Notes from the Road: May Conference Season Wraps Up

We recently participated in Zonda’s Builder 100 conference and the JBREC Summit in beautiful Laguna Niguel. Both events were well attended, but with a higher than usual weighting of capital and service providers rather than builder executives. From our perspective, this underscores how intensely builders are focused on managing operations in an incredibly uncertain market, while the surplus of capital providers is allowing for more favorable financing terms for our builder clients.

1. Builders are adapting to market volatility with differentiated strategies

• Most of the larger builders are pricing for velocity, choosing to sacrifice margin to support absorption and operating leverage

• Smaller builders tend to take a margin-first approach, pulling back on starts and relying on stronger positioning in local markets

• Across the board, spec home strategies and land-light models are being recalibrated to align with slower traffic and increased buyer hesitancy. Due to an underwhelming spring selling season, specs have shifted from an asset to a liability, prompting price cuts to increase cash flow

2. Long-term demand remains robust, despite near-term softness

• The current reduced pace of home starts and sales will lead to greater pent-up buyer demand in the future

• Larger builders continue to invest in strengthening their lot positions, albeit at a slightly less aggressive pace than a year ago

• At comparable price points, consumers continue to favor purpose built single-family rental homes (BTR) vs. multifamily options

3. M&A remains active, with serious buyers making deals

• While the short term is uncertain, the long-term demographic trends in our industry are highly compelling. Builders are supplementing slowing organic growth with acquisitions. We expect 2025 to be another record year for M&A activity

• Numerous private discussions on behalf of our clients confirm continued appetite among capital-backed platforms to gain share across new markets and price points

• Valuation multiples for private builders with strong fundamentals remain high when compared to historical averages

4. Private lenders continue to expand homebuilder access to capital

• As traditional banks retrench from residential construction lending, private lenders are expanding aggressively into the AD&C space

• Land banking has matured into an institutional capital strategy, driving more capital and attracting new land banking groups into the arena. This competition has resulted in more attractive financing terms for builders

• We are also observing a new trend whereby land bankers are acting as a clearinghouse on lot positions they control when a builder partner underperforms

• Our team has recently represented several builder clients in establishing successful new land banking relationships. Our understanding of the space and our extensive rolodex enables us to secure the most attractive terms for our clients

5. Single-family rental is evolving into a tech- and service-driven business

• Larger SFR platforms are capitalizing on the slower acquisition market by making significant investments in technology and processes to efficiently manage a highly fragmented asset pool, creating significant differentiation and barriers to entry

• Rents in the Midwest are outperforming the Sunbelt region, which has been hindered by oversupply – highlighting a shift from yield chasing to fundamentals-first investment

• We expect build-to-rent to continue gaining share from multifamily in the years ahead  

6. Uncertainty creates risk

• Today’s homebuyer faces a challenging combination of elevated rates, high home prices, and macroeconomic uncertainty

• Policy changes – such as the FHA eliminating eligibility for work-visa holders and shifting immigration trends – are contributing to localized demographic shifts and tightening credit

• A “wait and see” mindset is pervasive, with muted buyer urgency suggesting that current market conditions may persist into late 2025. On a positive note, this sets the stage for much easier year-over-year comparisons for the 2026 spring selling season

Please contact us to schedule a confidential conversation about your capital or growth needs.