This episode analyzes macro housing indicators including 20-25% homebuilder stock declines since December, demographic shifts reducing household formation, and regional inventory buildups signaling potential overvaluation. The discussion connects these trends to land investment thesis validation, examining whether population growth and affordable housing demand justify continued aggressive acquisition despite near-term headwinds.
Key Takeaways:
- Major Homebuilders Down 20-25% Since December Market repricing reflects investor concern about unsustainable home prices relative to wages, suggesting correction pressure that could impact land values in overheated markets.
- Strong Fundamentals Trump Macro Volatility for Fast Flips Conservative comparable sales analysis and 50%+ discounts on acquisition create margin buffers that succeed regardless of 6-month market swings in either direction.
- Bet on Optimists Building the Future Multi-decade population growth and chronic affordable housing shortages create structural tailwinds that reward patient capital and value-add development despite cyclical pricing pressures.
Listen to the complete analysis of how to balance defensive positioning with growth thesis conviction in the current market environment.
(Podcast transcript below)
Hi, Chris Duff over at Serious Land Capital, vacant land funding partner. So today, and really over the past few days, been reflecting more on the state of the market, especially where things may be going from a residential real estate perspective.
So I mean, there’s a whole bunch of folks that are talking about this. know the YouTube channel Revencher, sorry, I forget the guy’s name who runs that, he has the Revencher app and a lot of clickbaity titles, but solid data, just mainly on home sales across the country and how there’s a lot of trepidation.
across not the entire country, but a good portion of it, especially the areas of the country that have been perceived to be hotter and were hotter for much of the period of time during COVID and the first few years after COVID, where there’s just been a greater inventory of homes available and
prices that are just too high for the average consumer. And that’s all coupled with various demographic issues where the average age of the homebuyer has increased dramatically even over the past decade, less than a decade. And where less established households have
kids too that’s been declining for decades as well. know, spacing is less of a concern for a greater proportion of human beings within the U.S. How does that come into play with a demand for housing? So you have, you know, a couple of negative pressure points with homes being too expensive in relation to wages.
and a lack of having children that’s also impacting the need for more space for your residence. Now, you know, is every single person or a couple without kids content in living in a multifamily or condo or, you know, just space restricted setup for the rest of their lives? I don’t know the answer to that. It makes it easier. Sure. I can relate.
being a parent with a kid, hopefully another one soon enough where the space helps a ton, whereas if it was just my wife and I, we just don’t need that much space comparatively. More of a luxury, if anything. So, trying to…
keep that in mind here and also, mean, some of this is actually being reflected within the market caps of home builders. know the new builds were increasing as a percentage of total home sales, like pretty dramatically over the last five years. mean, there was a lock-in effect, the existing housing, once interest rates rose, people didn’t want to move.
So it was really, you the home builders coming in to fill that gap. But if you look at pretty much any of the large home builders, look at their market cap since, you know, roughly December of last year, it’s only less than a couple months old, like pretty dramatic dips. I mean, we’re talking 20, 25 % reduction in their stock price here. So I think some more of the savvy investors are.
taking into account some of this information and seeing, are we overbuilding in some areas? even if we’re not necessarily overbuilding, these prices for these homes are just unsustainable here. To me, it’s more of that latter point looking at it, because even with reduction in children in the country, we’re still on a net.
population growth curve within the US and that’ll probably stay that way for at least the next few decades. If not, you know, the rest of this century, it gets a little cagey to predict that far out, but you know, the next two to three decades seems pretty certain that that’s going to be the case, barring some, you know, black swan event or, you know, dramatic change in regulations and…
and government governance.
So inevitably, you know, more affordable housing is just necessary. mean, that point is just repeated ad nauseam constantly. you know, regardless of the demographic shifts and price points of residences, like ultimately we need to build more and more efficiently. And, you know, while each
residential unit may just feel the pressure of the market to come down, the volume theoretically could make up for that by providing more people more affordable housing. if that’s the case, maybe more folks will feel more inclined to have children and want that extra space.
The world and the future is built by optimists. That’s a tale as old as humanity. You can either take the more hopeful, not Pollyannaish look, but you can bet on the future and bet on positivity and oftentimes be rewarded for it. Sometimes you pay the price, but again, more than often, looking at the past few thousand years of
recorded history, the optimists went out and provided the step function growth for our species as a whole here. us as land investors, do we consider land to still continue being a scarce resource and that more of it will be needed for affordable housing and what appears to be the consistent population growth of
the country, at least for the next generation, likely more.
then we have to continue to double down with an understanding of the macro risks that are behind us that are certainly a headwind, but do we have more of a tailwind in our direction here? So I’m more in the latter camp that our thesis as quicker turnaround
land investors on average, you know, we’re looking at doing more value add longer term projects, lending on them accordingly. So, you know, there’s more inherent risks to that more reward, but you more risk. So that’s that’s how it goes. But, know, on the shorter term where you’re still buying at
you know, large enough discounts to the market and really being diligent about comping out your properties and understanding where the market is, you know, today versus speculating on the future, looking where it was, you know, two or three years ago. That strategy is always going to pay off because the fundamentals are strong regardless of
what the underlying macro market has done. mean, those of us who’ve been in land since 2020 or even a bit earlier, look how many times, even on a six-month basis, the land market has shifted with us. And again, if your fundamentals are strong, you can succeed. Buyers market, sellers market, doesn’t matter because our turnaround cycles should be short enough to account for any.
real underlying market. yeah, those longer term plays have to be more cautious. But the strategy overall, even accounting for all those macro factors that I’m mentioning, we have to stay focused as a country on providing affordable housing. That’s one of the biggest unlocks that is still available for us. And if we stay optimistic and stay focused on how to achieve that.
goal sustainably and provide better lives in both a quality and quantity standpoint for our fellow citizens and immigrants that we welcome in, then I think that is still the ultimate bet to make here. And that is where we are putting
you know, but both are words behind as well as our money. So that’s ultimately what matters. I just wanted to share some of those thoughts. Of course, if you’re looking for funding, seriousland.capital, Land Daily Diligence, Facebook group for zero cost review of your land deals Mondays and Thursdays, and also LandPricer.AI for the most simple and accurate way to price land deals. Take care, everybody. Bye.
