Home Builders Are Focusing on Affordable Homes, First-Time Homebuyers

U.S. home builder D.R. Horton's Express Homes brand launched in 2014, geared toward first-time homebuyers. Last quarter, Express accounted for over one-third of homes sold, and over one-fourth of home sales.

When Horton launched Express, majority of homebuilders were focused on buying land in city centers. Horton bought land in less fashionable and less developed areas to build cheaper and smaller homes. However, other firms are taking notice of the affordable housing market, as Horton's unit is expected to grow 10 to 15 percent by 2021. “Lennar and Pulte tend to try to generate the best margins they can, Horton is willing to sacrifice a little on margins in order to improve their turnover and returns,” Moody’s Investors Service Vice President Joseph Snider told Reuters.

“While the new tax laws may affect the upper-end home buyers and owners, there is enough demand strength for less-expensive homes, particularly in first-time homes, to keep the industry growing in 2018,” Snider wrote in a note published earlier this month. Demand for starter homes has become the “sweet spot” of the homebuilding industry, Snider told Reuters.

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