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High mortgage rates, affordability challenges, and limited resale inventory have shifted the dynamics of the housing market in recent quarters. The impact of the lock-in effect, namely fewer existing homes available for sale, has positively impacted home builders. Data indicates new-home builders have increased market share in the housing market from historical levels of around 15% to over 30% due to record-low levels of inventory in the resale market.

Shifting market dynamics have caused home builders to adjust their strategies to better meet demand. Public home builders have detailed during earnings reports and calls for recent quarters the positive benefit of offering more spec homes to capture demand from buyers who typically would engage with the existing-home market. The would-be existing-home buyers have favored spec homes due to shorter times between sale and move-in and greater certainty in mortgage rates.

The strategic shift is not limited to national public builders, as many private builders also have reported shifting toward more spec homes in response to changing market conditions.

“In the current climate of fluctuating interest rates, prospective home buyers are increasingly seeking the security of known interest rates to make confident purchasing decisions. Consequently, many are favoring the idea of a move-in-ready home over the traditional build-to-order approach, mainly due to the timeline involved,” says David Drees, president and CEO of Drees Homes, No. 36 on the 2023 BUILDER 100 list. “Furthermore, there are instances when incentives are exclusively available for homes that can close quickly, further incentivizing home buyers to opt for quick move-in homes.”

Heather Humphrey, chief financial officer for David Weekley Homes, says build-to-order and quick move-in homes oscillate between an even split and a 60-40 split, depending on current market dynamics.

“During the rapidly rising and volatile mortgage rate environment in the last half of 2022, our customers were selecting quick move-in homes at that high share, or 60% of the time,” Humphrey says. “However, in 2023, we have seen an increase in the demand for build-to-order homes, now representing a more typical 55% share.”

Drees says while the production of quick move-in homes “has seen a slightly higher rate than usual” due to conditions in the resale market, the Kentucky-based builder still has “a substantial number of home buyers” who prefer a build-to-order approach.

“[Buyers interested in build-to-order] have both the patience and necessary resources to await the construction of a home that is precisely tailored to their personal taste,” Drees says. “We see the increase in quick move-in homes as a short-term shift due to interest rate volatility. Although, our company mainly caters to the luxury market where buyers are not as impacted by the interest rate.”

For Meridian, Idaho-based CBH Homes, the company’s shift to spec homes predated the pandemic and resale inventory shortage. The No. 55 company on the 2023 BUILDER 100 list shifted to purely spec/quick move-in homes in 2019, according to president and owner Corey Barton.

“It was a strategic move for us that has set us up for success in the following years. Buyers are ready to move faster,” Barton says. “Whether it’s due to uncertainty of the mortgage rates or life changes that cause them to need to move in the next 30 to 45 days, CBH Homes has been able to go against the norm of builders and continue to sell through hard mortgage rates because of the quick move-in-ready homes that we have available to them.”

Barton says the shift allows CBH Homes to offer more options to buyers at “better prices” and deliver homes more quickly.

“The CBH team has been able to accomplish more with less all while making us more efficient and cost effective,” Barton says.

Land Strategy

Builder approaches to the land market also have experienced significant shifts in the past year and a half. According to a Zonda survey of builders, fewer than 10% of respondents reported approaching land with a “full steam ahead” strategy from July 2022 through December 2022. During the same period, more than 50% of respondents reported proceeding with caution, with an additional 20% to 30% of home builders reporting that they paused on deals entirely.

However, in August, 46% of home builders reported returning to a “full steam ahead” approach to land acquisition, with an additional 47% continuing to proceed with caution. The Zonda survey indicates builders are also finding that land prices have begun to inch higher over the course of 2023 as appetite has returned to the land market.

Humphrey says David Weekley has seen the appetite to acquire land increase, and prices have subsequently increased “as demand, development costs, and fees continue to rise.” The No. 18 home builder on the 2023 BUILDER 100 list anticipates the land acquisition market will be “very competitive” in the next six to 12 months.

“In response to the dynamic demand conditions and potential near-term slowdown, we have added a formal project underwriting update and review at key acquisition, development, and operational milestones,” Humphrey says.

For CBH Homes, Barton says the influx of national builders in the southern Idaho market has increased competition for land and has driven prices higher as well.

Andy Seitz, vice president of corporate land for Drees Homes, notes the home builder's strategy toward land has shifted as demand continues to increase

“A year ago, we were less certain about the market demand, which made underwriting more difficult and resulted in a more conservative approach to land acquisition,” says Seitz. “However, with the strong and consistent demand we’ve witnessed in recent months, we now approach land deals with greater confidence and have resumed acquisition efforts at a normal pace.”

Seitz says a year ago, the builder saw “some softening of deal terms, but prices remained high.” However, in the past six months, Drees Homes has seen “deal terms revert back to they were when the market was at its peak.”

“We are seeing higher earnest money requirements on deals, which we believe is connected to a more difficult lending and capital environment,” Seitz says. “We anticipate that the market for land will remain highly competitive as long as the industry continues to see strong demand signals. Deals will get done, but they will be challenging.”


Drees says in addition to changing land and quick move-in approaches, the company has conducted a “thorough assessment of affordability” in light of the uncertain interest rate environment.

“Our evaluation encompassed various aspects, including architectural choices, lot sizes, and our overall range of product offerings,” Drees says. “We have taken steps to redesign floor plans in a more space-efficient manner and have introduced homes that require a smaller footprint. For instance, we have expanded our offerings of attached products, such as paired villas, condos, and townhomes.”

Drees Homes has also debuted its Pure Style collection, which features a lineup of one- and two-story homes that “prioritize both affordability and striking design,” according to Drees.

Barton says CBH Homes is also attempting to combat affordability challenges for its buyers, through the form of incentives and offerings to make homes more affordable.

“We are pushing programs and options for buyers to be able to buy down rates and make homes more affordable,” Barton says. “One program is the CBH Trade Up Program, where renters in a CBH rental get 10% of rent paid each month to use toward a new home.”