The cost of land — and the risks that come with owning it — make it harder for U.S. homebuilders to plan and grow their businesses.

As a result, many builders are recovering from the risky and expensive process of buying and holding land for years before developing it. Instead, they focus on what they know best: designing, building, and selling homes. This approach, often called “asset-light” or “land-light,” reshapes the industry.

Two companies that give a sneak-peek preview of how this shift is playing out are Forestar and Five Point Holdings. Both were spun off from large builders —Forestar from D.R. Horton and Five Point from Lennar — and their recent earnings reports shed light on what it takes to succeed with this model.

At the same time, Lennar’s planned spin-off of Millrose Properties underscores the growing importance of this strategy. Here’s what Forestar and Five Point’s latest results tell us about the future of homebuilding.

Forestar: Scaling Lot Delivery with D.R. Horton

Forestar reported $250.4 million in revenue for the first quarter of 2025, down 18% from the same period last year. The company sold 2,333 finished lots, with an average price of $15,500, and earned $0.32 per share. While revenues and profits fell compared to 2024, Forestar’s lot deliveries show how the company is building a competitive edge in the highly fragmented land development industry.

Forestar’s focus is clear: it aims to be a leading supplier of finished lots, particularly for D.R. Horton, its largest customer. As CEO Andy Oxley explained during the earnings call:

Forestar is uniquely positioned to gain market share in the highly fragmented lot development industry.”

The company’s land acquisition strategy is ambitious. During the quarter, it invested $685 million in land and development, a 50% increase from the previous year, and increased its total lot position by 29% to 106,000 lots. However, Forestar’s results also highlight some challenges. Operating costs rose, with selling, general, and administrative expenses increasing by 29% due to higher headcount and expansion into new markets.

Still, demand for finished lots remains strong. Mark Walker, Chief Operating Officer, noted:

Builders are lining up at the door essentially to get into new communities.”

That demand, coupled with Forestar’s disciplined approach to land investment, positions the company to keep growing its market share.

Five Point Holdings: Master-Planned Community Focus

While Forestar concentrates on delivering lots, Five Point’s strategy revolves around large-scale, master-planned communities. In 2024, Five Point posted record net income of $177.6 million, with a strong fourth quarter that included $121 million in profit. The company’s financial success comes from managing its three major communities: The Great Park Neighborhoods in Irvine, Valencia in Los Angeles County, and Candlestick in San Francisco.

Five Point has embraced an “asset-lighter” approach to land development. Instead of owning vast amounts of land outright, it partners with builders and investors to reduce its financial risks while still managing the development process.

CEO Dan Hedigan described this strategy as:

A platform that produces recurring earnings along with sustainable long-term growth.”

In Irvine’s Great Park, Five Point closed five land sales in the fourth quarter, generating $309.3 million in revenue. Similarly, Valencia saw four new sales totaling $137.9 million. These transactions underscore Five Point’s ability to attract builders, even in a challenging market. According to Hedigan,

California... remains in chronically undersupplied residential land markets,” which helps drive demand for Five Point’s projects.

At the same time, Five Point is looking ahead to its next chapter of growth. It recently received approvals to begin development at Candlestick in San Francisco, where work will focus on horizontal infrastructure like roads and utilities. The company has also started exploring opportunities for smaller, infill projects in urban areas to complement its larger communities.

Comparison and Broader Industry Context

Forestar and Five Point’s strategies reflect roughly similar trends:

Builders want to spend less time and money managing land and focus more on their core business of constructing and selling homes.

Lennar’s upcoming Millrose spin-off takes this idea a step further. By separating its land holdings into a publicly traded real estate investment trust (REIT), Lennar hopes to achieve the efficiency and flexibility of companies like Forestar and Five Point.

Lennar’s Executive Chairman, Stuart Miller, captured the essence of this approach:

Land is an input akin to building materials.”

In other words, land is something to be used when needed — not held for years at a time. This mindset is reshaping how builders think about their business models.

The financial benefits of going asset-light are clear. Companies like NVR, which has long operated with minimal land ownership, command higher valuation multiples because they avoid land speculation's heavy costs and risks. Lennar, Forestar, and Five Point are all adapting their strategies to achieve similar results.

Challenges to Adoption Across Builders of All Sizes

The transition to asset-light models is achievable for large, well-capitalized builders like Lennar, D.R. Horton, and their spin-offs. However, smaller builders face significant challenges. Many rely on traditional land bankers or private equity partners without access to the same resources, which can be costly and restrictive.

Tony Avila, CEO of Builder Advisor Group, highlighted the importance of cost savings in this shift. Speaking about Lennar’s Millrose spin-off, he noted,

Millrose will charge a lower rate than land bankers typically do. This reduces the interest charge for holding land, providing a cost advantage to Lennar and potentially other builders.”

For smaller players, however, the path to asset-light operations may be slower and more difficult.

Outlook

The asset-light trend is transforming homebuilding, but it’s not without risks. Forestar and Five Point’s success depends on continued demand for finished lots and land. Five Point, for example, is heavily concentrated in California, where regulatory hurdles and affordability issues – exacerbated by the horrific human and economic effects of the recent barrage of wildfires around Los Angeles – could limit growth. As Hedigan acknowledged,

Insurance is obviously going to be a question that's debated a lot in the State of California.”

At the same time, builders and developers must carefully balance their investments. Forestar’s significant spending on land acquisition could strain its financial performance if market conditions worsen. For Five Point, long-term projects like Candlestick require upfront investment with no immediate returns.

Despite these challenges, both companies — and Lennar with its Millrose spin-off—are positioned to lead the way in asset-light strategies. As Hedigan put it,

Our optimism for the future continues to grow as we execute on our core priorities.”

Their success will likely shape how the industry evolves in the years to come.