WEBVTT - The Digital Home Builder Business 0:00:00.200 --> 0:00:03.760 So US Treasury Secretary Janet Yellen and Fed Chief J 0:00:03.960 --> 0:00:07.760 Powell are slated to and they may have already just 0:00:07.800 --> 0:00:10.720 looking for some headlines. Uh, there's they were expected to 0:00:10.760 --> 0:00:12.800 talk about the hot US housing market today and the 0:00:12.880 --> 0:00:15.560 risks that could pose to the financial system. Uh. And 0:00:15.600 --> 0:00:18.640 what's interesting is the Treasury Secretary actually this week already 0:00:18.680 --> 0:00:21.880 saying she's worried about housing affordability, but doesn't see the 0:00:21.920 --> 0:00:23.880 same dangers in the housing market as we saw back 0:00:23.880 --> 0:00:26.599 in the two thousands. So let's get into it, um 0:00:26.760 --> 0:00:30.160 when it comes to the housing market. Someone who we 0:00:30.280 --> 0:00:33.360 caught caught up with last uh, and I think we 0:00:33.440 --> 0:00:36.360 talked with in April of hear really how they were 0:00:36.400 --> 0:00:39.600 dealing with the pandemic is Cheryl Palmer. She's chairman and 0:00:39.640 --> 0:00:42.199 see you at Taylor Morrison Home Corporations, a national home 0:00:42.240 --> 0:00:45.920 builder and developer. They're based in Scottsdale, Arizona, and she's 0:00:46.000 --> 0:00:49.839 joining us from Scottsdale, Arizona. Cheryl, So nice to have 0:00:49.920 --> 0:00:53.120 you here with us. How are you well, I'm really 0:00:53.159 --> 0:00:55.360 not really really good, Carol. Thank you so much for 0:00:55.400 --> 0:00:58.200 having me today. Right, it's great to have you here 0:00:58.200 --> 0:01:00.520 because you were such a good check with us in 0:01:00.600 --> 0:01:03.400 terms of what was going in the housing market, Janet 0:01:03.480 --> 0:01:07.040 Yellen saying she doesn't seem, you know, like it's similar 0:01:07.080 --> 0:01:10.319 to the Miltown that we saw going into, you know, 0:01:10.360 --> 0:01:13.080 two thousand nine. How do you see the housing market 0:01:13.160 --> 0:01:17.399 right now? Yeah, I think, um, it's clearly a very 0:01:17.440 --> 0:01:21.000 different time than two thousand nine, Carol. And where I'd 0:01:21.000 --> 0:01:25.600 really spend some energy is understanding really the overall lack 0:01:25.640 --> 0:01:28.959 of supply that we have in the country today. You know, 0:01:29.200 --> 0:01:33.200 depending on what numbers you want to subscribe to, we're somewhere, 0:01:34.280 --> 0:01:39.120 you know, over five million, six million kind of rooftop 0:01:39.720 --> 0:01:44.000 rooftops short in this country today, and we can discuss 0:01:44.080 --> 0:01:48.120 those for rent or for sale housing. I'm just saying 0:01:48.280 --> 0:01:51.800 total shelter. And for the last many years, as I'm 0:01:51.840 --> 0:01:55.320 sure you know, the governor on kind of building has 0:01:55.400 --> 0:01:58.040 been the labor environment and our inability to kind of 0:01:58.120 --> 0:02:04.400 meet demand and rely the household formations, and so yeah, 0:02:04.560 --> 0:02:08.080 we absolutely have seen prices. We've seen some real movement 0:02:08.080 --> 0:02:10.959 in prices these last twelve months, which I think is 0:02:11.000 --> 0:02:17.720 what Jane has been referring to um, and that's absolutely correct. 0:02:17.880 --> 0:02:21.119 But at the same time, we've had a great deal 0:02:21.160 --> 0:02:23.560 of support with interest rates. And when you look at 0:02:23.560 --> 0:02:29.320 affordability today over twelve months ago, the average consumer buying 0:02:29.440 --> 0:02:32.440 a three or four hundred thousand dollar house van, it's 0:02:32.440 --> 0:02:34.880 been less today than they did a year ago on 0:02:34.919 --> 0:02:39.280 their monthly mortgage because by quite as much health. Because 0:02:39.280 --> 0:02:41.960 of the interest rates, you know, arguably, you might not 0:02:42.040 --> 0:02:44.200 buy as much house today as you could buy a 0:02:44.280 --> 0:02:47.160 year ago um. And that's why I think the concern 0:02:47.280 --> 0:02:49.600 has really been on that first time buyer where maybe 0:02:49.639 --> 0:02:52.040 you don't have as many lovers to pull. You know, 0:02:52.120 --> 0:02:54.200 it's not about you know, can I reduce my square 0:02:54.280 --> 0:02:58.239 footage or maybe you know, I'll take a smaller lot um. 0:02:58.320 --> 0:03:02.000 But today, when we look at the overall affordability, given 0:03:02.080 --> 0:03:04.480 the fact that we're still looking at interest rates you know, 0:03:05.080 --> 0:03:08.240 really below three UM, it's it's providing a great deal 0:03:08.280 --> 0:03:11.080 of opportunity for the consumer. All right, So help me 0:03:11.160 --> 0:03:13.000 understand something. I'm taking a look at your share price 0:03:13.000 --> 0:03:16.280 and it's really come under some pressure, uh and down 0:03:16.360 --> 0:03:18.880 a lot from we had to high back in April. 0:03:19.800 --> 0:03:21.959 Why is that? Why do you think that is? Is 0:03:22.000 --> 0:03:24.280 it because you guys can't build fast enough, can't find 0:03:24.280 --> 0:03:29.840 the materials or what is it now fair question? UM? So, 0:03:29.919 --> 0:03:32.440 a couple of things. One, I think the industry's seen, 0:03:32.720 --> 0:03:35.600 you know, has been under some pressure over the last 0:03:35.640 --> 0:03:38.320 few weeks, and I think that points to just some 0:03:38.440 --> 0:03:40.720 of the concerns not just with housing but just in 0:03:40.760 --> 0:03:46.200 general on inflation. And you know, is this environment we're in, 0:03:46.480 --> 0:03:48.640 is this kind of the new normal or is this 0:03:48.680 --> 0:03:52.800 more transitory? Um? And at the same time, we've seen 0:03:52.920 --> 0:03:57.280 housing prices move now on average over the last year 0:03:57.440 --> 0:04:02.320 something around twenty percent. I mean, that's that's significant. Once again, 0:04:02.560 --> 0:04:06.680 as I as I shared, you've got we are so undersupplied. 0:04:06.960 --> 0:04:10.160 But I think the market is trying to digest what 0:04:10.360 --> 0:04:14.160 is this you know, rapid price movement mean for the 0:04:14.240 --> 0:04:17.360 industry and most importantly, what does it mean for that 0:04:17.400 --> 0:04:22.560 first time buyer that maybe it's stretching into homeownership, you know, 0:04:22.640 --> 0:04:26.680 and it's probably worth an honorable mentioned, Carol, I think, Um, 0:04:26.720 --> 0:04:28.680 I don't think we talked about it last time you 0:04:28.760 --> 0:04:31.520 when I were on the zone, but you know, about 0:04:31.600 --> 0:04:35.040 two years ago we entered into the build to rent space. 0:04:35.600 --> 0:04:40.479 Homeownership isn't for anyone, and we announced a strategic partnership 0:04:40.560 --> 0:04:45.000 with UM Christopher Todd Communities which really allows us to 0:04:45.440 --> 0:04:48.880 kind of address that missing middle. And so we're excited 0:04:49.080 --> 0:04:53.839 about one are our least are leasing projects that we're building, 0:04:53.839 --> 0:04:57.360 our build to rent Christopher Todd communities and what that 0:04:57.440 --> 0:05:00.400 does to meet the demand of folks at ount or 0:05:00.480 --> 0:05:03.479 don't want to buy today as well as what it 0:05:03.520 --> 0:05:07.159 does for um just the overall business as people look 0:05:07.200 --> 0:05:10.200 for a step into homeownership. Well, what's the demand for 0:05:10.240 --> 0:05:14.119 the bill to rent? Is that outpacing the traditional uh 0:05:14.160 --> 0:05:17.120 individuals who are coming up to buy our bill to buy? 0:05:18.800 --> 0:05:20.960 You know, it's such a small piece of the overall 0:05:21.000 --> 0:05:23.560 pipes to day took Okay, I mean across the country 0:05:23.600 --> 0:05:26.840 we have something like sixteen just over I think sixteen 0:05:26.880 --> 0:05:30.960 million homes of the inventory are not individually owned, so 0:05:31.040 --> 0:05:34.480 you would say those are there available for rent. And 0:05:34.480 --> 0:05:37.400 when we look at what we're building on an annual basis, 0:05:37.720 --> 0:05:41.080 you know, it's generally been about five percent of starts 0:05:41.120 --> 0:05:45.200 and so that's been around fifty thou but once again 0:05:45.320 --> 0:05:47.680 go back to that, you know, we're five to six 0:05:47.760 --> 0:05:52.480 million rooftop short fifty thousand, and we have a long 0:05:52.520 --> 0:05:56.159 way to go. And the reason we remain you know, 0:05:56.360 --> 0:05:59.320 relatively optimistic and not that there won't be some bumps 0:05:59.360 --> 0:06:03.920 on the road. Is you know, the governor for building 0:06:04.120 --> 0:06:07.560 is just how many homes we can build in our 0:06:07.839 --> 0:06:14.040 current environment with regulatory demands, with labor to actually meet 0:06:14.120 --> 0:06:18.560 the need of what's out there today. Hey Cheryl, um, 0:06:18.680 --> 0:06:21.160 what's interesting is I'm looking at your website. What's the 0:06:21.200 --> 0:06:25.560 most lucrative building that you guys do? Is it individual homes? 0:06:25.640 --> 0:06:29.120 Is that those communities? Is it's you know, where along 0:06:29.160 --> 0:06:31.560 the spectrum of the world that you work in do 0:06:31.600 --> 0:06:33.600 you find it to be the most beneficial to the 0:06:33.640 --> 0:06:38.760 bottom line. Um. I don't think I would point to 0:06:39.000 --> 0:06:43.640 one product type. I think it's really culmination of you know, 0:06:43.640 --> 0:06:47.640 we're a community building builder where we built communities. Obviously 0:06:47.720 --> 0:06:50.760 in our communities we build homes. UM. As I look 0:06:50.800 --> 0:06:54.680 across the consumer groups, one of the areas that's really 0:06:55.240 --> 0:06:57.680 done well for the organization is what I would call 0:06:57.680 --> 0:07:01.880 our lifestyle communities. And those are gem really targeted who 0:07:01.920 --> 0:07:05.640 you know, you could call it active adults or plus 0:07:06.400 --> 0:07:08.920 um where it's that kind of stage in life where 0:07:08.960 --> 0:07:10.760 my kids have left and you know, it's kind of 0:07:10.800 --> 0:07:14.760 about me now. And those can be welf course communities, 0:07:14.840 --> 0:07:18.240 as can be water communities as could be country clubs. 0:07:18.280 --> 0:07:21.960 So we we we provide that lifestyle living at really 0:07:22.320 --> 0:07:25.200 any an all price point. But it's really much right 0:07:25.280 --> 0:07:27.960 for the individual. UM. But when we look at that 0:07:28.040 --> 0:07:31.240 particular consumer group, generally they're at a place in life 0:07:31.320 --> 0:07:34.400 where they know what they want, they have the resources 0:07:34.480 --> 0:07:37.760 to pay for it, and it's just a it's a tremendous, 0:07:37.840 --> 0:07:41.280 tremendous part of our overall portfolio. Well, and I do wonder, 0:07:41.440 --> 0:07:43.600 you know, it's interesting we watch what's going on in 0:07:43.680 --> 0:07:47.120 terms of climate change. You know, the Pacific Northwest right 0:07:47.240 --> 0:07:52.000 seeing extreme temperatures. Um are there, Florida. You're in Florida 0:07:52.040 --> 0:07:55.240 big time. You know, do you factor that in? Do 0:07:55.280 --> 0:07:58.480 you think about that in terms of location? I'm assuming 0:07:58.520 --> 0:08:01.360 of course you do. But I mean, is it starting 0:08:01.360 --> 0:08:04.360 to maybe shape some of bigger, broader strategy in terms 0:08:04.360 --> 0:08:09.160 of future longer term developments. Well? Absolutely, I mean when 0:08:09.160 --> 0:08:11.600 we if you look at our portfolio and you listed 0:08:11.640 --> 0:08:15.200 the markets, um that we build in across the country, 0:08:15.280 --> 0:08:19.560 and generally you'll see a theme of larger you know, 0:08:19.760 --> 0:08:26.320 larger macro um markets that you know, the employment bases there, UM, 0:08:26.480 --> 0:08:30.040 affordability is there. It's really there's not one thing that 0:08:30.160 --> 0:08:33.320 drives a good market. Um. You know, it's just like 0:08:33.360 --> 0:08:38.240 our strategy on core locations. You know the basic rules 0:08:38.240 --> 0:08:41.160 of home ownership and being close to services and close 0:08:41.240 --> 0:08:45.360 to good schools and transportation, all of that climate, all 0:08:45.400 --> 0:08:48.480 of that comes into play as we think about what 0:08:48.640 --> 0:08:50.960 is the consumer want and where they're going to raise 0:08:51.360 --> 0:08:55.360 their family or where they individually want to live. So UM, 0:08:55.400 --> 0:08:58.640 I'm very pleased with our portfolio across the country right 0:08:58.640 --> 0:09:01.559 now and the fact that we build really for that 0:09:01.600 --> 0:09:04.360 first time buyer. UM is about a third of our 0:09:04.440 --> 0:09:08.679 business that kind of first time move up and then, 0:09:08.760 --> 0:09:11.760 like I said, our active adult business, our lifestyle community. 0:09:11.840 --> 0:09:15.000 So we really are able to meet the demand market 0:09:15.000 --> 0:09:17.319 by market based on what the consumer wants to need 0:09:17.640 --> 0:09:20.160 right and spread out, you know, your your exposure right 0:09:20.200 --> 0:09:22.720 to those different markets. Hey, talk to us about the 0:09:22.800 --> 0:09:26.679 leading in of digital increasingly. Uh, you've got a new 0:09:26.720 --> 0:09:29.400 digital to be built reservation system. How does this work? 0:09:29.440 --> 0:09:33.440 Can can you basically now just go online pick your house, 0:09:33.480 --> 0:09:37.359 design your house, have it built, almost do everything digitally. 0:09:39.080 --> 0:09:42.840 That's exactly right, Carol. Um. You know when we spoke 0:09:43.320 --> 0:09:46.839 eighteen months ago be pre covid, I would tell you 0:09:46.880 --> 0:09:50.559 that it absolutely helped advance the industry because everyone beyond 0:09:50.600 --> 0:09:53.520 demand system was very, very different, and certainly I would 0:09:53.559 --> 0:09:56.840 tell you that our industry was probably the last to 0:09:56.880 --> 0:10:00.600 subscribe to kind of new technology, and the way that 0:10:00.640 --> 0:10:03.120 we've been doing it in the home building world hadn't 0:10:03.200 --> 0:10:08.160 really advanced over the decades. But it's really about giving 0:10:08.200 --> 0:10:14.760 the consumer eve simplicity when they're shopping and allowing them 0:10:15.640 --> 0:10:18.360 to in to engage with the brand in a way 0:10:18.400 --> 0:10:21.360 that makes sense for them. So Taylor Morrison, I believe 0:10:21.360 --> 0:10:25.000 it's been very progressive and leading the pack in this 0:10:25.240 --> 0:10:31.720 elevated virtual shopping experience. We have a online scheduling tool. 0:10:31.920 --> 0:10:34.440 We have self guided tours where we'll send you a 0:10:34.440 --> 0:10:37.840 four digit code and you can go walk through a 0:10:37.920 --> 0:10:41.640 home on your own time, on your own You can 0:10:42.080 --> 0:10:47.319 you know, online home reservations. That's what we introduced. I 0:10:47.679 --> 0:10:51.160 think that was last summer, where and you could go 0:10:51.200 --> 0:10:54.120 into an inventory home. I think that's just perfect for 0:10:54.160 --> 0:10:57.439 me to go back home and put it in your 0:10:57.480 --> 0:11:00.240 shopping cart and then we would send you a contract. 0:11:00.280 --> 0:11:03.120 So amazing, and then in the last it's it's truly 0:11:03.160 --> 0:11:06.000 who would have thought, you know, two years ago you 0:11:06.000 --> 0:11:08.760 could buy a house online, and now we're selling hundreds 0:11:08.800 --> 0:11:14.200 and hundreds of homes entirely virtually with no physical contact. 0:11:14.840 --> 0:11:20.040 It's it's remarkable. Well and just go ahead, No, I 0:11:20.120 --> 0:11:24.840 just got about fifteen seconds. Our most recent tool, which 0:11:24.880 --> 0:11:27.520 is the most exciting them all, is being able to 0:11:27.640 --> 0:11:30.920 match somebody. They can go pick their lot, pick their 0:11:31.240 --> 0:11:34.360 floor plants and do all that virtually as well. Yeah, 0:11:34.400 --> 0:11:36.319 and like with cameras and things, you can really get 0:11:36.320 --> 0:11:39.120 a good, good picture of everything. Cheryl, thank you so much, 0:11:39.160 --> 0:11:42.280 great good check on housing. She's chairman CEO Taylor Morrison 0:11:42.400 --> 0:11:45.280 Home Corporation, joining us on the phone from Scottsdale.