Builders have scaled back spec building to the point where the number of unsold new homes in inventory is now at its lowest level since March 2002.
Demand may not have snapped back just yet, but some in the industry are guessing that with a closing window to take advantage of federal and state home buyer tax initiatives, builders may begin to bulk up on specs.
Big Builder Online last week asked readers about their spec counts. Almost half of the respondents--46.4%--said they have three to five specs on average per community. However, 28.6% said they only have one to two specs, and 17.9% said they have six to 10.
Response was tighter when readers were asked if they expect their spec count to change in the next six to nine months: 39.3% said their spec count will increase, 32.1% predicted a decrease, and 28.6% said their spec count will stay the same.
There was a broad range on what percentage of sales are spec units: 31% to 40% and 91% to 100% garnered the largest response, with 21.4% each, followed by 61% to 70% and 71% to 80% each with 14.3%.
More than half of the respondents--53.6%--said their margins on spec sales are a little worse than their margins on dirt sales. However, 21.4% said margins on spec sales were significantly worse. Only 17.9% said the margins were about the same, while 7.2% said better.