Current land strategy: Proceed with caution

(Disclosure: Rose Law Group represents Lennar and Taylor Morrison.)

By Vincent Salandro | Builder

During 2022, high mortgage rates, home price appreciation, and inflation began to negatively impact overall consumer confidence and demand in the housing market. Cooling demand was reflected in Zonda’s December New Home Market Update, which indicated the count of new homes sold in November represented a 10.6% decline from the previous month and a 35.9% decrease from the same period in 2021. 

Due to current market conditions, many builders have shifted away from a full-steam-ahead approach to land acquisition, instead taking a more cautious path with a focus on developing land within the existing pipeline rather than acquiring land at a rapid pace. 

During Zonda’s National Housing Update webinar in November, senior managing principal Tim Sullivan said nearly 60% of builders were “cautiously moving forward” with their land acquisition strategy, with a quarter of builders pausing completely on land deals. Only 2% of builders said they were continuing to move “full steam ahead” in regard to land acquisition. Sullivan said many builders are “pausing deals in the outskirts” while focusing on land acquisition within core operating markets. 

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