The U.S. housing market has been facing various challenges, from affordability concerns to higher mortgage rates and a shortage of existing homes for sale. In a recent Bloomberg article, these issues were highlighted and discussed by experts in the industry.
During an episode of the Walker Webcast on November 8th, 2023, Willy Walker featured guest Stuart Miller, Executive Chairman and Co-CEO of Lennar Corp., one of the largest homebuilders in the country. Miller acknowledged that housing affordability is a major issue but also pointed out that it is closely tied to another problem – lack of supply.
According to Miller’s insights shared during the webcast discussion with Walker & Dunlop Chairman and CEO Willy Walker , high interest rates are making it difficult for buyers to afford homes which leads to lower demand. This ultimately affects new home construction as well since builders are not able or willing to build at such high interest rates.
However, what was not mentioned in Bloomberg’s article but was brought up by Miller is how homebuilders are trying innovative ways like adjustable rate mortgages or buydowns on fixed-rate mortgages in order bridge this gap between affordability and supply shortage.
Miller further explained that although there has been an increase in new construction with about 1.3 million housing starts currently compared to only 600 thousand after the Great Recession , it still falls short compared traditional levels needed for meeting demand.
Blaming sellers who hold onto their homes due low mortgage rates as causing this supply shortage may not be entirely accurate according accordingtoMiller.Millerbelievesthatwhenthesesellersfinallydecidetosellandmove,itwillonlyaddtothedemandforhomes.Thiscreatesa”zero-sumgame”whereinorderforthesupplyshortage tobefilled,newconstructionisneededtobebuilt.However,Millernotedthattherehasbeenanoverproductionof multifamily units which could potentially lead tonewchallengesinthatsectorasinterestratescontinue torise.
During the webcast, Miller also discussed the role of innovation in the homebuilding industry. He emphasized how technology has impacted every business and those who do not adapt may be left behind. Lennar has been investing in technology companies for years and developing their own digital marketing platform called “Lennar Machine” which uses machine learning and AI to find the right product at a suitable price for customers.
Miller also touched upon data management as an important aspect of innovation, stating that it can help improve efficiency, reduce costs, and ultimately provide better value for customers while increasing profits for shareholders.
Another topic addressed during the hour-long webcast was corporate culture within Lennar. Miller shared his experience with mergers & acquisitions within his company over time which resulted in a shift towards a more team-oriented culture with an emphasis on open communication and unity among employees. This unique approach is reflected even in their company meetings where they start off by reading “The Little Red Hen”.
According to Miller, this strong corporate culture is what sets Lennar apart from other companies as it brings together its core values of integrity, quality , value,andcustomerorientation.Thesearetheprinciples that have definedLennarasaleaderinthemarketfordecadesandcontinuetodrivethecompanyforward.MillerbelievesthatthisuniquelyLennerwayofdoingbusinessiswhatkeepsitsassociatestogetherandmotivatedtodeliverexcellenceineveryaspectoftheirwork.Thisstrongculturehasbeeninstrumentalinhelpingthecompanyadapttochangesintoday’sever-evolvingmarketandsustainitssuccessovertheyears.”Cultureisthefoundationthatbringseverythingtogether,”saidMiller.”Itguidesusinhowwedealwithchallengesandremindsusofwhoweareandasacompany.”
In conclusion,theWalkerWebcastfeaturingStuartMillerprovidedinsightfuldiscussionsonthechallengesfacingtheU.S.housingmarket,innovationinhomebuilding,andthecriticalroleofcorporatecultureinLennar’ssuccess.Miller’sexpertiseandperspectiveasaleaderinthemarketofferedvaluableinsightsforthoseinterestedinthefutureoftherealestateindustry.
