(Disclosure: Rose Law Group represents Emmerson Holdings.)
Guest contribution from Chase Emmerson, the co-CEO of Emmerson Holdings
Since mid-2022, the housing market has experienced extreme volatility, negatively impacting both new housing supply and long-term housing affordability. Major U.S. homebuilders widely acknowledge a housing deficit and strong long-term demand fundamentals. However, in the shadow of the Great Financial Crisis (GFC), and under pressure from shareholders, publicly traded homebuilders remain highly reactive to short-term market fluctuations.
When volatility arises, large homebuilders typically scale back investments in new housing supply—beginning with land acquisition and land development. The latest surge in market uncertainty has dampened homebuyer sentiment and driven up 10-year U.S. Treasury yields, which in turn have pushed 30-year mortgage rates higher. The recent impacts of the Trump Administration’s tariff and immigration policies on building costs have added to the uncertainty for homebuilders.
As a result, builders are once again hitting the brakes on land and land development spending for future communities. Due to this recent macroeconomic uncertainty, we have had homebuilders terminate purchase agreements on over 700 single-family lots that we own in Metro Phoenix.
The timeline to deliver new residential communities is lengthy—often taking up to 18 months just to secure final approvals, followed by another 12 to 18 months for construction of horizontal improvements, like streets, utilities, landscaping, and amenities.
Thus, when builders reduce land investment due to short-term volatility, the resulting supply shortfall is felt for years. These issues are often compounded by the fact that new subdivision approvals from municipalities typically expire if development does not begin within a set timeframe, in many cases just 12 months after the final approval date. When a homebuilder cancels a deal, often the next buyer will need to obtain new final approvals before they can begin development.
Pulte Homes addressed these market dynamics during their Q1 2025 earnings call on April 22. While reaffirming the long-term demand fundamentals, they announced an approximately 10% reduction in land spending in response to current market volatility. CEO Ryan Marshall stated, “given greater macroeconomic uncertainty, we are recalibrating our land spend.” He added, “I continue to believe in the long-term demand dynamics within the housing industry… it is reasonable to expect that demand will be there in the future.”
As a land investor that regularly sells to large homebuilders in Metro Phoenix, I have witnessed firsthand how short-term volatility has delayed builders’ land investment plans. One illustrative example involves a 56-acre site in one of the fastest-growing suburbs in the U.S. Emmerson Holdings’ land investment partnership acquired that property for roughly $625,000 in late 2018 – a time when builders were still working through finished lots left over from the GFC and avoiding raw land purchases. Despite this, we rezoned the site and began planning a 226-lot single-family community.
During the early COVID-era housing boom, we opened escrow with a large homebuilder with closing scheduled for summer 2022. They had invested heavily – non-refundable earnest money, final engineering, and even prepaid utility fees. A few months before closing, their local land acquisition team joked that they would never walk away from the deal. But when mortgage rates spiked in mid-2022, builders across the board began canceling land deals—regardless of how favorable the terms or how much they had already invested. The deal was canceled.
It took nine months to find another buyer, but that deal also fell through when mortgage rates surged into the high-7% range. Following that, two other publicly traded builders entered and exited escrow for the same reasons: market volatility and, in some cases, rising improvement costs—an issue I have previously covered in the Odd Lots newsletter. As Rob Kaplan said in a recent Odd Lots episode, “The problem with uncertainty going on for too long is that it slows activity.” Whether due to interest rates, sentiment, infrastructure costs, or policy changes—from Biden’s spending initiatives to Trump-era tariffs—policy-related uncertainty is clearly hurting housing supply.
So, have homebuilders actually benefited from their knee-jerk reactions to market swings? Recent evidence suggests otherwise. Land prices have continued to climb since mid-2022—contrary to many builders’ expectations.
I have seen this play out personally: from our original $625,000 land purchase, we sold a 3-acre commercial parcel for $575,000, and just this week we sold the remaining 53 acres for $6.5 million to a publicly traded homebuilder—far more than what the 2022 buyer could have paid. Not only did the original builder miss out on a better price, but they also lost the chance to avoid today’s higher land improvement costs.
As Pulte’s CEO Ryan Marshall noted, “Disruptions in the marketplace can create exciting opportunities that have the potential to accelerate future performance.” However, over the past few years, these “opportunities” have largely failed to materialize, including in the wake of the mid-2022 mortgage rate spike, the regional banking crisis of early 2023, and now during this tariff-induced volatility.
Whether more attractive land buying opportunities will emerge for homebuilders in the years ahead remains uncertain. DR Horton, for instance, expects land prices to keep rising. On their Q2 2025 earnings call on April 17, they reported a 10% year-over-year increase in land and lot costs and warned of further inflation, citing the ongoing difficulty of bringing communities online. For our part, on the deals we own that builders have walked away from this year, we also expect to sell for even higher prices once this short-term volatility fades.
Policymakers must recognize that macroeconomic policies such as tariffs that contribute to short-term market volatility reduce investment in the supply of much-needed homes. Due to the long lead times associated with developing new communities, these impacts reverberate for years and exacerbate housing shortages.
While builders may view their cautious approach as prudent risk management, the long-term consequence is a widening gap between housing demand and supply, which ultimately harms affordability. Additionally, the repeated pattern of pulling back during volatile periods has not necessarily shielded homebuilders from rising land and development costs, and in many cases, has caused them to be caught flat-footed when homebuyer demand proves more resilient than expected.
If we are to have a hope of improving housing affordability and meeting long-term demand for new housing, then a steadier hand is needed…both in terms of policymakers and their macroeconomic policies, and homebuilders and their reactions to short-term market volatility.
Follow Chase: @azlandinvestor
