The Nation’s Largest Builders Are Speeding up Land Purchases, but What Happens if the Market Cools?

In the last year, the nation’s largest home builders acquired a large share of lots either owned or “controlled” through land purchasing options or contracts, reports Bill McBride in the CalculatedRisk Newsletter. A surge in land purchases could benefit the housing market if demand remains high, but if the market cools, land/lot markets may not see the kind of growth they were expecting.

As of March 31, D.R. Horton tallied 574,000 lots total—131,200 owned and 442,800 “controlled,” while Lennar and PulteGroup reported totals of 481,102 and 234,532, respectively.

Obviously, the land/lot acquisition strategy of these (and other) builders over the last 15 months reflected an assumption that the exceptionally strong (frothy?) housing market over that period would continue throughout this year.  If, in fact, housing demand slows considerably this year, then there could be some serious weakness in the land/lot markets.