• Millennial demand is expected to boost sales specifically in Sunbelt states.
  • Homebuilders are focusing more on for-sale product that is more urban in nature.
  • KB Home has a significant backlog of home sales orders.

A trio of publicly-traded homebuilders will deliver a larger volume of properties this year to accommodate millennial home demand.

“We anticipate (housing) demand will be boosted by the large millennial population that is expected to be purchasing more homes in 2016,” said Jeffrey Mezger, CEO of Los Angeles-based KB Home during a recent earnings conference.

The homebuilder currently has a backlog of 4,000 sales orders and is likely to surpass its 2015 home delivery total of 8,196 residences this year.

In total, the homebuilder expects to invest at least $1.5 billion in land and development. The majority of its communities are located in Sunbelt states, with an average sales price around $350,000.

Millennial home demand fueling niche market

Meritage Homes notices increased demand from millennials seeking closer-in, more infill product that’s still affordable. In response, the homebuilder is making the construction of “entry-level plus” communities a larger focal point in 2016.

In its most recent earning conference, Meritage stated that 30 percent to 35 percent of its overall business this year will be in this entry-level niche, as the builder begins to rotate out its higher-priced communities. The builder is active in the four major Texas metros along with Colorado, California, the Carolinas, Georgia and Tennessee.

Pulte Homes is targeting older, urban millennials seeking for-sale infill communities at a slightly higher price point. Most of these millennials represent first-time buyers.

In addition to millennials, KB Home is also counting on increased demand from ‘boomerang buyers’ who lost their homes in the downturn and are now returning to the for-sale market.

“While mortgage rates are expected to rise in 2016 in most markets buying a home will continue to be a more attractive affordable alternative to renting,” Mezger stated.

Another publicly-traded homebuilder still views the fundamentals of the rental market as extremely compelling, in comparison to the for-sale market, and will continue to construct urban multifamily this year. Via its Lennar Multifamily Communities division, Lennar focuses on developing newly-built Class A apartments for millennials and credit challenged first-time buyers.

Email Erik Pisor

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