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What 6 Homebuilder CEOs Are Saying About the Housing Industry

By Morgan Housel - Apr 22, 2013 at 9:26AM

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In their own words.

Few industries were as savagely beaten down during the recession as housing. Today, few industries have as much potential to rebound.

What are CEOs from some of the nation's largest homebuilders saying about the housing industry? I scanned through a pile of recent conference call transcripts to find out.

Jeffrey Mezger, KB Home (KBH 2.63%):

Although the pace of the housing market recovery is gaining momentum, it is important to keep in mind that we are still in the early stages of the recovery. And there's a long way to go before the industry reaches normalized activity levels ...

There isn't a city we're in today that doesn't have a lot of opportunity. The California recovery has become strong enough. And I've been and talking about it for the last probably 6 earnings calls, but every city we're in has a similar recovery occurring, where there's a desirable area with no inventory, a lot of price movement upward, and then the recovery will ripple out to the other areas adjacent and so on and so on.

Stuart Miller, Lennar (LEN 0.37%):

Housing is recovering, and the recovery is consistent, healthy and growing stronger. We saw from yesterday's housing starts and permits numbers that the recovery in housing is continuing to progress in both multifamily and single-family products. This data confirms what we've seen in the field for some time.

There has been an underproduction of housing during the downturn, as we produced as few as 550,000 homes per year during the downturn of both multi- and for-sale product. This is very close to the rate at which homes become obsolete. So for some of those years, we had essentially no net production against the normalized household formation rate of some 1.25 million annually. This shortfall will have to be made up, and the market is beginning to move in that direction.

Larry Mizel, MDC Holdings

The country is growing. The homebuilding industry, the opportunities have never been greater for the large builders. The capital markets are open and I would say in all the years I've been in business, this is probably the clearest period of time that I have seen as to the future of the housing industry for those who would have excess to capital.

Donald Tomnitz, DR Horton (DHI 1.23%)

We're clearly raising prices on each and every one of our communities on a house by house, on a subdivision by subdivision basis ... We do have costs which are going up in some of our markets and with some of our subcontractors but clearly, our pricing power is exceeding the cost increases that we have today ...

We're trying to replenish our lot supply. To be quite frank with you, Phoenix turned around faster than we thought it was going to turn around and we probably are scrambling a little bit more than we normally would in the Phoenix market to replenish our lot supply, and the same thing in the Albuquerque market.

Ara Hovnanian, Hovnanian (HOV 3.32%)

Needless to say, the growth in sales is significant. As a matter of fact, every single month in fiscal '13 is virtually double what it was 2 years ago. If you look at net contracts per active selling community ... We sold more homes per community in each of the prior 12 months than we did the year before. In fact, the 3.3 net contracts per community we reported for February of '13 was the highest net contracts per community for a single month since September of '07.

Richard Dugas, PulteGroup (PHM 0.07%)

Demand up and down the East Coast remains strong, with double-digit percentage increases in almost every market. We continue to see notable gains reported by our operations in the New England area, the Carolinas and Florida. In fact, exceptional demand in our Florida markets is forcing us to take similar action to that in Phoenix, where we are purposefully slowing our rate of sales, as we focus on maximizing margin over driving volume.

Market conditions in the middle third of the country also showed continuous strength in the quarter. Demand in the Midwest was generally strong, with limited lot supply often being as big an influence of our reported sign-ups as buyer demand. All of our Texas markets posted double-digit gains, with Houston delivering the biggest year-over-year increase in sign-ups during the quarter.

For more on housing's recovery, check out what could be the coming boom.

Transcripts courtesy of

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Stocks Mentioned

PulteGroup, Inc. Stock Quote
PulteGroup, Inc.
$41.67 (0.07%) $0.03
Lennar Corporation Stock Quote
Lennar Corporation
$72.67 (0.37%) $0.27
D.R. Horton, Inc. Stock Quote
D.R. Horton, Inc.
$66.52 (1.23%) $0.81
Hovnanian Enterprises, Inc. Stock Quote
Hovnanian Enterprises, Inc.
$44.16 (3.32%) $1.42
KB Home Stock Quote
KB Home
$32.72 (2.63%) $0.84

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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