Rising interest rates have caused understandable buyer apprehension in the first two quarters of 2022, leading to elevated cancellations halfway through the year. Cancellation rates increased across the board among the nation’s top home builders, meaning that new home sales in June were lower than the 590,000 gross sales reported by the Census Bureau, Bill McBride reports in the CalculatedRisk Newsletter.
D.R. Horton posted a 24% cancellation rate in Q2, higher than their normal cancellation rate in the 16% to 20% range. For comparison, D.R. Horton saw rates surge near 50% during the housing bust in 2007 and 2008.
For D.R. Horton, their normal cancellation rate is in the 16% to 20% range, so they were above the normal range in Q2. During the housing bust, Horton’s cancellation rate was close to 50% for a couple of quarters in 2007 and 2008.
A few key points are:
- The new home sales report doesn’t include cancellations.
- Cancellations increased sharply in Q2.
- This suggests that new home sales in June were lower than the gross sales reported by the Census Bureau.