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Several developments in a volatile 2023 provided sufficient reason for home builders to carry optimistic outlooks into 2024. The scarcity of resale inventory, the mortgage rate lock-in effect, and resilient housing demand are all positive tailwinds for the new-home market that will likely carry throughout the year. While potential headwinds lurk, including lot availability and rising land costs, many believe 2024 will be a positive year for home building and a return to pre-pandemic seasonality.

The previous calendar year was characterized by the emergence of two parallel housing markets: the resale market, with limited supply and record-low levels of sales, and the new-home market, with an increased market share as buyers began searching for new homes with existing-housing inventory constrained. The consensus from economic experts is this trend will continue in 2024, with a solid year for housing being driven by the new-home market.

This positive outlook is largely mirrored by companies on the Builder 100/Next 100 lists. Adrian Foley, president and CEO at 50th-ranked Brookfield Residential Properties says the company believes the resale market will remain relatively tight and prices will remain elevated, making new homes an attractive option for shoppers via financing and other incentives offered by home builders.

“Potential interest rate cuts, a relatively stable job market, and consumer sentiment will be key for a healthy housing market in 2024,” Foley says.

Michael McGraw, CEO of Grand Rapids, Michigan–based Eastbrook Homes, ranked No. 104, says some competition from the existing-home market may return later in the year.

Some builders described their outlook for 2024 as bullish, steady, and strong, while others expressed excitement for the year and hopes for a return to pre-pandemic normalcy. Some noted several markets will provide more opportunities than others.

“We are excited about the year ahead. The industry outlook is strong,” says Todd Chachere, CEO of Houston-based Perry Homes, ranked No. 25 . “On the industry side, we see that the market continues to be undersupplied, leading to strong demand for new homes. On the consumer side, stable interest rates, with the potential for cuts in the second half of the year, should create an optimal purchasing environment.”

Chachere says, when taken together, the good market fundamentals underlying the industry and the consumer sides of the market will result in “a positive year” for the home building industry.

Jalal Farzaneh, co-founder of Moore, Oklahoma–based Home Creations, ranked No. 88, says expectations that both the prime rate and mortgage rate will be lower by the end of the year should bring “more stability to the market.”

Expectations for stability are also shared by Tom Hennessy, president and CEO of Colorado Springs, Colorado–based Challenger Homes, who says the company expects business to be flat relative to last year.

"We're excited about the year ahead. The industry outlook is strong." — Todd Chachere, Perry Homes

“While supply is low, affordability is a major factor for keeping demand tempered. Our thinking going into 2024 was that the first half of the year would be ‘the bottom,’ and we should see demand rise in the last half of the year and into 2025,” Hennessy says in regard to the outlook at the 69th-ranked builder.

Joe Rentfro, co-chief operating officer at Houston-based David Weekley Homes, ranked No. 17 , says the improvement of cycle times is allowing the builder to be more optimistic about the year ahead. Lot delivery timelines, review timelines with municipalities, and construction cycle times have “all significantly improved,” he says.

“The normalized supply chain environment, potential for lower interest rates later in the year, and sustained strength of demand should allow us to continue the positive momentum,” Rentfro adds.

Zonda, the NAHB, and the National Association of Realtors (NAR) project a positive year for the new-home market. NAHB chief economist Rob Dietz shared the organization projects housing starts will increase between 3% and 4% in 2024, with new-home sales also forecast to experience growth in the year. NAR forecasts 1.04 million single-family starts in 2024 and a 19% year-over-year increase in new-home sales.

Zonda chief economist Ali Wolf projects starts will increase by 2% while noting that incentives remain “the name of the game,” representing a competitive advantage for home builders to help solve for affordability. Zonda’s most recent monthly survey of builders indicates that 80% of respondents plan to increase starts this year compared with 2023. Over 50% of respondents plan to increase starts by 10% or more on an annual basis.

Market Consolidation and M&A

After starting slow on the M&A front in 2023, activity began to accelerate in the back half of the year and has continued through the beginning of 2024, becoming a prominent trend in the home building sector.

A knock-on result of the mortgage rate lock-in effect has been sustained demand for new homes, and many home builders, particularly well-capitalized public companies, began actively pursuing new market positions. Public builders have continued to report strong cash positions during earnings calls and are electing to leverage their balance sheets in the M&A market. Many would-be sellers, including smaller, regional private builders, have posted record profit and revenue numbers, which, coupled with the number of buyers, has driven up valuations and multiples.

In 2023, D.R. Horton, the largest company on the 2024 Builder 100 list, expanded in the Gulf Coast region with its acquisition of Truland Homes. Other public builders were active in the M&A market, including No. 42 Landsea Homes, which entered the Colorado market through its acquisition of Richfield Homes; No. 51 United Homes Group, which completed deals to acquire Herring Homes in North Carolina and Rosewood Communities in South Carolina; and newly public No. 36 Smith Douglas Homes, which acquired Houston-based Devon Street Homes. Private builder Fischer Homes, ranked No. 32, expanded into Florida through its acquisition of Samuel Taylor Homes, and New Home Co., ranked No. 85, entered the Texas market by acquiring Hamilton Thomas Homes.

However, the biggest M&A theme that emerged in 2023—and one that has carried into this year—is the strong interest from Japanese buyers in the U.S. housing market. Since 2013, Asian buyers have acquired more than 30 builder or construction service companies. Interest, particularly from Japanese companies, is partially driven by the desire to diversify portfolios amid cloudier demographic outlooks in Japan.

Brightland Homes (formerly known as Gehan Homes and backed by Sumitomo Forestry), Woodside Homes (backed by Japanese company Sekisui House), and Trumark Homes (backed by Japan-based Daiwa House) all completed deals in 2023.

On the 2024 Builder 100 list, Sekisui House combined its brands, which include Woodside Homes, Holt Homes, Chesmar Homes, and Hubble Homes, to become the 20th largest builder in the nation.

Meanwhile, U.S.-based subsidiaries of Daiwa House—No. 22 Stanley Martin Homes, No. 52 CastleRock Communities, and No. 73 Trumark Homes—and Sumitomo Forestry—No. 24 DRB Group, No. 30 Brightland Homes, No. 44 Bloomfield Homes, No. 54 Edge Homes, and No. 172 MainVue Homes—are presented as individual listings on the 2024 list.

Interest from Japanese buyers has accelerated in the housing market this year, with Sekisui House completing the $4.9 billion blockbuster acquisition of 12th-ranked M.D.C. Holdings.

The Sekisui-M.D.C. deal represented the largest transaction undertaken in the home building sector and was a prominent illustration of market consolidation. Analysts estimate the largest 20 home building companies control approximately 40% of the market. Taking the 2023 closings of the 200 Builder 100 and Next 100 companies, which has M.D.C. Holdings and Sekisui House listed separately, the top 20 builders accounted for 69% of total closings last year.

Daiwa House and Sumitomo Forestry also continued their expansion into the U.S. housing market with deals closed in the early months of 2024. Daiwa House subsidiary CastleRock Communities acquired The Jones Co., with operations in the hot Nashville, Tennessee, market. Sumitomo Forestry subsidiary DRB Group further expanded its presence in the Southeast with the acquisition of Tampa, Florida–based Biscayne Homes.

Early in 2024, Landsea Homes doubled down on its presence in Texas with the acquisition of Antares Homes. United Homes Group nearly doubled its presence in the Myrtle Beach, South Carolina, market with the acquisition of Creekside Custom Homes. In addition, public companies No. 10 Century Communities and No. 14 Dream Finders Homes strategically expanded into new markets by acquiring Landmark Homes of Tennessee and Crescent Ventures, respectively.

The rapid pace of deals is in line with expectations. Whelan Advisory CEO and co-founder Margaret Whelan forecast 2024 would be a “record year” for M&A activity given resilient demand, strong public balance sheets, a high number of interested buyers, and record valuations and transaction values for sellers.

“We really look at M&A at this point as opportunistic abilities to enhance our organic portfolio of land,” Dale Francescon, co-CEO of Century Communities, shared on the builder’s most recent earnings call. “We’re there throughout Florida in our Century Complete brand, but on our Communities brand, we’re only in Jacksonville. And we’d like to expand our presence there, and M&A would be one way to do that.”

In addition to Century Communities, many public builders expressed during year-end earnings calls the desire to expand in 2024 via the M&A market.

Incentives, Floor Plans, and the Buyer Experience

As affordability remains a top concern for many prospective home buyers, incentives are continuing to play an essential role in the toolkit for home builders. According to Zonda’s most recent New Home Market Update, more than half of new-home communities offered sales incentives.

Scott DeBoard, president and CEO of Pelham, Alabama–based Valor Communities, No. 129, says incentives are still driving decision-making for buyers, particularly those conscious of living expenses after the sale.

Fischer Homes CEO Tim McMahon says the builder continues to offer rate buydowns and complimentary refinancing with its affiliated mortgage partner to help buyers solve for affordability.

“Incentive use continues to be widespread in the broader industry and within our business, with rate buydowns being particularly effective for the majority of buyers when mortgage rates sit between 5.5% and 7%,” says Brookfield Residential’s Foley. “We have been primarily utilizing mechanisms like interest rate buydowns—such as 3-2-1 buydowns—and base price incentives to combat affordability concerns from potential buyers.”

In addition to incentives, builders also are introducing products with smaller floor plans and simplified offerings to help lower price points for home buyers. According to a recent Zonda survey, 46% of builders said they were planning to build smaller homes to lower costs and sales prices.

At Challenger Homes, Hennessy says the builder has offered smaller and affordable floor plans since 2018, and the company’s average home size has decreased each year since 2019.

Farzaneh says Home Creations is building homes with “less bells and whistles” and developing smaller lots to help with affordability, while Todd Pokrywa, president of No. 97-ranked Viera Builders, says a “focus on affordability through the correct product for the market is essential.”

Marla Telfair, national sales director at Drees Homes, says the No. 41-ranked builder has debuted its Pure Style collection emphasizing affordable design packages and introduced townhomes in select cities in the past year.

“We’ve worked to find the thoughtful balance between product, features, and design options,” says Rentfro of David Weekley Homes. “Over the past few years, we’ve invested significant resources to ensure we’ve properly curated our offerings across all three categories and identified the right combination to offer in each unique community.”

McGraw says Eastbrook Homes has seen a decrease in options and home sizes, noting townhome and narrow lot products introduced by the builder have been particularly popular among first-time home buyers.

Brian Davidson, group president of Fairfax, Virginia–based Van Metre Homes, says the No. 123 builder is introducing smaller floor plans and offering three to five times closing assistance for buyers, which can be used to buy down rates.

“We focus on attached homes for sale—townhomes and condos—so that generally puts us in the more affordable or attainable price point,” says Jason Sherrill, CEO at Windsor, Colorado–based Landmark Homes, ranked No. 177.

Many builders have also increased spec home starts to provide quick move-in alternatives to the inventory-scarce resale market. However, builders such as KB Home and Fischer Homes have continued to place an emphasis on built-to-order homes.

“Fischer Homes continues to focus on contract-to-build sales, while complementing this with quick move-in homes where it makes sense. This is somewhat different than what many new-home competitors have done,” says McMahon. “In our case, we believe our buyers continue to value personalization and choice, and we believe in the long term, continuing to pursue this model will help us achieve the best total customer experience, which is our ultimate goal.”

While there is a focus on interest rates, affordability, and incentives, Rentfro says David Weekley remains committed to delivering a top-tier customer experience, understanding that continues to be a differentiator for buyers.

At Meridian, Idaho–based CBH Homes, No. 47, president and owner Corey Barton says the company is no longer “gatekeeping” and instead is offering “full transparency” on its website with product and pricing information.

“Buyers today want 24/7 access to information, and they want to access our model homes on their terms,” he says.

To elevate the buyer experience and meet rising expectations, Telfair says Drees Homes is delivering more virtual experiences and reduced agent interaction, increasing the company’s digital footprint.

Chachere of Perry Homes says buyers are “more educated and knowledgeable than ever,” placing a greater emphasis on digital channels.

Land and Growth Plans for 2024

“We have hit 2024 at a sprint, releasing communities and beginning new developments in new areas and cities. We’re always looking for amazing land opportunities to help continue our success and growth for future years.” — Corey Barton, CBH Homes

Many public builders, including D.R. Horton, No. 3 PulteGroup, and No. 7 Taylor Morrison, have signaled intent to grow market share in 2024 after honing in on operational efficiencies in recent years.

PulteGroup president and CEO Ryan Marshall shared the company’s goal of 5% to 10% unit volume growth, while Taylor Morrison CEO Sheryl Palmer said the builder is targeting 12,000 closings in 2024 and 10% growth for 2025 and beyond. No. 15 LGI Homes, No. 5 Meritage Homes, and No. 18 Tri Pointe Homes shared goals of significantly growing community count in 2024 as part of their expansion goals.

For David Weekley, Rentfro says the company is also focused on increasing its footprint within its existing markets and growing community count.

“With a strategy to grow within our existing markets as a primary drive, it has heavily influenced how we’ve approached land acquisition and development,” Rentfro says. “To help facilitate our growth goals, we’ve increased our engagement on acquisition and development projects in select markets.”

Foley says Brookfield Residential continues to utilize and look for capital-efficient structures for land acquisition and development with a focus on holding a shorter duration of inventory on the company books.

Sherrill says Landmark Homes is pursuing smaller land opportunities to bolster its master-planned communities, while Pokrywa says Viera Builders is searching for “desirable land acquisitions” in nearby markets where the company can leverage its brand recognition and existing relationships.

Andy Seitz, vice president of corporate land at Drees Homes, says strong demand gives the company confidence to underwrite new deals in all 10 of the builder’s markets while noting that opportunities are limited as land is in short supply.

“We continue our philosophy of five to seven years of entitled land in our pipeline,” says McGraw of Eastbrook Homes. “Land costs are continuing to increase, so it takes a lot more work to find the right land positions.”

Chachere says Perry Homes will remain “very opportunistic” with land acquisition in 2024, with a focus on securing land and lot deals in its new Central Florida markets.

Of builders planning to expand or enter new geographies in 2024, Sun Belt markets in Florida, the Carolinas, and Texas are popular choices due to underlying demographic strength and employment growth.

While others are expressing more caution toward the land market, Barton says CBH Homes is moving “full steam ahead” this year.

“We have hit 2024 at a sprint, releasing communities and beginning new developments in new areas and cities,” Barton says. “We’re always looking for amazing land opportunities to help continue our success and growth for future years.”

Greater competition for land is likely to drive prices up and contribute to more difficult terms from developers. As such, several builders shared they are holding off expansion plans in 2024. Instead, many are planning to focus on existing markets, believing the economic environment is not suitable for expansion, citing high land acquisition costs as the primary deterrent.

The mix of enthusiasm to expand and caution mirrors sentiment gathered from Zonda’s survey of division presidents. The most recent results indicate an almost 50-50 split between builders planning to move “full steam ahead” on land acquisition and builders planning to proceed with caution.

Regardless of land strategy, though, builders are consistent in their observations that land prices are beginning to elevate from recent months, signaling land as a potential headwind to expansion plans for builders in the year ahead.