The second day of the Builder 100 Conference, held at the Ritz-Carlton Laguna Niguel in Dana Point, California, provided attendees with an economic outlook, insights from top public company executives, in-depth looks at capital and land markets, and a discussion on the role of technology in the industry's future.
Below are nine takeaways from the full day of sessions during the Builder 100 Conference:
Soft data is weighing down the economy. During her economic outlook, Zonda chief economist Ali Wolf shared that while measurable hard data on the economy—employment numbers, gross domestic product, inflation rates, and retail sales—is largely positive, soft data—indicators dependent on surveys, opinions, and subjective assessments—is trending negatively. More than 70% of consumers are concerned about a recession, over 50% believe the economy is getting worse for their family, and business sentiment is plagued by record-high uncertainty.
While there is not a direct correlation between soft data and hard data, Wolf said there is more reason to believe the sentiments behind soft data will begin to impact hard data.
“Given how many pillars are showing there is a shift, I am much more nervous than in recent memory about the idea that soft data does start to influence that hard data,” Wolf said.
Potential outcomes from tariffs: The bad and the good. Unsurprisingly, tariffs were a fixture of conversations across many sessions during the day. In her outlook, while cautioning that it is difficult to pin down direct impacts from tariffs, Wolf outlined several likely outcomes that could impact the economy and housing market.
Continued uncertainty in the economy as a result of tariffs could lead to less consumer spending and reduced economic growth. As a result, the economy could enter a recessionary period and experience stagflation—an economic downturn characterized by slow growth, high unemployment, and rising inflation. At the same time, the onshoring efforts to bring industries domestically could result in positives for certain markets. Wolf said while the tariffs may serve as a useful negotiation tool for the administration, the stop-start nature they have been rolled out cannot continue for too long. If uncertainty persists, depleted consumer and business confidence could affect consumer spending and other hard data.
Zonda surveys indicate 90% of home builder respondents are worried about the impacts of tariffs, chiefly on cost, demand, and the stock market. Many are already citing cost increases, with Zonda’s Todd Tomalak projecting tariffs will translate in a 9% increase in “sticks and brick” costs for builders.
The market is lacking urgency, and consumers want more than just rate buydown incentives. Faced with affordability concerns, sales incentives remain important for buyers in the current housing market. While rate buydowns, forward commitments, and closing cost assistance are being implemented by builders to entice buyers, Wolf said incentives are beginning to lose their effectiveness as the market lacks urgency. Many consumers expect incentives and are looking for additional concessions—such as design credits—on top of rate buydowns.
Incentives were also discussed during the public builder leadership panel with LGI Homes’ Eric Lipar, Taylor Morrison’s Sheryl Palmer, and PulteGroup’s Matt Koart. Koart noted that PulteGroup is not implementing incentives in all of its markets, but they remain an effective tool in helping hesitant buyers solve for payments.
“[Incentives] are the most effective way of delivering monthly payment right now. If we had to adjust price to get to the same monthly payment instead of using a forward commitment buydown, it would be a lot more painful on margin than the forward commitment,” Koart said. “As much as we talk about reducing [incentives] and we talk in the field about using it very selectively, I don’t think in the near term I see much hope for a meaningful reduction of incentives.”
Single-family starts will decline by 5% in 2025. After initially projecting that single-family starts would increase, Wolf shared Zonda’s updated projections for 2025. A combination of factors, including a pullback in specs, slower consumer demand, challenges in several top markets, revised expectations shared by public builders, and increased costs, contributed to the forecast that starts will decline by 5% in 2025.
Innovation and adaptation are paramount in an uncertain market. During the public builder panel, Palmer, chairman and CEO of Taylor Morrison, noted that while innovation cannot solve the problems caused by uncertainty, it is imperative for success today and moving forward.
“Innovation does not come easy for our industry. The consumer wants it, but getting that integration through the organization with an old mentality of thinking is really tough,” Palmer said. “Change is hard for any business, but I think for our industry it is harder. I think it has to become a way of life and believe it is a critical part of our future and we have to get on board, but I don’t know that it’s going to overturn some of the economic impacts we are feeling and the confidence the consumer is struggling with today.”
In addition to innovation, LGI Homes chairman and CEO Lipar highlighted the importance of adaptability to succeeding in the current market. While some markets may supply constrained and uncertainty abounds, demand is remaining resilient.
“We don’t look at the supply in the market as much, we look at the demand. The most positive part of our business is that demand is still there. We don’t have any real problems unless demand falls off,” Lipar said. “With demand still there, it’s working through affordability, working with the customer. We’ve adjusted our supply because it is a slower pace environment right now. You are managing the business to today’s dynamics.”
Land banking is becoming increasingly common and a way for builders to achieve growth. Land or lot banking was discussed frequently during both the capital and land sessions at the Builder 100 Conference. While not a new strategy for home builders, off-balance-sheet land banking arrangements supporting land-light models have become increasingly common in the industry.
“It is the path to growth,” Troy Wahlberg, senior vice president of corporate land acquisition and development for New Home Co., said during the land-focused session. “Even though lot banking has been around, you still have a lot of people out in the market that don’t know all the nuances to the structure and options and construction agreements that are required. It is a necessary tool to have in your growth tool belt.”
As land banking becomes more common, Hilla Sferruzza, executive vice president and chief financial officer for Meritage Homes, said relationships and comfort are more important in the space. An early adopter of lot banking, Meritage Homes had as many as 19 different land banker partners in 2005; currently, the builder has a handful of partners.
“It is not a fun process to underwrite. Once you’ve found a partner that gets you and understands you and your risk profile, it is a much simpler process,” Sferruzza said during the capital-focused session. “Folks are tightening the relationships to work on better terms for both sides and going deeper with fewer folks instead of having an auction process.”
Land banking capital is also becoming a more important element in the M&A space. Tony Avila, founder and CEO of Builder Advisor Group and Avila Capital Real Estate, said land banking and off-balance-sheet financing has played a role in almost all of the dozen deals his firm has worked on since September 2024. Greg Vogel, CEO of Land Advisors Organization, echoed this sentiment, noting “virtually every deal” closed since the beginning of the year involved a land banker.
No one-size-fits-all solution for BTR, but builders are realizing premiums in the space. During the session “Expanding Horizons: Multifamily and Build-to-Rent Diversification Success,” Kimberly Byrum outlined how builders are participating in the multifamily sector and how they are leveraging multifamily and build-to-rent (BTR) to address affordability. Zonda’s managing principal of multifamily noted that portfolio diversification, increased land utilization, and market growth in the BTR sector are among the reasons builders are entering the space.
Additionally, the preferences of many millennials and baby boomers favoring renting makes diversification into multifamily and BTR an attractive option. Byrum said builders, including D.R. Horton, Toll Brothers, Taylor Morrison, Lennar, and Shea Homes, are building a range of products from garden-style apartments to high-rise apartments. While there is not a one-size-fits-all approach to the market, Byrum noted that builders in the multifamily and BTR sector are able to command rent premiums, demonstrating the strong appeal of the products they are bringing to the market.
Slow technology adoption will lead companies to get left further behind faster. Between artificial intelligence (AI), smart technology, sustainability-focused initiatives, and digitized transactions, the pace of technological innovation is accelerating rapidly. During a session discussing the landscape of technological innovations, Moderne Ventures founder and managing partner Constance Freedman shared that at the pace technology is being introduced and deployed, companies slow to adopt new solutions will risk being left further behind their peers at a much faster rate.
At the same time, companies should ensure technological investments create value in some form, either in increasing revenues or decreasing expenses. For example, AI technologies are 60 times faster at analyzing data and will generate an estimated annual savings in the construction industry of $40 billion by 2030.
Freedman said AI can mitigate 37% of delays and speed up projects by 10%. Similarly, smart technology is something that is no longer seen as a “nice to have” by buyers. More than half of buyers expect smart technology in the homes they are shopping, and nearly 80% of buyers would pay more for homes with smart technology integrated into the house.
Builder, buyer, and Realtor dynamics have shifted following the National Association of Realtors (NAR) settlement. While many builders have differing approaches to Realtors in the new-home market, Ron Nelson of Hovnanian Enterprises and Tracy Tannenbaum of Meritage Homes shared how both companies are leaning into their Realtor relationships. Nelson said that as Hovnanian has shifted toward quick move-in homes (QMIs), co-broker participation has increased to around 75% of sales.
“We court the brokers,” Nelson, vice president and chief marketing officer for Hovnanian Enterprises, said. “We look at them as a way to get velocity. We are willing to trade profitability through commissions for inventory turn.”
As Meritage Homes has shifted its strategic approach toward QMIs, it has also leaned into Realtor relationships. The builder has launched a Realtor loyalty program and has tried to remove common hurdles Realtors encounter when selling homes. Tannenbaum said the builder is working toward its long-term goal of 100% co-broker participation.
