Nation's top homebuilders bullish on more Phoenix metro land buys

By Angela Gonzales 

Many of the nation's largest homebuilders are bullish on land buys and home construction in metro Phoenix at a time when home prices are on their way back up.

Miami-based Lennar Corp. (NYSE: LEN), ranked as the second largest homebuilder in the nation on the 2024 Builder 100 List by Zonda, currently has 46 active communities in metro Phoenix. The national list ranks by home closings.

The homebuilder's Phoenix division had approximately 2,700 closings in metro Phoenix in 2023, which would have put the Phoenix division as the 35th largest homebuilder in the nation.

But it's tough finding land, said Alan Jones, Phoenix division president for Lennar.

"Lennar is looking to deliver somewhere between 2,500 and 2,600 homes and are looking to grow from there," he said. "We're not going to be able to grow this year. We don't have the land to be able to do it."

As more people move to metro Phoenix, where job growth is strong, Jones said his goal is to grow 10% to 15% a year.

Jones is focused on the north Phoenix market, where Taiwan Semiconductor Manufacturing Co. is building a $65 billion plant. Lennar has about 700 lots up in that area where it's prepared to meet demand for employment growth.

Los Angeles-based KB Home (NYSE: KBH), which ranked No. 6 on the top 100 list of homebuilders nationwide, has 18 new home communities either open for sale or under construction throughout metro Phoenix, including its newest communities, Mystic Vista Traditions and Mystic Vista Enclaves in Buckeye.

JIM DOYLE

Kevin McAndrews, president of KB Home's Phoenix division, said he expects to accelerate land investment activity to support future growth, while remaining diligent with respect to product strategy and price points.

KB Home recently acquired 450 lots for future communities in Gold Canyon, San Tan Valley and Buckeye, he said. The average sale price of a KB home is around $427,000.

In 2023, KB Home's Phoenix division closed on 628 homes, up from 472 closings in 2022, McAndrews said.

"We are facing low levels of inventory for new homes and existing homes, especially in our price points in the high $200,000s to mid $400,000s," McAndrews said. "The demographics of the millennials and Gen Zs are advantageous for our business, as our primary buyer segments are first-time and first move-up buyers. These demographics are our strong underpinning for demand. Buyers also seem to be acknowledging that these rates are the new normal, as we are encouraged by both demand and our sales results."

Phoenix median home price now $485K

Overall, in metro Phoenix, the median price for a new home is $485,000 and $445,000 for a resale home, according to the Phoenix Housing Market Letter, published by R.L. Brown Housing Reports.

Homebuilders are offering incentives such as rate buydowns to help homeowners with current mortgage interest rates, said Jim Daniel, president of R.L. Brown Housing Reports.

Buyers don't get those types of incentives when purchasing existing resale homes, he said.

That said, many of these new homes are being built on the fringes of town, where land is available, Daniel said.

For example, last month, The Woodlands, Texas-based Howard Hughes Holdings Inc. (NYSE: HHH) closed on the first 365 lots at its 37,000-acre Teravalis master-planned community along Sun Valley Parkway in Buckeye.

KB Home took 106 of those lots while Lennar took another 87 lots there.

Denver-based Century Communities, which was No. 10 on the national homebuilder list, also recently closed on 114 lots at Teravalis, paying $2.39 million for the lots, according to Tempe-based Vizzda LLC real estate database.

With six existing communities across metro Phoenix, Century Communities is looking to increase its land position in the area, said Taylor Lilly, Phoenix division president for Century Communities.

"One of the major reasons we were attracted to Teravalis was the exciting opportunity to be one of the first homebuilders in a Howard Hughes master-planned community," he said. "Howard Hughes has an impressive track record of deliverig well thought-out communities. An example of this is our successful partnership with Howard Hughes in their Woodlands master-planned community in the Houston metro area."

Century Communities exec: Phoenix has a strong economy

Price points in metro Phoenix vary by location but generally range between $300,000 and $500,000, Lilly said.

"We believe Phoenix will continue to be at the top of the list for people to move to due to its strong economy, attractive weather, job opportunities and outdoor recreation," Lilly said.

Century Communities closed on 533 homes in 2023, up from 296 in 2022.

"We have just started pre-selling our Lakes at Rancho El Dorado community in Maricopa," Lilly said. "Additionally, we will be opening up our 30-foot product at North Copper Canyon in Surprise for sale later this month. Both locations offer affordable homes in the $300,000s."

Two home-grown homebuilders also made it into the Top 10 on Zonda's national homebuilder list.

Scottsdale-based Meritage Homes Corp. (NYSE: MTH) ranked No. 5 and Taylor Morrison Home Corp. (NYSE: TMHC) ranked No. 7.

"Taylor Morrison is on track to grow its business by 15% in the Phoenix MSA from 2023 to 2024," said Brad Schoenberg, Phoenix division president at Scottsdale-based Taylor Morrison.

"We are very confident in our future land holdings and the new products that will be introduced over the next 12 to 18 months," he said.

Homebuilder permits so far this year have been really strong, Daniel said, pointing to the Phoenix Housing Market Letter's April report.

"That gives us a good snapshot," he said. "We've got four months of solid activity. We know those homes are going to close eventually. That bodes well for the rest of 2024."

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