2023-11-08 15:56:00

Homebuilders struggle to find buyers as cancellations by developers rise: 'The build-for-rent market is going to...

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MarketWatch
By Aarthi Swaminathan

Its a tough time to be selling a home. Home builders more than anyone else, know that, as they see more orders being canceled, and as traffic dwindles.

Mortgage applications have been running down close to 40% year-over-year. People are clearly in sort of a wait-and-see, or pause mode, John Lovallo, a UBS UBS, +0.64% analyst who covers homebuilders, told MarketWatch on an episode of Barrons Live.

Homebuilders are feeling quite gloomy, as theyre finding a dearth of buyers as mortgage rates continue to rise above 7%. Confidence among builders dropped for the 10th month in a row in October.

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Setting aside the pandemic, builder confidence was at a 10-year low. The National Association of Home Builders said that the traffic of prospective buyers, one of the components that measured confidence, fell significantly.

Cancellations by property developers are up, Lovallo noted. KB Home KBH, +0.50% is reporting a 35% cancellation rate in the third quarter, up from 9% a year ago. Lennar said 21% of orders are being canceled; while Meritage Homes MTH, +1.32% reported a 30% cancellation rate. Ali Wolf, chief economist at Zonda Research, on Thursday afternoon, tweeted that her data shows a 70% cancellation rate among builders in Phoenix.

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