Lennar FY 2Q17 Earnings Call Notse

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Stuart Miller – CEO

Continue to see strength in the housing market

“We have continued to see strength in the housing market through the second quarter and have seen new orders, home deliveries and margins exceed our initial expectations. Generally speaking, in spite of the often noisy political environment, there continues to be a general sense of optimism in the market, there continues to be a perception that jobs are being created across the country and that wages are generally moving positively.”

*”a definitive reversion to normal”

“Overall, the attitude of our customers continues to confirm the sense that we have as business operators that the economic environment in general is strong and stable and improving. The slow and steady though sometimes erratic market improvement that we have seen for the entirety of this recovery continues to seem to be giving way to a more definitive reversion to normal.”

Seeing pricing power, millennials moving into market

“We continue to feel that limited supply and production deficits from the past years are now intersecting with land and labor shortage and we started to see some pricing power as we have moved through the selling season, somewhat offset however by construction costs increases. Additionally the economic realities of a constrained and supply of housing options and the economic realities of higher rental rates are beginning to have a rational impact on decision making for the first time home buyer as millennials are continuing to come to the housing market.”

This is animal spirits

“a lot of what’s driving people to the market is a sense of confidence, it’s animal spirits, it’s the notion that all of this is in exact science, interest rates and affordability and wages and pricing all play a part and what people can afford and how the math actually works out. But the confidence that people bring with them to the table about whether their job is table and whether there’s going to be a wage increase or there is opportunity for them to move and be mobile to the next job opportunity. Whether they have been to able accumulate a down payment or in excess of a down payment, or whether their family members that are able to help support with the gift or something else, all of these are moving parts that define this in exact science that we are all trying to kind of define going forward. So it’s kind of hard to wrap all of our heads around where the market is going, but the general trajectory is positive and even at the first time buyer level as the millennials start to unwind their doubling up and come to the market realizing that rental rates have gone up and there is a real reason to go ahead and purchase. That first time buyer segment is showing some optimism and some ability to be flexible in and around the affordability levels and as prices move up”

Jon Jaffe

Consumer sentiment is a driving factor

Yes I would just echo that the consumer sentiment is really a driving factor right now and we’re not seeing spikes in appreciation that are causing concerns and we’re really not seeing that at the mortgage table. So, I think it’s typical housing follows jobs and wages and that’s really a tailwind that we have right now.”

Spring selling season was a little bit stronger

“Yes I think you saw the traditional spring selling season that strength as you look at year-over-year and the slight uptick in comparison just show that this year was a little bit stronger reflective as our earlier comments seeing in consumer confidence, wage and job growth all reflecting an increased traffic at our welcome home centers, increased convergent rate of that traffic. So all building to a slightly stronger sales pace.”