PulteGroup 2Q15 Earnings Call Notes

posted in: Notes | 0

Design communities for 11 targeted customer groups

“While externally, we discuss buyer activity along brand lines for the sake of simplicity, investors who have followed PulteGroup for a while know that we actually design communities to serve 11 targeted consumer groups or TCGs. From the community location and lot layout to the specific floor plans and options we offer, we develop each community to address distinct buyer wants and needs.”

Millenials value proximity to downtown over schools and single family design

“within our array of communities are those developed to serve a subset of first-time buyers who prioritize proximity to downtown over schools and single-family design. Based on experience and consistent with this year’s market research work, the buyers for these communities are very much today’s millennials who are moving out of shared living arrangements and into their first homes.”

Overall demand was solid in 2Q

“overall demand in the second quarter was solid, with strong buyer traffic to our communities and sign-up gains in both units and dollars. Generally, demand trends at the market level have remained fairly constant over the past several quarters”

Spring selling season was successful

“From PulteGroup’s perspective, we would say the spring selling season was a successful one for the company and one that leaves us well positioned for the coming quarters. ”

Millenials are becoming a significant part of our first time buyer portfolio

“there is a group of first-time buyers in that millennial age group that – and you said it will – are willing to trade size for proximity. And I think it’s essentially what Richard talked about in his prepared remarks about that millennial buyer. And what it was trying to tell you was that it is already a pretty significant part of our portfolio of, again, not entry-level, but first-time buyers in that millennial age group. ”

We’re seeing a change where millenials are skipping the entry level product in their 20s and buying a higher level home in their 30s

“sort of the traditional view of an entry-level consumer buying a home in their mid-20s and then trading up, et cetera, over time is changing. And in fact we’re seeing a lot of people actually skip the Centex true entry-level product, say at $200,000, and buy a Pulte-branded home at $300,000 in their early-to-mid-30s, typically consistent with when they either get married or begin living together, and their housing needs change from rental to ownership.”

Not hearing a lot of rate hike fear driving purchase behavior

“Rates just did begin rising here over the last month to six weeks primarily. Historically, I would say that does drive purchase behavior as people kind of fear the loss of a low rate environment. So we certainly don’t fear that occurring, provided that it continues with the economy continuing to strengthen. But are we hearing a lot of anecdotal information on the ground about that? I’d say not yet.”

We’re very comfortable running with less cash because we have easy access to capital markets

“I think we’re very comfortable running with this much cash and even a little bit less, candidly, because we have so much availability under the revolver. And then we think we’ve got access to the capital markets on terms that what would be attractive. So, when we need to, we have a way to fill any cash shortfalls that we might want to deal with. So, again, leverage being between 30% and 40% is what is driving most of our decision making.”