In a recent Bloomberg article, the current state of the U.S. housing market was addressed, highlighting issues such as affordability and a lack of available homes for sale. During an episode of the Walker Webcast on November 8th, 2023 featuring guest Stuart Miller, Executive Chairman and Co-CEO of Lennar Corp., these concerns were further discussed.
Miller acknowledged that housing affordability is indeed a problem but also pointed out that it is closely tied to another issue – supply shortage. He explained how higher interest rates make it more difficult for potential buyers to afford homes and in turn decreases demand which pushes down on supply.
However, what was not mentioned in the Bloomberg article is how homebuilders are attempting to bridge this gap through adjustable rate mortgages and buydowns on fixed-rate mortgages. This has led to an increase in new home construction.
Accordingly with Miller’s comments during the webcast: “If you look at housing starts,” he stated “we’re running at about 1.3 million…which is still traditionally shy of what’s needed.” Blaming sellers who are holding onto their homes due to lower mortgage rates as contributors towards this shortage may be disingenuous according to Miller because when they do decide sell their current home they will then be looking for another one which only adds more pressure onto already limited inventory levels; making it clear that new production must fill this void.
Multifamily supply however seems promising with around half-a-million units currently above trend being built according from data collected by Connect CRE . However there might be some changes coming soon due mainly because interest rates have changed dynamics within debt-to-cap ratios relative towards building costs associated with constructing apartment complexes; leading many developers/owners within single-family-for-rent sector facing similar challenges .
The bottom line here though isn’t necessarily shrinking inventory levels but rather adding even more options into mix while we continue trying our best efforts keeping up pace between both rental and sale markets. Miller also mentioned that the longer-term prospects for our business are good as long as we remain innovative and sensitive to affordability.
Innovation was another topic discussed during the webcast, with Miller emphasizing how technology is impacting every industry. He stated that businesses who do not adapt may find themselves at a disadvantage while those who embrace it will thrive.
Lennar has been investing in technology companies for years now while simultaneously building out their own platform in order to stay ahead of competition; one example being what they call “The Lennar Machine”. This digital marketing funnel utilizes an internet new-home consultant, sales engagement program, dynamic pricing model all wrapped together into one system designed specifically help customers find right product at right price point; leading towards more advanced learning mechanisms such machine learning & AI which have become buzzwords today according from Connect CRE .
Miller also touched on importance of data processing/confirming authenticity so use cases can be set up allowing even more advanced learning mechanisms helping us sell homes but build them too maximizing efficiencies bringing down costs ultimately providing better value both customer bottom line shareholders alike he said.
Corporate culture was yet another subject covered during hour-long webcast between Walker & Dunlop Chairman/CEO Willy Walker Stuart Miller himself . During this discussion Mr.Miller referred back when Lennar acquired U.S.Home Corp 2000 where two different philosophies were operating side-by-side: design-studio-oriented vs everything-included mantra. After several years passed by company decided follow everything-included philosophy throughout entire organization resulting next acquisition CalAtlantic 2017 followed suit transitioning away from previous design-studio orientation towards focus on everything included instead .
Accordingly with Millers comments: “We were able look side-by-side just how valuable ‘everything’s included’ model supporting production-oriented program reducing costs built value customer,” he explained adding “As result whole company adopted same approach.” From his perspective success within corporate culture resides around team orientation; open floor plan model being utilized while focus remains on company’s strength spirit. Meetings start off with readings from “The Little Red Hen” which he admits may seem peculiar but it helps bring people together.
Ultimately, Miller believes that culture is what brings everything together and keeps employees focused on the company’s values of integrity, quality, value and customer orientation. He stated that these are the elements that make Lennar unique and what they want all their associates to be tied to.
In conclusion: The U.S housing market has its challenges but homebuilders like Lennar are finding ways to bridge affordability gap through innovative methods such as adjustable rate mortgages & buydowns fixed-rate mortgages leading towards an increase in new home construction . Technology continues playing a major role within industry so businesses must adapt order stay ahead competition according from Connect CRE ; ultimately though corporate culture plays vital part too ensuring everyone stays focused shared goals/values helping us achieve success both short-term long-term alike.
