters washed away a road and a bridge in Red Lodge, M...
Associated Press

Yellowstone flooding reveals forecast flaws as climate warms

BILLINGS, Mont. (AP) — The Yellowstone National Park area’s weather forecast the morning of June 12 seemed fairly tame: warmer temperatures and rain showers would accelerate mountain snow melt and could produce “minor flooding.” A National Weather Service bulletin recommended moving livestock from low-lying areas but made no mention of danger to people. By nightfall, […]
22 hours ago
Associated Press

Today in History: July 7, female cadets at West Point

Today in History Today is Thursday, July 7, the 188th day of 2022. There are 177 days left in the year. Today’s Highlight in History: On July 7, 1976, the United States Military Academy at West Point included female cadets for the first time as 119 women joined the Class of 1980. On this date: […]
22 hours ago
A police officer prepares an ATV for patrol ahead of the G20 Foreign Ministers' Meeting in Nusa Dua...
Associated Press

Russia’s war in Ukraine to overshadow G20 talks in Bali

JAKARTA, Indonesia (AP) — Foreign ministers from the Group of 20 leading rich and developing nations are gathering in Indonesia’s resort island of Bali for talks bound to be dominated by the conflict in Ukraine despite an agenda focused on global cooperation and food and energy security. The one-day gathering will take place on Friday […]
22 hours ago
This undated photo released by the San Francisco Zoo & Gardens, shows, a male Magellanic penguin, c...
Associated Press

Oldest Magellanic penguin at San Francisco Zoo dies at 40

SAN FRANCISCO (AP) — The oldest Magellanic penguin at the San Francisco Zoo & Gardens — one of the oldest penguins living under human care anywhere in the world — died Wednesday at the age of 40, the zoo reported. The estimated age of the male, called Captain Eo, was well over the species’ average […]
22 hours ago
Cherelle Griner, Brittney Griner's wife, talks prior to a rally for Phoenix Mercury WNBA basketball...
Associated Press

Mercury hold public rally in support of Brittney Griner

PHOENIX (AP) — They shared laughs, smiles, memories. There also were tears, fears, unease. Through the range of emotions, one common thread bonded them together: Brittney Griner. Wearing “BG” shirts and holding signs, several hundred fans gathered for a public rally in support of Griner on Wednesday, hoping their sentiments would reach the WNBA player […]
22 hours ago

Sponsored Articles


Best retirement savings rates hit 4.30%

Maximize your retirement savings with guaranteed fixed rates up to 4.30%. Did you know there is a financial product that can give you great interest rates as you build your retirement savings and provide you with a paycheck for life once you retire? It might sound too good to be true but it is not; this product is called an annuity.
Carla Berg, MHS, Deputy Director, Public Health Services, Arizona Department of Health Services

Update your child’s vaccines before kindergarten

So, your little one starts kindergarten soon. How exciting! You still have a few months before the school year starts, so now’s the time to make sure students-to-be have the vaccines needed to stay safe as they head into a new chapter of life.
Day & Night Air

Tips to lower your energy bill in the Arizona heat

Does your summer electric bill make you groan? Are you looking for effective ways to reduce your bill?
Solid demand, backlog of home orders favors builders in ’22