After 2022 ended with a cloud of economic uncertainty, home buyer hesitancy, and mortgage-rate sensitivity, builders have experienced strong demand trends, sales pace, and price discovery in 2023’s spring selling season.
Public home builders have discussed “encouraging” and “stabilizing” demand trends and “positive sales momentum” as highlights of a strong and healthy beginning of the spring selling season during their recent earnings calls.
Strong underlying conditions helped a majority of public builders outperform analyst expectations for both revenue and profits per share for the fiscal first quarter. Given underlying market fundamentals and trends as well as strategic initiatives put in place to respond to shifting market conditions, public builders have expressed optimism for the long-term runway of their respective companies and the sector overall. Here are some forward-looking thoughts shared by builders during this latest round of earnings calls.
“Although higher interest rates and economic uncertainty may persist for some time, the supply of both new and existing homes at affordable price points remains limited, and demographics supporting housing demand remain favorable. We are well-positioned to navigate changing market conditions with our experienced operators, diverse product offerings, and flexible lot supply.” —Donald Horton, chairman of the board, D.R. Horton
“While the consumer remains challenged by affordability concerns, they are adjusting to the new normal of higher interest rates and opting to purchase their home. In these extraordinarily difficult and volatile market conditions, the Lennar team has focused on strategy, and we have executed with precision. … While we’re prepared for volatility, and adversity along the way, we will stick to our focus on our core operating strategies in order to perform as expected.” —Stuart Miller, executive chairman, Lennar
“Within an evolving macro environment, consumers across all buyer segments and price points continue to demonstrate a strong desire for homeownership. With interest rates more stable and the supply of new and existing homes generally in balance with demand, we remain optimistic about the housing industry as we navigate this phase of the housing cycle.” —Ryan Marshall, president and CEO, PulteGroup
“We believe our focus on pace over price and commitment to our spec inventory position us well to capitalize on buyer demand and continue to gain market share. We expect the undersupply of new and resale home inventory as well as favorable demographics to provide a strong long-term runway for the home buying market.” —Phillippe Lord, CEO, Meritage Homes
“We are off to a solid start for the year, and, although there are some key unknowns with respect to interest rates and the economy, we are confident in our ability to navigate market conditions.” —Jeff Mezger, president and CEO, KB Home
“While we are greatly encouraged by the recent improvement in sales and consumer sentiment, we also recognize the uncertainty surrounding interest rates and economic conditions. Given our balanced portfolio, scale, and financial strength, we believe we are well-positioned to navigate the near-term market volatility while remaining grounded in our long-term approach to disciplined capital allocation and market positioning.” —Sheryl Palmer, chairman and CEO, Taylor Morrison
“We are continuing to see strong underlying demand for affordable entry-level homes. Buyers are currently looking for affordably priced homes with near-term completions, and we intend to meet this demand. We have been ramping up our starts and new community openings over the past several months, given our confidence that the homes we are starting now should carry higher margins and returns.” —Dale Francescon, co-CEO, Century Communities
“Since the start of the calendar year, we have seen a marked increase in demand beyond normal seasonality as buyer confidence appears to be improving. We believe the recent pickup in demand is a sign that the long-term fundamentals underpinning the housing market remain intact. These include favorable demographic and migration trends, a very tight resale market, and growing pent-up demand resulting from over a decade of underproduction. Notwithstanding near-term uncertainty in the economy, we expect these factors will continue to support the housing market well into the future.” —Douglas Yearley, CEO, Toll Brothers
“We continue to see favorable fundamental and demographic trends in our markets driving new-home demand. Existing-home inventory remains scarce in most of our markets. Employment trends have been resilient, giving potential buyers the stable income and confidence needed to purchase a new home. In addition, many of the markets in which we build are seeing outsized growth, thanks to an influx of jobs and high-wage earners from other parts of the country. These industry positives, coupled with our more affordable product focus and strong balance sheet, give me confidence in the long-term outlook for M.D.C.” —David Mandarich, president and CEO, M.D.C. Holdings
“Despite the changes in housing conditions over the past year, there remains a strong desire for homeownership, and we believe our industry will continue to benefit from strong fundamentals, including favorable demographic trends and an undersupply of housing. Looking ahead, we are well-positioned with our diverse markets and product offerings, a strong balance sheet, and low leverage.” —Robert Schottenstein, president and CEO, M/I Homes
“Supply remains low in our markets, and we believe our high-quality locations offer some resiliency against potential headwinds in the economy. Although plenty of uncertainty remains for 2023, [Dream Finders Homes] is poised to deliver another solid year.” —Patrick Zalupski, chairman and CEO, Dream Finders Homes
“Recent demand trends are encouraging, and we remain optimistic on the long-term outlook for the housing market. We are confident that our unique business model, entry-level spec focus, strong balance sheet, and dedicated employees position us to capitalize on these trends and deliver strong results.” —Eric Lipar, CEO, LGI Homes
“We believe long-term fundamentals, such as strong employment levels, pent-up housing demand from the substantial underproduction of new homes for more than a decade, and historically low levels of existing-home supply, set the stage for a housing market rebound.” —Ara Hovnanian, president and CEO, Hovnanian Homes
“As the housing market continues to rebound from the interest rate reset that took place in 2022, we continue to believe the supply and demand dynamics are a strong tailwind for the home building industry, particularly during a time where the resale market has softened and inventory is at historically low levels. Tri Pointe Homes is well-positioned to capitalize on current market conditions and continue our growth trajectory.” —Doug Bauer, CEO, Tri Pointe Homes
“We remain confident in the multiyear growth of our business and the new-home industry. With a seasoned operating team, an ample supply of lots, and a more efficient and less leveraged balance sheet, we remain confident that we will be able to create durable value for our stakeholders in the year ahead.” —Allan Merrill, CEO, Beazer Homes
“While we are encouraged by the strength in sales pace, the volatility in interest rates remains the biggest moving target in the home building industry. However, we believe Green Brick possesses multiple strategic advantages that position us for industry leading performance. … We remain positive about the long-term housing supply and demand fundamentals. … We are encouraged by the results of the first quarter, and, as we look ahead, we remain confident in our ability to execute on our strategic initiatives to continue to deliver long-term value to our shareholders.” —Jim Brickman, CEO and co-founder, Green Brick Partners
“Our home building operations made considerable headway in the first quarter in overcoming many of the issues facing our industry last year, namely home buyer confidence and affordability. … Our focus remains on growing our operations in select, high-growth markets by attracting buyers with quality, affordable new-home options. … As a result, we believe the future remains bright for Landsea Homes.” —John Ho, CEO, Landsea Homes
