Public home builders weathered softer demand patterns due to mortgage rates and election uncertainty in the fiscal third quarter and delivered results that positioned many from significant growth in 2024.
The third quarter earnings season for public home builders was highlighted by strong community count growth, record revenue and quarterly closing numbers, and general optimism about the state of the new home market heading into 2025.
As the Federal Reserve enters a period of rate cuts, mortgage rates are expected to trend downwards, which could help activate both pent-up demand and resale inventory. However, several builders, including Taylor Morrison and Meritage Homes, noted their companies remain in strong positions to compete against the increased levels of resale supply in their operating markets. Rate buydowns are likely to remain a key element of the public home builder playbook moving forward and a competitive advantage for builders over existing home sellers.
The strong land positions and pipelines of public builders are continuing to allow public builders to achieve growth targets and scale operations. Many companies, including KB Home, LGI Homes, Beazer Homes, and Landsea Homes, reported significant year-over-year growth in community count during the fiscal quarter and are positioned to achieve double-digit growth on an annual basis in 2024.
During earnings calls, public home building executives shared largely optimistic outlooks for the new-home market ahead of the 2025 spring selling season. A collection of perspectives, outlooks, reflections, and operational highlights are compiled below:
“To help spur demand and address affordability, we are continuing to use incentives such as mortgage rate buydowns and we have continued to start and sell more of our smaller floor plans. With 46% of fourth quarter closings also sold in the same quarter, our sales, incentive levels, and gross margins are generally representative of current market conditions. We typically experience seasonally slower demand during the fall and our tenured local operators seek to find the right balance of sales pace, pricing, and incentives in each community that will best position our returns and inventory levels before we enter the spring. For the full year of fiscal 2025, our home building volume and profit margins will largely be dependent on the strength of the upcoming spring selling season.” — Paul Ramanowski, president and CEO, D.R. Horton
“We are nearing the end of a five-year marathon that will have restructured our entire operating platform for long-term success and greater returns on capital and equity. We have continued to drive production to meet the housing shortage that we know persists across the market. As interest rates subside and normalize and now that the Fed has boldly begun to cut rates, we believe that pent-up demand will be activated, and we are well prepared with growing community count and growing volume.” — Stuart Miller, executive vice president and co-CEO, Lennar
“While we continue to invest in new land positions, we have to make sure we are efficiently and intelligently turning our existing land assets. Within our business model, we seek to achieve high returns by balancing the desire to maximize profitability of each home, while making sure we are turning our land assets. We often use the phrase, ‘we can’t be margin proud.’ The gross margin is an important driver of return on invested capital, and we don’t want to give away lots that we’ve worked hard to secure. At the same time, we must be price competitive and offer a clear and compelling value to potential home buyers.” — Ryan Marshall, president and CEO, PulteGroup
“We believe our targeted market segments of entry-level and first move-up homes remain undersupplied even with the increase in resale listings and that our product continues to be attractive. We also have a competitive advantage related to affordability, as unlike existing home sellers, we can offer financing incentives. We are confident that our strategy allows us to target the largest piece of the potential home buyer pool by effectively competing [against] resale inventory, which we believe will help us continue to grow our market share even as existing home inventory reenters the market.” — Phillippe Lord, CEO, Meritage Homes
“Going forward, we plan to continue aligning our starts with sales, which will help keep our production in balance with the majority of those starts already sold. Our build times on homes delivered during the quarter was about 150 days, a two-week improvement sequentially and a factor in delivering more homes in the third quarter than we projected. Going forward, we are focused on continued progress to drive build times down to four months, which is the lower end of our historical range.” — Robert McGibney, president and chief operating officer, KB Home
“While the macro backdrop remains chopping with headwinds from interest rates, the election and broader economic unknowns weighing on consumers’ confidence, and a sense of urgency, we believe we are well positioned to continue to take advantage of what is still an undeniably strong underlying need for new construction… As we wrap up 2024, our results are tracking firmly ahead of our expectations coming into the year with strong upside to our closings and gross margin and I’m confident that the positive momentum will continue into 2025 and beyond, based on our land pipeline that is concentrated in quality locations meant to perform through the ebbs and flows of housing cycles.” — Sheryl Palmer, chairman and CEO, Taylor Morrison
“Our strategy of widening our geographies and price points to include more affordable homes and increasing our supply of spec homes has helped us meet demand while becoming a more efficient home builder. As we have expanded and come down in price, we now have the widest variety of product and the widest range of price of any of the builders, which presents us with a great opportunity to grow our core home building business in our 60 markets across the country.” — Douglas Yearley, CEO, Toll Brothers
“Given the growth in our lot count and community count so far this year through both acquisitions and organic growth, starting in 2025 we think we are well positioned to drive delivery growth of 10% or more on an annual basis over the next couple years.” — Dale Francescon, co-CEO, Century Communities
“We continue to promote sales in a very targeted and strategic way using mortgage rate buydowns. About one third of our buyers during the quarter used our rate buydown program and about half of our buyers purchased our most affordable line of homes. We feel very good about the breadth of our product offering and product mix across our 17 markets. As we enter the fourth quarter, we remain on track to open a number of new communities and we are very excited about the many new communities we will be opening in 2025.” — Robert Schottenstein, president and CEO, M/I Homes
“We will remain opportunistic in all facets of growing the per share returns of Dream Finders Homes. We are focused on closing our another successful year in 2024 while also hard at work building long-term value for 2025 and beyond. We reiterate our guidance of 8,250 closings for the full year 2024.” — Patrick Zalupski, chairman and CEO, Dream Finders Homes
“The fundamentals of the housing market are strong, supported by continued household formations, years of underproduction, and limited supply of resale homes. Based on recent demand trends, our results to date and outlook for the next two months, we now expect to close between 6,100 and 6,400 homes this year at an average selling price between $360,000 and $37,000.” — Eric Lipar, chairman and CEO, LGI Homes
“Given the relatively high mortgage rate environment, we assume buydowns will remain at similar levels going forward. We are budgeting the cost of buydowns to remain consistent. In order to meet home buyers’ desires to use mortgage rate buydowns, elevated levels of quick move-in homes remain part of our new operating philosophy in the last few years.” — Ara Hovnanian, president and CEO, Hovnanian Homes
“We remain focused on expanding our presence in both established and growth markets, positioning ourselves for long-term strength. Our strategic initiatives are creating a more geographically diversified and resilient company, enabling us to navigate market fluctuations and capitalize on new opportunities. We continue to leverage our strengths and seize opportunities in both established and expansion markets.” — Doug Bauer, CEO, Tri Pointe Homes
“At a macro level, we do not expect significant reductions in mortgage rates over the balance of the fiscal year. Higher rates have typically led to a larger share of spec sales. As such, our outlook contemplates the specs which carry somewhat lower margins will represent more than 60% of our closings, the highest level in a decade.” — Allan Merrill, CEO, Beazer Homes
“Over the long term, we continue to believe that favorable demographic shifts will serve as a strong backdrop for the home building industry. A wave of millennials and Gen Z are entering into prime home buying years, fueling demand for the next decade. The housing market has been underbuilt for years, creating a significant shortage estimated between four million and seven million units. These factors collectively represent a substantial opportunity for new home construction and we believe Green Brick is well-positioned to capitalize on this trend and to expand our market share with our superior land pipeline.” — Jim Brickman, co-founder and CEO, Green Brick Partners
“We believe we are in a great position to achieve our delivery goals for the year and carry that momentum into 2025. Cycle times are back to their pre-COVID levels in most markets and, in some instances, even better. We had a number of communities scheduled to open ahead of the spring selling season that we believe will help us drive sales. We have the advantage of offering some of the most affordably priced homes of any of the publicly-traded home builders.” — Greg Bennett, president and CEO, Smith Douglas Homes
“We continue to see a long runway of growth for Landsea in our existing markets which represent some of the best home building markets in the country. We entered most of these markets via acquisitions, which allowed us to establish a presence more rapidly than if we expanded organically. The difficult task of integrating these acquisitions is largely behind us [and] we are now focused on growing our presence beyond what it is today, reaping the benefits of increased scale.” — John Ho, CEO, Landsea Homes
“We know that maintaining sales momentum in a community is important and we plan on staying competitive in the marketplace, so that we cycle through our lot positions and drive higher inventory returns. While there’s a lot of work to be done to achieve these goals, I’m confident that we have the right people, strategy and focus in place to get there. The strong year-over-year growth we posted in both orders and deliveries in the third quarter reflects our company’s ability to adapt to changing market conditions and execute on strategic initiatives. While the market is competitive, United Homes Group is in a great position to capitalize on the positive housing fundamentals that we see in our markets and our internal initiatives to drive improved profitability.” — Jamie Pirello, interim CEO, United Homes Group
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