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Housing Market Remains Strong, but Builders Cash in During the 4th Quarter of 2020

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Friday February 12, 2021
Housing Market Remains Strong, but Builders Cash in During the 4th Quarter of 2020

On February 10, 2021 Taylor Morrison, the country’s 5th largest home building company, reported their Q4 2020 revenue was $1.6B – 6% growth from Q4 2019. Moreover, Q4 2020 sales orders had increased by 46% from Q4 2019. Taylor Morrison’s 2020 revenue was 28.7% higher than their revenue in 2019, clocking in at $6.13B. Given how hot the housing market has been, notwithstanding the impact that COVID has had on other sectors of the economy, this also appears to be a natural progression in light of record-low inventory.

According to the January report from the U.S. Commerce Department, December 2020 saw a 5.8% increase in “housing starts" (to keep it simple, this means new construction on homes); the seasonally adjusted rate is 1.67 million, which is the highest it has been since September 2006. Initially, new construction was driven by millennials seeking to purchase a home for the first time but stymied by the lack of options. Recently however, the 55+ demographic has entered the fray.

Record-low inventory is responsible for the surge in new builds, in part, because of how quickly newly listed homes go off the market. In December 2020, homes were on the market for approximately 17 days before they were sold: significantly less than the 42-day average in December 2019. While the cost of land and lumber are on the rise, the sky-high housing prices have created a situation where the cost of building a brand-new home, and purchasing an older home, are basically the same. It should come as no surprise that people, particularly millennials, are opting to build something new. Homes are flying off the shelves, and builders are capitalizing on low-inventory to record historic profits.

At the Chernov Team we understand that knowledge is power, and our knowledge of the new construction market is powerful knowledge indeed. At the Chernov Team we know that whoever comes to the table most prepared leaves with the most, and the Chernov Team always leaves the table with the most.

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