2016 is shaping up as another solid year for the new-home market, a stable labour market and low interest rates help boost the new-home construction to its highest level since the Great Recession.
These trends are the help of large homebuilders as Atlanta ‘ s PulteGroup to thrive. PulteGroup profit jumped 24 percent through the first nine months of 2016 compared with a year earlier, and sales rose even faster.
Yet new-home sales are running below their historical averages as housing continues to heal from the bankruptcies and failures that led to the Great Recession at the end of 2007.
Chief Executive Ryan Marshall took PulteGroup to the top job in September, after more than 15 years with the builder.
He spoke recently with The Associated Press about the builder’s outlook for 2017, as well as how millennials’ delayed access to the house to buy the market is the shaping of the industry. Questions and answers have been edited for length and clarity:
Q: PulteGroup sales and orders are up sharply this year, as are profits. You have opened up more home communities. How is that shaping your view of how to deal with 2017?
A: Housing demand clearly remains on a sustainable path to recovery, even though it is about below the 650,000 new home sales average over the past 50 years.
There are a number of other factors that we believe continue to support the continued growth in the housing sector. We have excellent demographics. We have pent up demand. Low inventory of new and existing homes. And if you combine that with historically low interest rates, I think that combination creates an environment that is very favorable for our company.
Q: What types of buyers you are catering to these days. And do you see any changes in the coming years?
A: Our strategy will be to move to a balanced approach that we serve.
This particular recovery was really led by the move-up buyer, but in the past few months, we are beginning to see a very strong buying behavior of the first buyer as they re-enter the housing market.
Our research tells us that if the millennial buyers are approaching the critical age of 28, 29, 30, she behaves very similar to the way their parents raised. They move to the suburbs. They are looking for a home. They are looking for schools. They are looking for security.
We see that the millennials are becoming first-time buyers, only later in the cycle than their predecessors.
Q: What are you doing to specifically cater to the first-time buyers?
A: one of the most important strategies in the way we buy land is to stay closer to the centre of the city. An example that I want to give is here in Atlanta. We bought a C-Class, the nature of the 1970’s vintage apartment complex … We demolished and are now in the process of building four different product lines, ranging from high-density, single-family houses to apartments.
It is a strategy that we have implemented very effectively in a number of cities. It does not work everywhere, but if you look on your big urban cities of Atlanta, San Francisco, Washington D. C., Chicago, Boston — these are all places where we have a very healthy in-town company that is the catering at the millennium, and even the downsizer that wants to be in the middle of everything.
Q: What do you see as the biggest challenge for the new-home market?
A: Country. Getting the title of land is so difficult as it has ever been, so that is definitely a limitation is that keeping the industry somewhat in check and not allowing all of the requirements to be met.
And we simply have not seen the return of the labour involved in the industry looking for another job during the housing crisis.
There are not many plumbers, drywallers, roofers, concrete workers, etc., with the skills that we need in the housing sector.
Q: Why don’t more people back to the construction industry?
A: There are a number of generations challenges. The millennials that are coming out of the school with a heavy load of student debt, I don’t know that for very many of them, one of the careers she is considering something in one of the trade, which I think is a simple demographic shift in attitude that we have seen in the United States.
And the last piece is really about immigration.
The country of the immigration policies have not made it very easy to attract workers from other countries outside of the United States.
Q: What about the affordability? Many millennials are saddled with student loan debt, which makes it more difficult to make a down payment. Is that a problem?
A: What we saw in this recovery because of tight supply, prices rose quickly, because there was just no delivery. And the growth in housing prices has outpaced wage increases.
What we need to see that the course of time is the growth of wages will need to keep up with the growth of the housing prices, because certainly affordability is stretched.
Interest rates are low, and that is to help the equation is balanced and the total value of the work.
We want the environment in which we operate in, but we certainly recognize that we need to see what the wage increase to keep up with the average selling price growth.