Exclusive Q&A With PulteGroup CEO: Mortgage Lending Still a 'Headwind'
Access to mortgages and a shortage of labor are two headwinds facing PulteGroup, company CEO Richard Dugas tells us in this exclusive Q&A.
Even as PulteGroup reported profits approaching $500M on revenues of nearly $6B last year, Richard (on left with Atlanta Mayor Kasim Reed) says limited mortgage availability, particularly for entry-level buyers, remains a headwind to overall housing demand. He also says finding labor for new construction can be constrained at certain times during the year.
“We have implemented some changes to work through the latter issue, but I am not sure there is an imminent solution for improved mortgage access.”
Bisnow: What do you see in terms of homebuying velocity this year?
Richard Dugas: Consistent with our long-held expectations for a gradual but sustained recovery, 2015 new-home sales of approximately 500,000 units for the country were up 15% over last year. Given the favorable market dynamics of strong job growth, accelerating household formations, supportive demographic trends and continued low interest rates, we expect new-home sales will continue their slow and steady path higher for the next several years.
Bisnow: What impact do you think recent Wall Street upheaval could have on your economic expectations this year?
Richard Dugas: From concerns about global economic conditions to the swoon in oil prices to gyrations in the stock market, the day-to-day swings can be violent. The reality is, however, that we can’t control any of these factors. What we can do is focus on running our business consistent with the goals we have established. This means acquiring well-located communities that can deliver high returns on investment, using more land options where possible, and focusing in on smaller, shorter-duration projects where we can get our capital back quickly.
Bisnow: How does the John Weiland acquisition fit into the overall PulteGroup model?
Richard Dugas: Population growth and housing demand in the Southeast are expected to remain strong for years to come, so this acquisition of certain assets, including 7,000 building lots and the John Wieland Homes and Neighborhoods brand, provides a great opportunity to increase our presence and operating leverage in five important cities, while expanding our presence among luxury buyers.
Bisnow: When it comes to your new HQ presence at Capital City Plaza in Atlanta's tony business district Buckhead, what factors led you to choose your current location?
Richard Dugas: We picked Atlanta because it is a vibrant city, with a talented and growing workforce and direct flights to our operations throughout the country. We selected the office because of its location directly adjacent to the MARTA station. Having such convenient access to a reliable mass transit system is so important to employees and can be a tremendous recruiting advantage in today’s marketplace.
Bisnow: Speaking of Millennials, they've largely been part of the rental pool in many cities. How is Pulte addressing this issue, and how do you expect to lure them to become homeowners?
Richard Dugas: We are focused on serving the Millennial buyer who is looking for a more urban-like location, specifically targeting older Millennials buyer who are seeking closer-in locations and comfortable with a townhome or condo product [such as PulteGroup's Stonehill at Lenox townhouse project here]. While the entitlement/development process is often more challenging, the high returns which can be realized make this is an attractive product category, and one we can develop in many markets throughout the country.