Residential Development Outlook for next 1-3 years...
What are your thoughts on the outlook of the single-family development market in the near future? Would like to get a conversation going and see what everyone’s thoughts are! Here are mine (FYI nothing too perceptive here):

Affordability and limited inventory will continue to be a problem. Construction costs may decrease, but only slightly overall. Institutional investment will continue to rise - I think we could see 15-20% of purchases and/or development be institutional investors. B2R market will explode, single-family B2R subdivisions will be a great alternative to traditional multi-family. There will be a correction, maybe 10% across all markets but not the complete meltdown that some are calling for. I think the fundamental lack of supply will keep prices from free-diving. Mom and pop shops will struggle. Many of the new “deVeloPerS” out there that paid way over market for deals will either 1) cut their asking prices dramatically and sell at or near cost 2) sell for a substantial loss or 3) go out of business! 

Let me know how you see this crazy market playing out in the near future!
[{"id": "ipx9wyh", "text": "I can see limitability and affordability be a problem as well but I think single family homes will come to a stand still. Home developers won\u2019t build cause the demand isn\u2019t there to purchase homes with an 8% interest. Renting will be favored over purchasing. Rents will continue to stay strong. I am unsure as to why you think the new developers all point to bad signs. Unless your saying single family then yes. Multi family then no", "replies": [{"id": "ipyvf5o", "text": "Because costs are continuing to grow, at the same time the higher interest rates are pushing cap rates up. Rents aren\u2019t going to grow fast enough to keep prices up, so you will have falling prices.\n\nMaybe built to core long term holds will still make sense, but for merchant build strategies, your potential returns are going to fall significantly as exit pricing deteriorates and construction costs grow.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ipxk3zk", "text": "I started writing a longer answer but dialed it back. I think single family for sale is drying up faster than people realize due to rates. B2R was buoyed by cheap capital, crazy appreciation, and people looking for a new asset class. As home prices drop (they are and they will), B2R is not going to pencil until building costs come down significantly (and even then, it might not make a lot of sense). \n\nOn the development side - guys who broke ground on large subdivisions in the last 6-12 months may get hosed. They paid all time highs for dirt and improvements and are coming into a cooling market. Newer deals, made on the basis of crazy valuations or competitive counteroffers, will need to get re-cut. Older deals that are finally coming online may still work. The next 1-3 years are going to be tough for development as people work though high costs bases or try to retrade deals. \n\nYou can make money in bull markets as well as bear markets, but you need to be a hell of a lot more cautious and smart about it in a bear market.", "replies": [], "depth": 1}, {"id": "ipxkkek", "text": "I think we will see many developers put many projects on hold and build existing projects slower.  2 years of inventory just became 4.\n\nMy guess is feds will be lowering rates again in 12 months.\n\nConstruction costs will flatten. I dont see labor coming down in a meaningful amount.  \n\nLenders will get more creative.  \n\nThe perception on institutional build to rent communities and the institutionalization of entry level sfd will get bad press and may eventually be disallowed or limited by jurisdictions.  \n\nPain will not be felt equally across all markets.  States that are faster to permit projects have less regulation will be hurt worse (Idaho, Colorado, Florida and Texas).  \n\nWe will see lots of bad headlines for the next 6 months.  My opinion is housing fundamentals are sound and we have many reluctant sellers with equity and sub-4% mortgages.  My guess is China and other foreign markets will see more pain than the USA.\n\nWho can know for sure?   When COVID hit, pretty much the opposite of what I thought should happen became reality.", "replies": [], "depth": 1}, {"id": "ipzg734", "text": "B2R SF is not as profitable as multi-fam. The only pro from B2R is speed - but upkeep cost is higher and you can\u2019t command as high rents - especially if the location sucks.", "replies": [{"id": "iq12j6v", "text": "Agreed it is not as profitable but it does have a major advantage over multifamily. Government subsidize buyer pool from owner occupant mortgages. Turning  multifamily to a for sale product is a pain where as B2R SF you just have to list it.", "replies": [], "depth": 2}], "depth": 1}]