Public builders are carrying optimism into 2024 after battling with volatile interest rates in the fourth quarter of 2023. Demand cooled when mortgage rates reached levels nearing 8% in October; however, it rebounded as rates ticked down to end the calendar year, with builders seeing some demand levels above seasonal historical levels.
The strong end to 2023 coupled with underlying market fundamentals have public builders feeling 2024 can be a year of growth. Many public builders also highlighted their strong balance sheets and bottom lines, providing the flexibility to deploy capital as many are looking to expand in 2024. During earnings calls recapping the fiscal fourth quarter, public builder executives shared plans to capture market share, expand geographic footprints, and grow community count in 2024.
The rapid pace of M&A activity to begin the year underscores both the strong balance sheets of large public builders as well as the appetite to grow in 2024.
Public builders shared 2024 outlooks, reasons driving optimism, and strategic goals during the most recent earnings cycle.
“We are focused on consolidating market share by supplying more homes at affordable price points to meet home buyer demand, while maximizing the returns and capital efficiency in each of our communities with improvements in both labor capacity and availability of materials. Our cycle times are decreasing, positioning us to improve our housing inventory turns. Our strong balance sheet, liquidity, and loan leverage provide us with significant financial flexibility to meet changing market conditions and continued aggregating market share.” —David Auld, executive vice chairman of the board, D.R. Horton
“We’ve continued to migrate to a pure-play manufacturing model across our home building platform and each of our 40 home building divisions in order to reduce production costs while we generate consistent cash flow. Additionally, we are reengineering our products for efficiency and volume in order to enhance our inventory turn and grow volume to contribute to build a balanced and, therefore, healthier overall housing market. We have also continued to migrate to a land-light balance sheet while we grow our business and expand market share in order to drive total shareholder returns, return on inventory, and return on equity.” —Stuart Miller, executive chairman, Lennar
“It remains our view that the long-term outlook for new-home construction is extremely positive. A structural shortage of housing caused by years of underbuilding has only been exacerbated by a lack of resale inventory as owners are financing and emotionally locked into their low rate mortgages. … Given our constructive views on the outlook for housing demand, we are investing in our operations, with the goal of growing unit volumes by 5% to 10% annually. Our decision to walk away from option locks as interest rates increased in 2022 will impact our community openings in 2024, leading to our growth this year being closer to the lower end of this range.” —Ryan Marshall, president and CEO, PulteGroup
“We remain focused on bringing new communities online in 2024 and growing our total community count. … We still anticipate further choppiness, some small ups and downs over the next few quarters, but expect more meaningful growth in the second half of 2024 as we bring our existing land under development online. We own all the lots we need in order to grow our community count mid- to high single digits year over year by the end of 2024 and almost all of what we need to grow our community count more meaningfully in 2025.” —Phillippe Lord, CEO, Meritage Homes
“Going forward, faster build times will boost our selling efforts as a build-to-order home with quicker delivery dates becomes even more compelling to a home buyer, and the cost to lock the interest rate on the mortgage for a short period of time will be lower. … We believe we are well-positioned to respond to the strengthening in buyer demand given our product positioning and price points as well as planned community count growth.” —Jeff Mezger, president and CEO, KB Home
“Our top priority as we move ahead is accelerating our growth now that we believe we have firmly established the operational efficiency required for outsized market share gains. On the operational front, we are focused on continuing to fully leverage our scale and streamline portfolio to reduce costs, support growth, and increase asset efficiency. This includes ongoing refinement of our product and floor plan library, utilization of our Canvas option packages, and sales, marketing, and back-office centralization efforts. … We believe the strength of our core land portfolio, financial health of our targeted consumers, and experienced teams will allow us to navigate the uncertainties that arise, while our healthy inventory levels, improving cycle times, and compelling sales and finance tools will allow us to meet our customers’ needs.” —Sheryl Palmer, chairman and CEO, Taylor Morrison
“Our key operational priorities remain consistent for 2024: executing our business model and providing the combination of best price and value to our customers while continuing to deliver high satisfaction levels to our buyers. We are focused on the reduction in our build times, incremental cost reductions through value-engineering, and community count growth for long-term grand openings.” Dale Francescon, co-CEO, Century Communities
“Our strategy of broadening our product offerings to include lower price points and capture greater market share and growth opportunities is working. Along these lines, our affordable luxury and active-adult communities were our strongest performers in the quarter. … We expect community count growth to also help drive results in fiscal 2024. We plan to increase community count by 10% this year and are targeting 410 operating communities at year-end. Importantly, we control sufficient land for community count growth beyond 2024.” —Douglas Yearley, CEO, Toll Brothers
“Most importantly, about 47% of our lots are controlled pursuant to optioned contracts. This gives us significant flexibility to react to changes in demand or individual market conditions. … We are very optimistic about a good selling season. We continue to see improvement in our cycle time. We feel very good about our business and fully expect to deliver another year of strong results in 2024.” —Robert Schottenstein, president and CEO, M/I Homes
“We are focused on the future and continuing to grow our earnings. We have already taken a nice step forward with our recently announced acquisition of Crescent Homes, based in Charleston, South Carolina, with additional operations in Greenville, South Carolina, and Nashville, Tennessee. This acquisition added three markets, increasing our footprint to an aggregate of 20 markets, and should provide meaningful future closing and earnings volume. … With the benefit of the Crescent Homes acquisition, for the full year 2024, DFH expects approximately 8,250 home closings.” —Patrick Zalupski, chairman and CEO, Dream Finders Homes
“Expanding community count remains at the forefront of our objectives. While the land required to drive our growth for the next several years is already owned and under development, there’s more work to do. We continue to invest in our long-term growth and are taking advantage of opportunities as they arise. … We expect to grow community count by 25% to 30% and end 2024 with approximately 150 active selling communities. Selling prices will be higher this year as we balance affordability and focus on increasing margins and offsetting expected cost inflation.” —Eric Lipar, chairman and CEO, LGI Homes
“One of the reasons we’ve been able to maintain such a strong sales pace is due to our pivot to start more quick move-in homes. The logic behind this pivot is that QMIs give our customers more certainty regarding delivery dates and more certainty on what their mortgage rates will be at closing. … This year, I feel like we’re in a better position than we were last year. Instead of scurrying to build up a supply of QMIs for the spring selling season, our construction teams have ramped up our starts, and we already have a healthy level of QMIs in our communities throughout the country for the spring selling season.” —Ara Hovnanian, president and CEO, Hovnanian Homes
“We remain encouraged about the fundamentals of our business, including household formations, strong demand from millennials and Gen Z buyers, a more normalized supply chain, and shorter cycle times. … We are focused on growing scale in our existing markets and targeting new markets through organic start ups or M&A in our existing markets. Our West region is close to targeted scale, generating strong margins and cash flow. Over the past few years, we have been investing heavily in our Central and East regions to grow community count that we [expect to see] the benefit from over the next two years.” —Doug Bauer, CEO, Tri Pointe Homes
“Our operating strategy is focused on maximizing returns at the community level, taking into account buyer profiles and local competitive pricing dynamics. … We've made huge progress with more than half our starts meeting the zero-energy-ready standard. By year-end, this will be 75% as we introduce our energy-efficient homes into many more communities. We are focused on generating meaningful profitability and returns this year while also making significant strides toward our multi-year goals.” —Allan Merrill, CEO, Beazer Homes
“We believe that our ability to self-develop in markets where land developers are scarce gives us an upper hand in generating the highest home building gross margins in the industry as well as having better control of lot delivery, scheduling, and cost. … As we look forward to 2024, the dynamic housing landscape creates many opportunities. Our land and lot positions, financial strength, and highly motivated and experienced employees set the stage for an exciting future.” —Jim Brickman, co-founder and CEO, Green Brick Partners
“Our goal is to build on the existing momentum we have generated in Florida, Arizona, California, and Colorado, while making a big push to further establish our presence in Texas. The recent acquisition of Antares gives us a running start in the efforts to penetrate the Dallas-Fort Worth market, while our active community pipeline in Austin continues to grow and should start contributing to sales and closings to our company’s total beginning in the first quarter. 2023 was a transformative year for the company, and we will be reaping the benefits of these accomplishments for years to come.” —Mike Forsum, president and chief operating officer, Landsea Homes
“United Homes Group exited 2023 with a lot of momentum, we successfully folded two smaller home builders into our operations and added a third in the early part of the new year. We also improved our land banking capabilities and maintained a land-light focus while keeping our balance sheet in great shape. We think we are well-positioned to build on our successes of 2023 into the future.” —Jack Micenko, president, United Homes Group
