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First Quarter Results Signal Optimistic 2024 Outlook for Homebuilders

The 2024 first quarter results demonstrate a resilient housing market despite high interest rates and the presidential election year. That is likely because the fundamentals of the housing market stayed strong while demand continued to exceed supply.

Net Sales

Net sales rose for all major builders, with a decrease in cancellations. Among the top ten, many reported substantial double-digit growth compared to last year. This evidences that new home construction has thrived due, in part, to the critically low housing supply and lack of competition in the resale market.

Revenue and Homes Closed

Revenue among the top builders also saw growth caused by an increase in the number of homes closed. Revenue gains, however, varied from single digit to 25% growth.  As material costs have stabilized and construction times have improved, the average sales prices remained steady with a slight year-over-year rise. This stability has allowed builders to better manage their costs.

Gross Margin

Good news continued in the area of gross profit margins, which ranged from 21.5% to 29.6% among the top ten builders, showing steady or slight improvements from the previous year. Higher expenses incurred to attract and retain skilled employees, along with incentives to lower interest rates have somewhat tempered the revenue growth actually realized by builders.

Tailwinds & Headwinds

Builders are reporting a robust spring market with a strong presence of financially solid buyers. These buyers generally have good credit scores (700+), and average down payments are healthy. While material costs have stabilized, the cost of land remains unpredictable, with the potential for price volatility in the short term.  The varying land strategies of different builders will be key to watch as the year unfolds.

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