PulteGroup CEO talks metro Atlanta’s housing market

Richard Dugas

PulteGroup chairman, president and CEO

PulteGroup is the largest U.S. homebuilder by revenue, and second largest by total home closings. The company was founded in metro Detroit in 1950.

On new home construction:

Nationwide, my prediction is the market is on a slow and steady upward climb from where we’ve been. This year, we’ll do about 450 (thousand new houses nationally) versus about 365 (thousand) or 367 (thousand) last year, which sounds like great growth until you realize the 20-year average was 760 (thousand). And the peak in 2005 was about 1.3 million new homes.

Atlanta took longer to come out of the downturn than many other major markets, but I’ve seen inventory levels drop dramatically. Pricing is up about 20 percent year-over-year.

On why PulteGroup chose Atlanta:

We wanted to be closer to our customers, closer to our investment, and we wanted to be in a city that we felt like could provide a good platform for us to grow from here. Great business climate, great infrastructure, frankly, a large diverse employee population to draw from — all of those things were important to us.

On changing living preferences:

(Intown living) certainly is a desire of a lot of buyer groups. We are one of the leading builders in the urban core. People want homes that are well-designed, but very close to work, if possible. I think inevitably you’ll continue to see (the population) push out. There’s no way you can accommodate a 46 percent growth in population (projected in metro Atlanta through 2030) without the suburbs continuing to experience growth. But I think there are also opportunities for more vertical building, more side-by-side townhome construction. When you have such a huge metro area, you are going to see growth in a lot of different areas.

On apartment development:

I think the economic realities of what a lot of people went through in the downturn make apartment living very attractive for many people.

Our studies show 75 percent of them would like to own a home (one day). I believe the apartment market is a transitional market. It offers people a step towards homeownership for people whose homeownership might be delayed a couple of years because of financial concerns. The apartment market is strong, and I think it will continue to stay strong.

On how PulteGroup has changed since the recession:

We changed our business model two or three years ago. What we realized was, excess speculative homes dilutes our return on invested capital. You tend to have to discount those houses once they reach the completion stage. By reducing our overall inventory levels, we’ve been able to improve our return on invested capital, plus get higher margins on existing homes. We’re not afraid of building speculative homes; we just want to sell it before it gets to the final stage.

Editor’s note: These comments are edited, condensed and organized to highlight important points.

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