Look For Home Construction to Boom Over Next Two Years

 Home construction is predicted to boom over the next two years, as publicly traded homebuilders continue the buying spree that started last summer and dramatically increase their land holdings coast to coast.

An analysis from John Burns Real Estate Consulting shows that builders have boosted their portfolios by 23% year over year through the first quarter. They’ve also paid for 30% more single-family permits over the last year than during the year prior⁠—a move analysts suggest underscores the rapidly expanding SFR and BFR markets, which have boomed during COVID. 

Most of the recently completed land buys are for large communities and involve buyers like Lennar, Meritage Homes, LGI Homes, Toll Brothers, and Green Brick Partners. Meritage Homes indicated on a recent earnings call that they expect their community counts to increase 20% year-over-year from the Q1 2021 numbers, while both Lennar and MDC suggest their counts will go up by 10%.

Many of the recent landbuying deals were in secondary markets.

“We believe supply is coming,” writes John Burns Real Estate Consulting’s Danielle Nguyen. “While this supply will be welcome by aspiring homeowners, economic forecasters, construction workers and building materials suppliers, we are already having conversations with our forward-thinking private equity and home building executive clients about ‘how much will be too much, and when will that happen?’”

Homebuilders have also thrown their bets behind the SFR market: earlier this spring, Lennar launched a $4 billion SFR platform with lead investor Centerbridge with the goal of acquiring SFRs in high growth markets across the US. Institutional capital has also flooded the space, thanks to its premium over multifamily yields. In March, JLL announced it was taking a strategic minority investment in online SFR marketplace Roofstock, and in February, the firm announced it had created a dedicated team to handle investment sales in the space. That same month Walker & Dunlop rolled out its own dedicated team for the SFR and build-for-rent space. 

https://www.globest.com/2021/08/05/look-for-home-construction-to-boom-over-next-two-years/