2013 to Bring First Home Builder IPOs in Nearly a Decade

By Gino Blefari
President & CEO
Intero Real Estate Services, Inc.

Even Wall Street is teeing up for a more active year in housing in 2013. In fact, strength in housing has already helped to lay the groundwork for several housing-related initial public offerings (IPOs) expected this year.

The Wall Street Journal highlights Taylor Morrison Home Corp. and TRI Pointe Homes Inc., as the first two on deck. The two home builders each filed plans for IPOs with the Securities and Exchange Commission last month, and would be the first home builder IPOs since late 2004.

The IPOs could come as soon as this month.

This is pretty monumental for a number of reasons.

It’s further proof point that the market is poised to bounce back. 2013 will be more about growth than recovery in most markets.

The improved performance of home builders is putting a healthy supply of homes back on the market. Constrained inventory has been a real problem in some markets and the strength of builders helps to alleviate the shortfall to better meet demand.

Just looking at three of the largest home builders shows great growth in the new home segment. Shares of Pulte Group have nearly tripled over the past year, while shares of Lennar Corp. have roughly doubled and shares of D.R. Horton have climbed nearly 60%, according to the WSJ.

The trick will be for these builders not to get too inebriated by a period of growth that they lose site of the market’s ability to keep up. That’s not likely to happen in 2013, but it will be interesting to see the performance numbers and how they compare at the end of the year.

Interest rates are expected to remain pretty low this year, which should continue to help fuel demand. But we need to be careful about oversupply in coming years as those rates creep up and more sellers become comfortable enough with values to sell. We wouldn’t want to tip the scale over into the too many homes problem area.

All in all, Wall Street isn’t the final word on housing. But when investors make a move, it does impact the market. The release of the first home builder IPOs since the market’s glory days is a pretty remarkable piece of news to start off the new year.

Get ready for some action.