We're joined by Stuart Miller, our executive chairman Stewart
. I'm gonna kick it off here. Why did
you do so well? How is housing demand so
strong when all we hear about is how affordability is
way too high? Ok. So let, let's
remember, let's go back a year and remember that
the home builders as a group as well, uh
really took a big step backwards, both on margin
and on volume. Uh When that, when the
fed started raising quite aggressively uh about a year ago
. And so the, the pain that was felt
in the home building world uh dates back a year
, we've been going through it and sorting through it
over the past year. Secondly, I know that
there's, there is a well documented supply shortage of
housing. It is 15 years in the making.
We've been under producing the housing that is needed in
the country for over 15 years since the great recession
. Um And that's not gonna fix itself quickly.
And so there's been a reconciliation. Um The consumer
has had to go through an adjustment. It started
with uh with sticker shock and migrated to affordability.
Um over the past year there's been a reconciliation in
pricing. There have been uh interest rate buy downs
that have been initiated by the industry. Uh And
while the existing home market has continued to suffer in
part because there's no inventory, people with low interest
rate mortgages don't wanna uh put their homes for sale
. Um And in part, uh because there's been
that reconcile, reconciliation with the customer. Um uh
we're now seeing demand come back to the market,
come back to the market and fulfill need within the
country. And pricing and interest rate buyouts have enabled
that. Well, sir, look, I'm looking
at the bank rate 30 year fixed rate. It's
at 7.1% today. What gets consumers to give up
the 3% that they have on their existing home or
is this all new demand from new buyers of homes
? Yeah, I I think that those that have
that 3% 4% mortgage are gonna be very reluctant to
give up that interest rate. They have equity in
their home, they have equity in their mortgage.
Uh So this is new demand. This is a
lot of the unraveling of doubling up people that have
lived at home for an ex uh uh with their
parents for an extended period of time coming to market
household formation remains strong. Uh So this is,
this is just the market revealing the underlying demand that
has been on hold for the past year. Stuart
. Ok, let's talk a little bit about how
we build more houses. How does America build more
houses? What do you need to have happen to
build more houses? Are you constrained by labor by
lumber prices, what is going on and what has
been going on for so long? That is basically
preventing America building the houses that it needs and how
would you solve the problem? So this is exactly
the question that is confronting mayors and governors across the
country right now. Uh The recognition that it is
as especially affordable workforce housing that is in short supply
. Um And it derives in part from land availability
. And when I say land, uh when you
fly on a plane, you see land available across
the country, it's entitled land that's ready to be
developed and to be put into production. Uh There
is a shortage of land, land developers are finding
it hard to get access to capital. Uh So
uh land prices have been moving up because of short
supply. Um The production prices have generally moved up
although moderated over the past year and we've seen production
costs, the costs of sticks and bricks start to
moderate and come down. Um And so you have
a math problem and that is it's expensive to build
, expensive to buy land, expensive to build uh
and very difficult to make homes affordable. What do
we have to do to solve the problem? We're
gonna have to get more land available at shorter,
uh shorter entitlement times with lower fees to bring costs
down. And we're gonna have to see some more
reconciliation in the cost of production. Uh, over
time, I think we can make this happen,
but it is gonna take somewhat of a partnership with
the private sector and public enterprise. Well, but
this is a supply demand story Stuart it hasn't been
playing the major role with house prices recently. Have
we hit the bottom in terms of home prices are
that we're going to start seeing them rise towards the
end of this year. Well, some of the
answer to that question is going to be market and
interest rate dependent. We'll see what comes around the
corner. But what we've said is that we think
that that home prices have come down about 10%.
They're probably going to remain right there, at least
for the foreseeable future. Um Of course, if
interest rates aggressively or even moderately start ticking up,
that might affect those prices, but I think there's
basic stability in pricing. And um, and I
think that uh I think we're not going to see
uh the supply shortage start to peak up the pricing
of housing again any time soon. Affordability is a
limiting factor. Stuart, how are your costs?
Labor, lumber, sticks and bricks as you called
it. Yeah. So starting a year ago,
as we saw our prices come down, we took
the first hit to margin, but then we started
to sit down with our building partners and our land
partners for that matter. And we started to build
partnership to say, ok, our margins are coming
down. We've got to work together to bring the
cost of labor, the cost of materials down.
And we've done that constructively over the past year.
So our costs have come down. Um And uh
and that has been an offset to the hit to
margin. And that's why you're starting to see some
recovery in our margin. Part of it is land
part of it is uh labor and materials and we'll
continue to see that flow through over the next quarters
. You know, I know you've been really aggressive
about incentives and cost cutting to make sure that people
can still afford your homes. How do you see
that playing out over the next couple of quarters?
Are you gonna still have to remain quite as aggressive
as you've been? Well, let's not use the
word aggressive. I think we've been constructive. I
think we recognize that there's a housing shortage and our
, our job is to continue to produce homes to
make up for the shortage and to build the product
, the dwellings that America needs. Uh At the
same time, we have joined hands with our land
partners and our production partners, our, our,
our building partners to say we're all in this together
. Let's keep volume moving forward. We have to
fill a void. And if we do it together
, we can maintain production levels and profitability, letters
levels that are not what they used to be,
but are acceptable in order to make sure that we
have affordable homes for America.