People are buying homes at some of the highest levels in decades, and there's not enough inventory to meet the demand. Homebuilders are scrambling to take advantage of the opportunity. Moreover, there's strong evidence that this isn't a short-term blip. There are more millennials than any other age cohort, and this generation is buying houses for the first time.
For NVR Homes (NVR -0.41%), the results are telling, with new home orders surging 40% higher in the third quarter. On the Oct. 20 edition of Motley Fool Live, "The Wrap" host Jason Hall talked about NVR's incredible growth numbers and whether the company will keep fueling growth in the years to come.
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Jason Hall: NVR is a homebuilder. It's a big homebuilder. Just reported third-quarter results. It's just some things about NVR that I like. First of all, I like its business model. Most homebuilders tend to take on a lot of debt to buy land, and then they sit on the land for three or four or five years before they get around to developing it. NVR does some of that, but mostly, they try to use options for the land so they don't outlay as much cash upfront. Then in a worst-case scenario, the market goes down, they lose that option, but they can walk away from the land if it doesn't make sense to start trying to develop it. Here's the thing, here's what really just absolutely jumped out. For anybody that hasn't been paying attention to the home market, I know there's a few viewers on here that are interactive with engaged with on Twitter that have talked about that they're looking right now, they're getting into the home market. It's crazy out there. There's huge demand and there's this bifurcation that we've seen. For a couple of years now, we've seen big demand in entry-level housing as new homebuilders or new home buyers, first-time buyers have gone to the market to try to buy houses.
Over the past decade, coming out of the financial crisis, nobody was building entry-level homes. Everybody was building custom homes and high-end homes so there's this major shortage in the market. What we've seen over the past few months is a surge in demand for premium homes. Just a big surge. NVR is interesting because they build across the spectrum. Here's what they said. Their third quarter ended Sept. 30. Their earnings-per-share went up about 15%, and consolidated revenues increased about 4%. Not too bad. Great earnings result there, 4% revenue. This was the big one. The big one is if you look at their orders, I'm going to have to search it in the document to give you the exact numbers. New orders for the third quarter were 6,681 units. That was up almost 2,000 units from last year's third quarter so 40% increase. Just a massive jump. I mean, this is a company that grew revenues four% on closed deals. Closed business. But new orders increased a massive 40%.
There is a huge surge right now in people looking to buy houses. I have some takeaways from this that I think are important. They're not really going to change how I invest, but they inform to me some things that are happening, some economic things that are happening, and also some opportunity that I see. Number one, interest rates are basically at all-time lows. The Fed funds, overnight rate, and our inter-bank lending rate is 0% now. The Fed has said that their plan is to keep it that way for the long term. Their big mandate right now is to manage rates, to keep rates low. That is incredible for buyers. If you're buying a home right now, it's amazing. If you have a mortgage that you finance anytime before March, it's an incredible chance to refinancing and save costs and lower how much you're going to pay in interest. It's terrible for banks. It's not great for people that are close to retirement, that are looking to try to lock in some sort of income, but it's great for consumers. I think that's going to really provide an even stronger tailwind for demand for homes over the next 10 years. We already had a really big surge as so many young families looked to get into the market for the first time. There's a lot of people now that are going to look to move up because they can afford a lot more house.
The flip side of that is home prices in a lot of places are going up incredibly quickly right now because there's no inventory. I'm interested to see over the next six months to a year how the supply and demand picture changes, what the homebuilders pivot to, and what they're focusing on because I wonder if some of the homebuilders that have just said, "Well, we're going to focus on entry-level," might be rethinking that now and might be thinking more about staying with custom homes, because so many people are looking for a bigger home so they can have an office so they can work from home. Maybe a couple of days a week, maybe a permanent remote work change. I just really want to follow up. I think it's really interesting. There could be some interesting investment opportunities that come out of that.