A Strong Start To 2023 Has Many Top Builders Optimistic And Looking For Ways To Capitalize

Inflation, high interest rates, and an impending recession were all anyone could talk about at the end of 2022. For many, the mere suggestion that 2023 could be anything other than downright dismal was considered naively foolish or overly optimistic. Many across the industry expected buyer demand to drop to record lows and inflation to heavily weigh on the cost of new construction.

However, as we approach the halfway point, things really haven’t been so bad. Business has been much stronger than expected, mortgage rates have dropped a few times during the year, and the “rolling” recession still hasn’t started. While uncertainty remains, this year’s surprising results have given many top builders extra confidence as we head into the back half of the year.

Some of our top builder partners have seen lots of opportunities in 2023, a surprising amount of growth, and a resilient market. While few if any are seeing the explosive results of 2020 through 2022, many expect the market to maintain its current pace, and very few expect it to completely turn south by the end of the year.

This isn’t to suggest the market hasn’t significantly shifted over the last 6 to 12 months. Buyer demand is well-off its Q2 2022 peak, and homes are sitting on the market for much longer. However, despite these headwinds, there are a few factors that are positively influencing the situation as well.

Home builders are working hard to offer better incentives and lower costs where they can. Some builders have dropped prices by as much as 10%, while others are offering rate locks. Demand for new construction has also increased due to a surprising drop in available inventory, which is largely due to homeowners’ anxiousness to sell in this high interest rate market. Many experts believe buyers have also adjusted to the new normal of higher interest rates.

The effects of the pandemic are also still lingering in the market. There is still a ton of pent-up demand for Millennials whose home-building experience was stifled during the pandemic due to supply chain issues, and some builders are still trying to catch up.

Many people still have flexible work arrangements, which is still driving more and more people from West Coast and Northeast markets like California, Oregon, Washington, and New York to areas of Texas and Florida, where home prices are still on the rise. In fact, some builders in Florida are seeing major growth, as they cater to an older demographic that is not nearly as impacted by high interest rates.

While the market has been fairly-stable, there is still uncertainty ahead, and many builders still expect demand to taper off. Therefore, builders would be wise to take advantage of the current market conditions while they can. Now is the time to do everything possible to hit the gas.

One of the ways builders continue to capitalize on the demand in high-growth markets like Florida is by turning to companies like Jobalia for infrastructure development. Builders are able to contract land, pass it along to Jobalia, and then purchase it back once the entitlements are secured and the infrastructure is in place. Jobalia handles every aspect of the development from start to finish.

This model has many benefits, especially in this environment. Partnering with an infrastructure development firm is one of the best ways to scale new construction quickly and efficiently. Builders don’t have to sit on vacant lots, which are often considered a liability on the balance sheet. Even if demand does decline more so in the future, there is always a shortage of ready-to-build acreage across many hot markets. These lots will then resell for a premium, making it important to capitalize before it’s too late.