Master-planned communities (MPCs) saw strong but slowing demand in 2022, with their shared amenities and desirable lifestyle attracting many home buyers. The 500+ communities we surveyed felt significant supply and demand pressure throughout 2022, with development delays bottlenecking builders’ lot supply and rising mortgage rates pricing out many buyers. Florida commanded the Top 50 ranking with 12 of the top 25 best-selling communities, all of which benefited from strong domestic migration.
The John Burns Real Estate Consulting staff congratulates the management teams behind the Top 50 master-planned communities, which sold at least 338 new homes per community during 2022. This threshold is the 4th highest in our 12-year survey history, trailing the record 460 sales required to make our 2021 ranking.
Over 31,000 home buyers purchased new homes in the Top 50 master plans in 2022, reflecting a -11% decrease from roughly 35,000 home sales in 2021 and trailing the 37,000 sales captured by the Top 50 master plans in 2020.
Three master plans, all in Florida, exceeded 1,000 new home sales in 2022, down from five breaking this threshold in 2021: the active-adult-focused Villages, all-ages Lakewood Ranch, and family-friendly Silverleaf master plans.
Rising rates and delivery delays cooled 2022 new home sales
In contrast to the 2021 work-from-home housing boom, a blend of lot gaps, delayed home deliveries, and weakened affordability constrained master-plan sales in 2022. What began as another year of red-hot sales cooled sequentially as mortgage rates increased.
The home-buying frenzy began to dissipate when mortgage rates breached 5% in April. Additional rate hikes between August and November quickly jumped from 5% to exceed 7%, steadily reducing the pool of potential buyers who could qualify for the monthly payments. Elevated monthly payments also hurt buyers waiting for new home deliveries, and many who could no longer qualify for the home purchase were forced to cancel.
By 4th quarter 2022, potential buyers with the financial capacity to purchase new homes had adopted a “wait and see” mentality. The earlier FOMO—fear of missing out—transitioned into a fear of buying too soon as consumers anticipated further price reductions.
Sales slowed first in the western regions
The substantial slowdown in new home demand started on the West Coast and has steadily flowed across the nation to finally include the Southeast and Florida regions. Builders in the western and central regions encompassing the Northwest, Northern and Southern California, Southwest, and Texas, began reporting slower traffic and sales in late spring/early summer. By June, 27% to 38% of builders in these regions were reducing net prices month over month (MOM), mostly through incentives. In comparison, Florida and Southeast builders did not report MOM pricing declines until August. Even now, we still rate a few Florida markets as Normal based on our analysis of new home sales and pricing ratings.
The shift in the regional distribution of top-selling master plans also exemplifies the west-to-east trend described above. Florida and the Southeast show healthy growth year over year in the number of master plans achieving top 50 status while fewer master plans in the western regions reached the sales threshold. In fact, 80% of the top 10 MPCs are located in Florida or the Southeast, where sales and pricing have held up relatively better than in other regions.
Developers and builders have taken steps to boost sales, reduce cancellations, and prepare for a short recession.
What developers are doing:
- Smaller lots and homes: Developers are prioritizing sections with smaller lots to enable builders to sell more affordable homes.
- Rental sections: A growing number of top-selling master plans are welcoming built-to-rent communities offering detached or attached homes.
- Reevaluating development plans: Some developers will continue to invest in future sections of their master plans to have lots ready when new home demand recovers; others will delay development in the short term.
What builders are doing:
- Incentives: Home builders are offering a wide range of incentives to boost sales, including contributions to closing costs; discounted or free options and upgrades; paying for rate locks; reducing, or eliminating lot premiums; and paying for rate buydowns. View our article explaining rate buydowns for more insight.
- Price reductions: Builders are reducing home prices on a broad array of homes, including fully or nearly completed homes that can close quickly.
- Managing backlog and cancellations: Many builders are offering incentives to buyers waiting for delivery to avoid cancellations and support closings. These incentives are often comparable to those offered for new sales being written currently.
- Reducing starts: Builders are aligning their starts with the lower sales rates to avoid building too much inventory. Single-family starts have declined year over year for eight consecutive months.
2023 Challenges and opportunities
We forecast new home demand will remain sluggish in 2023 and 2024, which should contribute to less construction and gradual improvements in build times and construction costs. We expect most master-planned community developers will progress on approvals and sitework in their existing communities, taking advantage of improving labor and materials availability.
Undeveloped land prices began declining in 3rd quarter 2022, especially in outlying locations where large land tracts are available to support master plan development. As land prices decline, 2023 and 2024 may offer opportunities for developers to purchase and design new master plans that will grace our future Top 50 rankings.
Contact us for support and information
Our experienced consulting team helps developers maximize sales by segmenting master-planned communities by life stage, price range, and lot size, while helping to shape community identity. As the market becomes more challenging, our team is helping developers tackle affordability challenges in new ways, from unique product offerings to identifying which amenities residents value the most.
Please contact Ken Perlman, our Consulting Principal who is recognized as a national expert on successful master-plan segmentation and amenity programs and works closely with our local leadership.
For more information on the MPC rankings, metro and regional new home sales and pricing trends, and our residential land, builder, single-family rental operator, resale agent, and fix and flip surveys, please contact Jody Kahn, Devyn Bachman, Nicole Stadick, or Dillan Krieg.
For information on our 2023 New Home Trends Summit, please contact our DesignLens™ Manager Jenni Nichols. Please contact Allie Martin to inquire about and subscribe to our New Home Trends Institute.