New-home demand throughout 2023 far exceeded expectations in most markets following the housing pullback in 2022. Home buyers frustrated by the lack of resale supply found themselves intrigued by the new-home market. Incentives, price cuts, and customization helped boost the new-home market throughout the year. An early read from builders for 2024 is that the housing market has started a bit better than expected. Mortgage rates, home prices, and lingering consumer confidence concerns are still inhibiting blockbuster sales, but consumer traffic and sales have ticked up in many markets to start the year.
Despite positive signs, affordability remains problematic for most potential buyers as both prices and interest rates remain elevated and supply is limited. While we would normally describe housing trends in one summary statement, it is apparent today that the existing-home and new-home markets are following different paths.
For the full year, Zonda preliminary sales figures show a 12% increase in new-home sales in 2023 over 2022. In contrast, full-year 2023 sales in the existing-home market posted the lowest number since 1995. The outperformance has been driven by incentives and the perpetually low resale supply.
With the resale market constrained by locked-in homeowners reluctant to give up their low interest rates, builders are capitalizing on the opportunity. New homes represent roughly 30% of total inventory, up from 10% to 15% historically. Further, Zonda’s latest figures show national quick move-ins are up 31% from 2019, as builders step up to provide buyers with immediate occupancy options.
Beyond short-term construction plans, 95% of builders intend on moving forward with land acquisition. The builder appetite varies, with nearly half of those builders cautious and tracking how the market progresses given the uncertain path of housing demand, the labor market, and inflation, while 51% are full steam ahead.
From a builder point of view, a focus on creativity is key. What kind of affordability relief can be achieved through home size, density, finishes, location, etc.? If done right, Zonda data shows a lot of prospective home buyers are sitting on the sidelines looking to buy a home at the right time and for the right price.
Overall, the top 200 firms accounted for 498,358 new-home closings in 2023, down slightly by 0.4% from 2022. The nearly $230 billion in associated revenue declined 3% from 2022.
The biggest movers on the Builder 100 and Next 100 lists are Prominence Homes and Landmark 24 Homes, respectively. Prominence Homes jumped 70 spots to No. 77, and Landmark 24 Homes moved 42 spots to No. 116.
Here’s a look at the top 100 and Next 100 firms ranked by 2023 closings; click here for a downloadable PDF. For more information on the rankings, email builder100@zondahome.com.
