Today, we’re sharing insights uncovered at the 10th annual IMN Build-to-Rent (BTR), Land, and Homebuilding Forum in Las Vegas. Here are our three big takeaways—all of which relate to change and uncertainty in the market:
- BTR and SFR are still waiting for their big moment.
- Land banking has evolved from an opportunistic move to a strategic play.
- Home builders are thriving despite rate uncertainty.
1. BTR and SFR firms are waiting for their big moment.
- Rents for build-to-rent (BTR) and single-family rental (SFR) homes have been climbing, though growth has slowed due to uncertainty and new supply easing demand. Operators are cutting costs wherever possible and focusing on operational efficiency.
- High borrowing rates have hindered investments, causing BTR and SFR companies to wait on the sidelines. Some SFR firms have started to monetize their portfolios by selling homes, while smaller BTR deals continue among established players. Capital markets offer better terms, though many deals are not closing due to persistent elevated interest rates.
- BTR’s allure lies in its promise of the home as an amenity, which resonates with millennials seeking more space for growing families and furry friends. A recent survey of 6,000+ BTR tenants by our New Home Trends Institute provides valuable insights into BTR tenant trends.
2. Land banking has evolved from an opportunistic move to a strategic play.
- “Build it, and they will come” no longer defines success. With rising land prices, it’s crucial to strategize land acquisitions in specific markets. Demand for finished lots remains high, driving up prices. With costs rising significantly since 2021, builders are sharing market risk with land sellers and financiers.
- Our Consulting team has been busy helping land bankers, developers, and builders nationwide evaluate strategic land opportunities while improving their balance sheets to lessen risk.
3. Home builders are adapting to rate uncertainty.
- The scarcity of resale supply has bolstered demand for new homes. Builders are getting creative to attract buyers, drawing from an arsenal of rate buydowns, closing cost assistance, and incentives. Larger home builders leverage their size and scale to reduce costs through partnerships and supply chain optimizations.
- Home builders are actively land banking, positioning themselves to bring more inventory to the market. Some are even seeing land opportunities from private builders due to distress from the current lending environment.
We closely monitor housing demand and provide our clients with clarity in this shifting terrain. Let us know how we can help you stay informed and stay ahead.
