(Disclosure: Rose Law Group represents Lennar, Meritage Homes, Taylor Morrison, and Toll Brothers.)
By Vincent Salandro | Builder
The resilience of demand in the housing market—partially aided by limited resale supply—contributed to strong quarters across the board for public home builders. In the recent round of quarterly earnings reports, many public builders posted record quarterly levels of sales, revenues, and profits per share, results supporting a growth-oriented outlook for 2024. The quarterly results and demographic tailwinds did little to temper growth plans, with many companies reiterating their 10% annual growth targets for closings and community openings.
In addition to limited resale supply, large public builders are also benefiting from several competitive advantages over the existing-home market, namely the ability to offer financing incentives. With elevated mortgage rates, rate buydowns remain prevalent in the market, particularly for first-time home buyers. Additionally, the ability for home builders to aid with closing costs and offer design upgrades are resonating with prospective buyers.
While lot availability ranked as the second biggest concern for home builders entering 2024, according to the NAHB, public builders largely reported strong lot portfolios through the early months of 2024. With strong years of supply, a majority of builders stated they had sufficient land to support growth targets through 2025. As a result, the companies have been more selective when evaluating land deals in the current market, characterized by increased competition and rising lot prices.
