B (3:13)

But you do have a garden that.

C (3:14)

You plan to do, and it's doing really well this year. Really?

B (3:18)

Is that due to your expertise, The Atlanta weather this summer?

C (3:21)

You know, I think I put a little more thought and effort into it. I redid the garden situation. I actually spent time all winter, and I got the irrigation set up right. So when I travel like I am this week, I'm gone all week. Somebody is still watering the garden, and it's called the computer that turns the irrigation on. So it's been a productive harvest this year. So, um, I also recently put in a greenhouse. So I plan it'll be the. This will be the first winter that I've had the greenhouse, but I plan on trying to grow things all winter in the greenhouse.

B (3:50)

So when you got out of business school in Arizona, your first endeavor was a gas station, where, you know, if you wanted to be a cattleman, you're in a good spot. If you want to be in the oil business, you're also in a good spot. We can get you two jobs coming out of here, I'm pretty sure.

C (4:05)

Yeah.

B (4:05)

Why'd you go into the gas station business?

C (4:07)

You know, it was one of those things where just things in life, doors open up, and sometime it's. Most of the time, I think when doors open up, it's out of necessity. And, you know, my parents were big on education, but they didn't have a ton of money. And so they said, you know, we'll. We'll help give you a few bucks to kind of pay rent and give you some food, but you're going to have to figure out tuition on your own. So I pulled into a gas station one day and there was a sign, and I had. I didn't have a job, and I had no money, and there was a sign saying that they were hiring a manager at a gas station. I was like, no, I can probably do that. And so I went in and I applied for the job and they'd had terrible turnover with the manager and the, the regional manager said everybody else has been a total failure. Why shouldn't I try hiring a college kid? And he did, he gave me a job. And they, they owned about 25 stores. It was a family run business. They also had the petroleum distribution rights for Sinclair. And I saw this family business and it was, it was, what I was probably more enthralled with was the idea of business. And so that's how I paid for college was by, I go into this gas station five in the morning, work until two and then I'd go to school from two until, you know, ten o' clock or whenever I was done studying. I made enough, I made enough money to pay tuition. And then when, and then I went into public accounting. I was an accounting undergrad and I quickly found out I didn't like public accounting. And so I said, well maybe I'll try and buy a gas station and I'll try and build the same thing that I used to work at in college. And so that was my, my entree into owning a gas station.

B (5:50)

And did you find at an early age that you were a good manager? Because it's very evident as a older person you're an exceptional manager.

C (5:58)

Yeah, you know, I, I, I, I don't know if I probably wasn't, I was probably really immature so I probably was not a great manager. But we actually, I had success in the, in the gas station that I was managing because most of our bonus was tied to controlling inventory shrink. And it's a really hard business controlling theft and losing beer and cigarettes and things like that out the back door. I decided to hire college kids to work in the gas station which typically that wasn't your employee demographic. And the only thing I had to do is I had to be super flexible with their school schedule, which that was the boat I was in. So it seemed fairly easy. And surprisingly enough, the college kids, at least the ones that I hired, they weren't stealing my cigarettes and my beer. And so I controlled the shrink really well and I did okay. So I think it was a good life lesson in if you can meet employees kind of where they are and it can be a mutual bargain. They're giving of their time and services. You're giving, you know, your employees or your team members an opportunity for employment. You can actually get a lot of things done and it's one of the things that I think I still try to live by today. We have an incredibly strong culture at Pulte Group that we're super proud of. For the fifth year in a row, we've been ranked as a top 100 best company to work for by Fortune magazine. And one of the things that we talk about is the commitment that we make to our employees. A lot of times it's only a one way street. I'm the employer. I hold all the cards. I want you to do all these things. If you do them, I'll pay you. And we actually say that it's a mutual bargain and there are commitments that we make to our employees to say you should expect and hold us accountable to do these things. Another one of our core values is team first mentality. So, you know, there, there are a lot of life lessons and roads that I think go back to the ranch when I was really young, the convenience store, you know, when I, when I decided that it was going to venture out on my own.

B (8:04)

When you stepped in as CEO in 2016, it was not. At that time, Pulte was in something of a crisis. The headquarters had been moved from Detroit down to Atlanta. There'd been quite a bit of acrimony as it relates to that move with the founder of the firm and then the CEO. At that time, you had an activist investor who'd stepped in. And you all of a sudden find yourself in the CEO role to the definition of a hot seat, as I see it. What I find to be so interesting now looking back on it, Ryan, is how well you were able to not only put up great financial results, but then also create an enduring culture. And you just talked upon that as you think back to those days when you were right in that CEO role with plenty of pressures on you by an activist investor and then a disgruntled founder of the firm and a CEO who preceded you stepping out. What was your priority at that moment as it relates to how do I write this ship? Is it all up to the financial returns? Is it to the culture that I create? Is it in the inventory that I build? Where was your focus at that time?

C (9:07)

Yeah, there was a lot. There was a lot going on there at that point in time. Will and I'll try and lay out a few things that address it. The good news is, even before I was in that position, I had been at the company for almost 15 years. And I started with the company in our accounting and finance organization. I eventually worked my way into operations and, you know, was. Was ultimately a division and regional president. So I had really good understanding of the business of home building. And I still think the best job in this business is division president. I love my job today, but there is no better job than being a home building division president in one of the markets that we operate in, like right here in Austin as an example. So I had good relationships with our entire team. I knew the business. And then my move to Atlanta was part of a, you know, a succession planning process that was well underway by our board and our CEO at the time, well before some of the tensions that you speak of with the activist investor and some of the disagreements with our founding family. And so I had a very strong relationship with our board. As I became CEO, there was some turnover in the board. The activist investor asked for some change, as often happens. And so I found myself knowing about two thirds of the board members, and then there was about a third of our board that became brand new. And so what I really tried to focus on was, number one, we've got to have the best people in the business, which I believe we do. We've got to treat them right. We've got to maintain good culture. I feel that is the foundation that all successful businesses are built on, is great culture. So we made sure that that was stable and that any potential cracks in that foundation, we were addressing and addressing quickly. We then really took a hard look at our strategy. Are we in the right markets? Are we going after the right consumer groups? How does it. What does our balance sheet look like? And there were some, you know, really good things that I inherited. There were some. Also some things that we needed to change. I'm sure we'll touch on some of those. And then it really became a matter of communicating to the stakeholders, to the activist investor, which we talk to often. I had a very strong relationship with our founder, who has since passed away, speaking with him and. And his. And his. His wife and just understanding some of the things that they wanted. And then, you know, there's a. The. The Py family is a big family. There's over 100 kids and grandkids. You know, they. At that point in time, they were fairly large shareholders, not so much today, and, you know, understanding kind of what their pain points were. And then that allowed us. That really allowed us to set priorities and go to work. And then I think for any business, Willie, especially a publicly traded business, that's got a lot of stakeholders, you know, you've got a lot of vested shareholders as well. You've got to do what you say. You're going to do and, and that I think, I think if you're able to set priorities, communicate clearly about what you're going to go do and then pay that off and deliver on it, you can find success.

B (12:39)

So one of the things I find interesting about that, Ryan, is that spring the strategy you, as Bob spit the lead in. You are the broadest homebuilder in America. You're in 26 states, you build entry level, move up as well as active adults and you're in a huge geographical footprint. That's quite, it's not, it's not completely different, but it's, it's quite different from doctor And Lennar who are the only two that are bigger than you and then a lot that are below you. It feels like you're trying to be a little bit of one size fits all, but you're actually not. You've got these three different segments. You want to talk through what you see in each one of those because just before I turn it over to you on that, we all know the stat now that the average age of the first time home buyer in America has now moved up to 38 or 39 years old. So back in the day it was, you know, get married in your 20s and start having your kids and you were buying your home in your late 20s, early 30s. The way that's been pushed out tremendously. The second thing is that people would think about finding a life partner and getting married and the marriage age is pushed back tremendously as well. How have those two big demographic shifts changed the market that Pulte is trying to build homes for?

C (13:55)

So our, our underlying strategy when we, when we think about consumer diversification and geographic diversification is we said we wanted, let me start with the consumer. We wanted to be indexed to what the market opportunity was. In our view. About 40% of the new home transactions in the United States are entry level. When I became CEO, our entry level exposure was about 32, 33%. And so we made a deliberate shift to say we're going to move some of our move up business into entry level. We wanted to keep the active adult exposure, which is about 25% of our business. We wanted to keep that constant. So that was, that was priority shift one. And you know, you wouldn't think moving from 32 or 3, 33% to 40% would be that big a deal. It was really hard and it took us about three to four years to move the numbers from the 32 up to the 40.

B (14:54)

Was that more penetration or bringing prices down to capture more, it was more penetration.

C (14:58)

And so it was really about buying different lands. We're very big on consumer segmentation. So inside of our company, we talk about consumer groups in 14 different groups. And some of those groups have got A, B and C categories. So we slice the baloney pretty thin in knowing exactly who you are, what stage of life you're in, how much money do you make, do you have kids, do you not have kids, et cetera. And based on that, we think we have a pretty good idea of the areas of town that you want to live and the type of home that you want to buy, you want live in.

B (15:34)

So just on that, if I can, you bought about $5 billion of land last year. So as you're buying that land, you're literally sitting saying, we want 40% of that land to be for entry level. We want 40% to be at move up, and we want 20% to be for active seniors.

C (15:48)

Yeah, 20.

B (15:48)

Adult.

C (15:49)

Yeah, 20.

B (15:50)

20, 25%.

C (15:50)

Yeah, yeah, that's exactly right. And, and the, the 5. We did spend 5 billion. About half of that is acquisition. The other half of that 5 billion is development. Right. You know, putting pipes and roads and, and sewers in the ground and et cetera. But, but that's exactly the. And it really starts at our individual division level, which we have 33 active divisions. You know, tomorrow I'll be in one of our divisions. We go through a strategy review with that local operating team once a year where we, we evaluate what's the population of the, of this city today, how does it break down in terms of the different buyer groups that we serve? What does the competition look like? How are we positioned? What parts of town are we playing in? Where are the permits happening? It's an incredibly robust, strategic. And you know, most of the time it's like, hey, we like the path we're on. Stay the course. Other times it'll be, why aren't we on the south side of town? Or why do we not have more of our business in entry level or active dual in a particular city? As you can, I'm sure, appreciate. Willie, if you get into a place like southwest Florida, Naples, Fort Myers, Sarasota example, there's very little entry level housing there. You know, there our entry level housing business is probably only 10 or 15%, and the rest of it is in move up an active adult, just because that's the consumer that's living there. From a geographic diversification standpoint, that's another one where we made a decision to say we want to be in the right markets. Not every market. You know, we're not in places like Milwaukee or Pittsburgh. We might someday, but we are in every major housing city across the United States. And it's one of the things that I believe we offer investors as something that's different than some of our other competitors. And the, the biggest differentiator between us and some of our other public competitors is our Midwest business, which, which does really well for us.

B (17:43)

I want to jump into the Midwest on your, on your active adult brand because you've opened up some communities there. But I want to pause on that for two seconds as I, as I think about when you've taken that $5 billion and the, the land and development and acquisition costs. I'm curious as it relates to Ryan, what the, if you will, leading indicator of where you're going to meet the demand. Because. So, for instance, let's go to Austin.

C (18:08)

Okay.

B (18:09)

Austin on the multifamily side has been wildly overdeveloped over the last several years. The, the oversupply is being absorbed and you've got massive job growth here as you look at in Austin. Just specifically do you say those people who are moving to Austin for jobs are going to be in these multifamily towers that are getting absorbed now and then five years, 10 years from now they're going to want to, if you will, graduate or move out of multifamily and establish a home and be the first time home buyer. So we'll build inventory into that. Or are you, if you will, not looking at the multifamily install base and just going at where jobs and opportunity are the latter.

C (18:49)

So do we pay attention to multifamily? It's a big part of the overall housing ecosystem. And so by no means do we ignore it, but our, one of our leading indicators of where we want to be is what's happening with population growth and more importantly, job growth. Right where there are jobs, there will be homes. And it's a formula that we found works really well for us. There are some anomalies though. Fort Myers, Naples area is a good example of that. There's not a lot of job growth, but it's a place where you have a lot of money and people coming from other places. And so we have a very successful business there despite there not being huge job growth. But most markets, if there's not new jobs, you're probably not seeing, you know, huge, huge housing growth numbers.

B (19:34)

You have created a reputation in the investment community of running the highest margins in the Home building industry, which I'm certain you're, you're proud of and your team's very proud of. But as you and I both know, it takes a whole lot more than focusing on margins to gain those margins. Talk for a moment how you've been able to maintain 30% margins when the rest of the industry is several hundred basis points inside of you.

C (19:56)

We think we're running a little bit of a different business than some of our competitors. And it really comes into, into three, three primary reasons how we think we get ultimately better returns, which I think are even more important than margins. The margins are certainly a component of the return on invested capital that we're looking to get. And the way we do it is the way, number one, the way that we buy land and it comes back to that consumer segmentation work that we do and really understanding who the customer is, where do they want to live, what type of home do they want to live in, and then making sure that we're targeting those areas from a land acquisition standpoint, try to be really smart in the way that we underwrite and the way that we handicap risk. So we have a risk adjusted return model, whereas we get into things that are a little more risky, maybe unproven, there's more development risk, there's more entitlement risk. We require a higher return and that helps, that helps ensure that we keep those returns at a higher level. We didn't always do it that way. It was something that we've changed probably in the last 15 years as we went through a strategy pivot was, was really changing the way that we underwrite land. The second piece of how we operate is the way that we design product. We have excellent architects and maybe even are as important as the great design and architectural team that we have. We have great consumer researchers and we spend an inordinate amount of time trying to get inside of the head of the consumer. We'll oftentimes, as we're in new product development phase, we'll go rent out a 200,000 square foot warehouse and we'll build the, the new plan designs out of paper and two by fours life size. You know, because normally when you're designing a new floor plan, you're looking at it on a three by five sheet of paper or on a, you know, computer screen. And we don't think that's good enough. That's so hard for the average consumer to really give you feedback on what they like or don't like. So we found by building life size two scale models that you could build in a day for relatively low cost, you could get feedback from the consumer, and you could make those changes really quickly. You could change the line drawings. And then when you actually go build the house for real, which costs a lot of money and takes a lot of time, you've got a better design. And then, you know, the last piece of what we've been able to do is our proprietary pricing model that we think a lot about what adds value to the consumer. So we sell the. We sell the lot. There are no two lots that are the same in any community. If you want the lot that backs, that's on the cul de sac and backs up to the preserve, there's only a couple of those, and we're going to charge more money for them. Not necessarily a novel concept, but we use a lot of data to help optimize the pricing on that. We sell the consumers the base floor plan, and then we give them a lot of opportunity to personalize it and customize it the way that they want. So if you want a loft, or you want a third car garage, or you want a second home office, or you want a bigger shower and you don't want a bathtub, those are all things that we allow the consumer to do. And then we're one of the few national production builders that are still using a design center. You can come into the design center and you can pick out the things that you really want. So all of those factors combined contribute to the profitability of the company.

B (23:28)

And you're building about half your homes on spec and the other half on design to build today.

C (23:36)

We are ideally, I'd like to see our specs probably closer to about 40%. We notched it up to close to 50%. We're probably at 47% spec today. And we did that just because we wanted more inventory that was quicker delivery, which allowed us to go into the financial markets and buy forward mortgage commitments, which effectively allows us to offer the consumer interest rates as low as 4.99% in some cases, maybe even 3.99% in certain markets today. And that incentive and that inducement to buy has been probably our single best and most effective tool to address the affordability challenges that exist in housing today.

B (24:23)

Yeah, that's been one of the big things that's been a big competitive advantage for you is that as your competitors have had to do those rate buy downs, it's been eating to their margins that in many instances, not like they don't have margins, but they don't have the margin that you have to be able to do it. And that's been extremely helpful to you. Talk for a moment on those margins just before as we transition into the active adult product. As I looked at it, you got about if you look at the three products of your entry level, your move up and your active adult, you've got about 200 basis point margin difference between the entry level product to the move up product to the, to the active adult product. So you're making more at the high end of it, even though that's a smaller percentage of your overall production. The going back to your point Marshall, as it Ryan, as it relates to the active adult product, they want not spec, they want to design it themselves, do they not? And so how is that getting into you wanting to lower the amount of, of of spec that you're doing when you want to grow that active adults and they actually want to be picking what they want to live in?

C (25:29)

Yeah, that active adult consumer, in a lot of cases this is the last home that they're ever going to build. Probably won't be the last place that they ever live, but it'll be definitely be the last home they build. And they, they want to pick the things that they want. It's really important to them. And so we think we have a formula and a model that allows that consumer to get exactly what they want. Our spec percentage in the Del Webb communities is much lower. We're probably sub 20, 25, 20 to 25% SPAC in our Del Web communities. It goes a little higher in our, our move up and family buyer brands. And then when we get into our entry level brands which is predominantly under the Suntex brand, you know, that's as much as 75 or 80% spec. So the 40, you know, the 45 or 6% that we are overall is really a blend between the different consumer.

B (26:19)

Groups that we serve and the Del Webb brand. 20 years ago was these large communities. Traditionally in the Sun Belt, you've moved out of that into smaller communities and gone into places like Michigan and Indianapolis and Boston and other markets. How have you been able to sell that product into those, if you will, demographics based on the old Del Webb model, which was Sunbelt large communities.

C (26:43)

So the old Del Webb model, we bought Del Webb and Pulte bought del Webb in 2001. And the old Del Webb model was sun City. So 6,500 home Hilton Head, Sun City grand in Phoenix, Las Vegas in the, you know, the Palm Desert area. You, you've probably been into some of those communities, and they're beautiful and we still have some of them. The, the difficulty in those big cruise ship del Web's is that they, they take a lot of upfront capital investment to get them off the ground, and then they're a real drag on return for the first number of years. And then when you get to the tail end of the community and you're, you know, you're monetizing the remaining few lots, the return's great. And so we just found that it was, you were just in the communities much too long when they were that big. Oftentimes it also re. It also required us to remodel amenities and have your third and your fourth model park. And so we, we came to the conclusion about 15 years ago that the ideal size of Del Webb community for us is somewhere between 750 and about a thousand homes. And that size of community is big enough to be big and have scale and you can, you can deliver all the lifestyle and the amenitization that that buyer wants. It's big enough to feel like, boy, there is something going on here, but it's also small enough that we can get in and get out of the community somewhere between five and seven years, which we find is kind of a nice sweet spot. So that's predominantly the way that we're developing communities today. We used to also build. We were a prolific golf course builder. We've decided that's a business that we don't love all that much. Our residents do love golf. And so when we're doing our site selection process, we always think about, are there golf courses nearby that we can have partnerships and relationships with without being the golf course operator? And then to your question about going into non Sunbelt markets. And we still do a lot of our business in those Sunbelt markets, But we, through the consumer segmentation work that we do, we found that there are a lot of active adult consumers that don't want to leave the place where they're currently living. A lot of people that live in Minneapolis and Detroit and Cleveland and Indianapolis, they don't want to leave those markets. They're working longer than they ever have. So it wasn't, it wasn't. We saw that that consumer was no longer hitting the age of 55 or 60, cashing everything out and then traveling south. They were, you know, maybe slowing down, and they were working well into their 60s, maybe even into their 70s. They still wanted to maintain the relationships that they'd built in church and their various clubs, Whether it was civically or professionally, maybe they had kids in town, but they, they didn't want their big family home anymore. And so by giving them the opportunity to say I can still stay connected to the city where I've been for a long time, but I can sell my big home, I can take a lot of the equity out of that and go into a Delaware community, I can buy a home that is more right sized who I am today. And I get this immediate community of built in residents that have, that are like me at my life stage and still want to be very engaged in doing things that are active and healthy and kind of promoting longevity and lifestyle. So we just, we just opened our newest Del Webb community in Cleveland, Ohio. Not exactly the hotbed of retirement. It's one of our best selling active adult Del Webb communities year to date is in Cleveland, Ohio.

B (30:36)

Who had like one community that 150 homes and you sold them all in 100 days. Well, I was the one in Michigan.

C (30:40)

I thought that was in Michigan. Yeah, that was about three years ago. But we just opened one in Cleveland in February. We've probably sold 110 homes in Cleveland, Ohio since, since February, which is pretty tremendous.

B (30:53)

And does, does longevity at the, at the older generation have something to do with this in the sense that as Joe Coughlin from MIT who's in here would tell you, you want to talk about where people are going to retire, look where the eldest daughter is to take care of mom and dad and that's where she's going to move into those older years. Do you think some of that of people wanting to stay in Cleveland, Ohio is because mom or dad is still alive in Cleveland, Ohio and they're actually sort of moving into a 55 active adult with still the need to take care of the parent. They can't just take off for the sun and the, the beach, if you will.

C (31:24)

I think there's some of that Willie. I think it's also the, the opposite as well. Maybe not so much in Cleveland, but in places like Raleigh, North Carolina, Charlotte, Nashville, 10, where there's been explosive job growth, we're finding that the parents are chasing the kids. So they're chasing their kids not because they really don't care about their kids. Surprisingly enough, what they care about are their grandkids.

B (31:47)

Of course, you and I are just about to need that when the parents don't want to talk to us anymore. They just want to see our kids. Kids.

C (31:55)

You know, you're coming about the eldest daughter though. I think that's exactly right. And I happen to be married to an eldest daughter. She's got an older brother and when her parents parents retired, they left southern Indiana, they came to Atlanta and they live, you know, within a couple of miles of my wife and I, because my wife is there and she's the eldest daughter and she's clearly much more dependable than her older and her younger brother who don't seem to be as actively engaged in taking care of mom and dad.

B (32:26)

You also have a non age restricted brand which is the, the, the, what do you call it? The Explorer brand.

C (32:31)

Del Webb Explorer.

B (32:32)

Del Webb Explorer. Talk about that for a moment because I find that to be interesting. And by the way, all this stuff bums me out because I was, I not only now fit into your age restricted at 55 plus, but I'm clearly well beyond the 45 plus and I, I feel like those were products that were never built for me. And now I'm sort of looking at what you're building. I'm like, maybe I'm moving in somewhere.

C (32:49)

Yeah. So you know, the Del Webb brand, it's 25 of our business. It's a, it's a really big, meaningful, important part of who we are. I think it's, I'm biased, but I think it's the most recognized, most valuable brand in home building. It's our highest gross margin and our most profitable brand. So it's super important. That said, Willie, between myself and my management team, when we were looking at kind of the future of the company, the future of the brand, we really felt the need to say this is a brand that's got to innovate as good as it's been to us. We can't just sit on our hands, rest on our laurels and assume that it's going to continue to be what it always has been. Because the consumer's changing. And so we're certainly serving today's retirees very well. We've got great market share, the communities do incredibly well. But we're starting to think about the 40, 45, 50 year old potential retiree or soft or that buyer that's easing into retirement. And it's mostly the Gen Xers. I happen to be square, personally, squarely in the Gen X cohort. So I've got a few opinions about how Gen Xers think and we've said we've got an opportunity to take all of the, the value that's created in a Del Webb community with lifestyle and community longevity and wellness, but not have it be age restricted. Somebody that's for the most Part if you're in Gen X, you don't qualify to live in a delegate community because you're not 55. And we also find that the Gen Xers, they, they bristle a little bit at the idea of going into a community where there's restrictions. You know, we were the latchkey kids growing up, we had no restrictions.

B (34:41)

Right.

C (34:42)

You know, our only rule was come home when it's dark. And I think we still want to live a little bit like that without rules or restrictions. And so with Del Webb Explorer, we think we've got an opportunity to give that buyer everything they want. It's all the community that they're looking for. It's the wellness, it's the restaurant, but it's not age restricted. And, and another really important kind of factor with that it's not age restricted is they don't think they're old. I'm, you know, my, biologically I'm 50, I don't feel 50 and I certain and I still, and you know, mentally I think I'm 25. So if you said you're going to go live in a community where there are 50, 55 year olds, you know, probably not exactly what I'm looking for right now.

B (35:26)

My, my whoop that I wear, I'm 58 and it tells me I'm 51.

C (35:30)

Yeah, same thing. I've got one as well. I checked it the other day, it said I was nine and a half years. So you know, talk for a moment.

B (35:40)

You said that you're not building golf courses anymore, but that, that is a very important amenity for your 55. Plus as you think about the Explorer community, what are the amenities that are attracting that demographic?

C (35:51)

So it's a little bit different. You know, there, there, there's still a lot of physical fitness, but it's different physical fitness. So in our Del Webb Explorer communities and we just have our, our first two or three that are coming online now. But the, the, the physical fitness packages are different. There's more and we don't, I'm just going to use this as an analogy because it'll, it'll kind of make the point. But, but it's more crossfit, it's less aerobics, the, you know, it's less potluck, potluck dinners, more individualized private dining kind of bar type options. So the, the, the semi retiree, the Gen Xer, they want different things than what the full blown retiree wants. We feel like we've tapped into some things with the Del Webb Explorer that are probably a little more on trend. Things like saunas and cold plun, some of the wellness and the kind of recovery type aspects that are, that are out there for that, that particular cohort.

B (36:55)

So you've moved sort of down, if you will, down market only in age from the 55 plus to now getting to a younger cohort. Any thoughts about moving the other way and going to the older cohort of either assisted or more acute care?

C (37:11)

We, we haven't Willie. It's, it's not really our core competency and our expertise and, and we've also found that our buyer, even our buyers that are moving into the age 55, they don't want to think about long term care. They're just not there yet. They will be at one point in time. We're all going to be there at one point in time and when we are, you're going to really need it. We're going to need those of you that are operators in this audience to continue to develop great properties where, where we can go. But we actually have tried at least initially up front to separate the two and make our brand be all about wellness, longevity, being active and not about kind of the maybe less attractive sides of aging. We do find that it doesn't work in every location, but if we have a big enough piece of land we'll actually hold out parcels that we can eventually sell off later in into the community that we can sell it to an assisted living or to a continuing care operator. But we don't like to do that until the community is bigger, more established and kind of near the end. And then we find that the residents actually love the idea because they can stay in the same general area where the Del Webb is and they can go kind of around the corner into kind of the next phase of housing for their particular age.

B (38:37)

Given that sort of that next phase isn't necessarily clear and present. When someone is looking at a home in one of your do web communities, how important is it access to healthcare as it relates to where you're siting those communities?

C (38:49)

It is one of the number one screens that we look at when we're doing our site selection process. And that same internal research team that we have that really studies the consumer, they also do site validation work for us. We also use John Burns, that's been a long time partner of ours. You know, John's team helps us do site selection in certain locations and, and access to healthcare and to hospitals is the number one criteria.

B (39:16)

So shifting a little bit to the macro environment that we find ourselves in today. Last time you and I spoke, you said that you thought that the impact of tariffs on each home you're building and the average price point year to date is about 535, 570. 570 was about $5,000. Has that. I mean, first of all, it's sort of a moving ball or a moving target. But so far, does it seem like the tariff impact on a, on a per home basis has been about 1%?

C (39:46)

Well, so, so just to kind of reiterate how much of a moving ball it's been, our updated guidance is, we think we're going to have almost zero impact in 2025 from tariffs. So now when you and I last talked, we thought it was going to be about $5,000. We think with kind of where we're at today, we'll get to the end of 2025 with no impact. And then as we go into 2026, we think it'll be somewhere around $3,000 today. So a little less than 1%. There are still a lot of trade agreements that haven't been negotiated. So not everything's done moving around.

B (40:21)

And that's specific to tariffs, not to inflation.

C (40:25)

Specific tariffs. It's specific to tariffs.

B (40:27)

Okay.

C (40:28)

Right.

B (40:28)

And then so on the inflationary side, as it relates to your input and materials there, how's that, what's that view look like?

C (40:34)

We've been fortunate that we've been flat. So our base house costs have been flat for 18 months. There's been some things that have gone up, some things that have gone down, but we've been able to maintain our overall cost. We haven't given any updated guidance for 2026.

B (40:52)

So I'm not trying to be an analyst here. I'm just curious and you do a really nice. I know I'm not, I'm not trying.

C (40:57)

To focus on these issues, but we, you know, we'll, we'll. Well, we've got a view. We're just not ready to share it yet on kind of what we'd expect for inflation to be in 2026. We'll share the next couple of months.

B (41:08)

And there's clearly about three weeks ago, I was watching three clips. One was Tucker Carlson, the other was Laura Ingram, the other was Elizabeth Warren. And all three of them across the political spectrum. And I think I'm probably being nice to Laura Ingram to put her in the middle of those two, all said the crisis in America is housing. If we can't get back to the American dream and allow people to afford to buy a single family detached home. We are missing the American dream and we've got to put time, resources, energy to it. So clearly, when, at least from my view, when you have those three people sitting there and espousing that we need more access to cheaper housing, the federal government's going to step in and do something about this. We haven't seen the Trump administration really move in with any ideas on how to stimulate growth in housing and get more supply. Pulte in 2005 built 45,000 homes. You built 31,000 homes last year. What would it take to get pool to, to go from 31,000 homes up to 45,000 homes on an annual basis?

C (42:13)

So let me start with, with where you started, Willie. There's this housing is probably the only thing that those three people agree on. Yeah, those three would agree on. There's, they're on opposite sides of everything. And I agree with all three of them, which is also probably tough, you know, tough to find an issue where you could agree with all three of them at the same time. The positive side of housing in the United States right now is that more than ever, politicians on both sides are talking about the need to protect the American dream and to make housing more affordable. We have to, I think we've absolutely got an existential crisis that if we don't lean in and solve, it's just going to continue to get worse. It just feels like it's slipping. And you mentioned it earlier, average age of first time home buyer used to be 26, 27 years old. It's 38 today. It's just not, it's not right. And, and I don't, I don't think it's what we should expect more from ourselves as, as Americans. So this, the second thing in terms of your question. What would it take for us to build more? We have the land. We, we have 250,000 lots that we control. So we've intentionally built an eight year Runway of land in front of us that we can build into. And I'd like our company to grow somewhere between 5 and 10% a year. So what we need in order to build 45,000 homes is better affordability. You know, I think we have the trade base not as if there's, there's not a huge surplus of labor and trades out there. But, but the trade base is pretty stable. We have the land, we have the, we have the capability to build those homes. It's just simply the affordability is so stretched that we're not there today. We've got to figure out a way to bring down a lot of the regulatory barriers and impediments that are, that is driving affordability. That is, that is really driving prices higher and putting, you know, a real hurt on affordability.

B (44:20)

Are those 250,000 lots entitled or are you waiting for entitlement on? Because that's clearly been one of the areas that everyone said, I've got the land, I can't get it entitled. It's taking too long, it's requiring too much.

C (44:30)

They're in various stages of entitlement. But you know, we have the next. Call it, we have the next two years of land that's fully entitled, ready to go. Right. And then, you know, part of the reason that we control 250,000 is so that over the next number of years we can work through the entitlements. But to your point, it's taking longer. Municipalities are asking for larger lot sizes as an example. A lot of municipalities, even here in Texas, it's a, it's a minimum of a quarter acre lot and then, you know, things like four sides brick and minimum square footages. And it's all things that are nice, but at all, but, but all of those things that are nice drive the cost up. And you know, if, if you went back inside of our company 10 years ago, our average price point would have been below $400,000. Today for our average price point to be almost $600,000. The level of income that you have to have to afford a $600,000 home is why your first time home buyer isn't 26 anymore. They're now 38.

B (45:32)

Right.

C (45:32)

Because their income has got to be, you know, well into this household. Income has got to be well into the six figures to afford a $600,000 home.

B (45:40)

Yeah.

C (45:40)

So we, we simply need different regulation and different kind of thinking around how we're master planning and, and area planning cities and municipalities. And we need more supply. And if, if we simply had more supply of available homes that could be built, you'd bring down the cost of land. And that's where you could make a real dent in affordability. You know, labor's labor, building materials are building materials. You know, can you save a little bit of money there? Sure. But it's in, it's in the, the underlying residual value of land, which is about 25 to 30% of the overall price of a home. If you could simply bring more supply on the, the residual value of that underlying land would be different than what it is today. And that's how you could change affordability.

B (46:34)

Labor is labor. Have the immigration laws and the enforcement of the border impacted the access to labor?

C (46:42)

We found it to be fairly stable, our company for as long as I can remember, as long as I've worked here, we require everybody that's on our job site to be. To have the right to work in the United States legally. And so, you know, I think we've been compliant with the laws of the land yesterday, today, and, and we, you know, we're committed to be compliant tomorrow. We've certainly seen immigration enforcement in some of our job sites. It seems to be very targeted toward individuals as opposed to large scale kind of mass deportation events. In the places where it's been, you know, maybe a bigger hot button. It's. It, it tends to kind of rattle even the, the citizen, the citizens and the legal, the legal labor that's working in the job sites. It will definitely rattle them for a few days, but for the most part we found it to be, you know, a stable, stable labor environment.

B (47:45)

Five, ten years ago, the differentiator between a pulte home and somebody else might have been a new countertop or the way you designed the unit. Today, it's really access to credit and what that mortgage rate. And you said, you know, you can now by buying down rates, get someone who's inside of a 5% mortgage. The future of Fannie and Freddie. A big topic going on right now. There was a letter that was sent to Director Pulte at FHFA last week that was talking about not increasing the cost of borrowing for the average American consumer. What's your thought on the privatization of Fannie and Freddie and does that increase liquidity in the single family space that then could drive down the cost of housing?

C (48:25)

Yeah, it's a tricky. I'm going to play Switzerland on this one, Willie. I think, you know, privatization of Fannie and Freddie, it's really complex. You know, what's made the American dream possible in the United States is the access to credit and effectively the government's involvement in supporting the dream of homeownership. We're the only country in the world that has that type of housing finance system. So, you know, I think there's an argument to be made that if you privatize it, maybe the private market would be a little more efficient than what the government is. And then, you know, the, the argument for not privatizing it, and there are many arguments, but I think the main one is, is that the risk associated with the loans that are made into housing would be priced differently, which might be higher than what it's priced day. So it actually might potentially drive the cost of borrowing up as opposed to down. You know, and then you get into all the arguments about, well, shouldn't you privatize it? Because should the government really be the one holding the, holding the bag in the event of a housing downTurn like in 2007, 2008, and shouldn't you just send that out to the private market and let the private market price that risk appropriately? I. There's definitely an argument to be made there. The counter argument to that is that, well, you can get into the. Even if you privatize it, it's too big to fail. And so if it did fail, does the government still have to step in in some way, shape or form? So, you know, the government's guarantee, whether it's explicit or implicit, of the, you know, the underlying securities that go into housing finance, I think it's a really important part of housing. It's, it's a, it's a very complicated process to think about privatizing it. My guess is there's probably a middle ground somewhere where the government still has some involvement that maybe we can get some of the efficiencies of it potentially being in the private market. So I know a lot of smart people working on it. I don't think it'll happen overnight. I think it's going to take a long time.

B (50:41)

You think it happens in this administration?

C (50:44)

Oof. I'm gonna pass on that one. I, I don't know. I know there's, I know there's desire, but it's, it's a, it's a, it's a complicated, it's a really complicated problem that needs to be handled with extreme care and speed on this one. Might not be our front.

B (51:06)

Yeah, yeah. And, and just as your thought, as it relates to how fundamental that is and the role that Fannie and Freddie play in the housing market and given the difficulty of having any clarity on A, when it would happen, or B, what it looks like when it happens, as you can imagine, is Fanny's largest partner in multifamily and Freddie's second largest partner in multifamily. We have a lot of exposure at it. Walker Nopen. I guess asked on this point all the time, and I'm going to treasury next week for a round table to talk about this specific issue. And one of the things I keep saying to everyone is, you tell me what they look like, you tell me that implicit or explicit guarantee and I'll tell you whether the value that they're assigning to Fanny and Freddy is a realistic value and how long the federal government sticks around and whether we get a return as taxpayers that we all expect to have gotten or not. And so there's so many variables out there. But, but I guess my question is, as you look out to Pulte in, you know, 2026 and 2030 and 2035, the future of the mortgage finance industry and the role that Fannie and Freddie play is a very significant component part to all that, is it not?

C (52:15)

I think it's really important to us. And we have our own mortgage company. About 80% of the homes that we build we finance through our own mortgage company and we sell directly to Fannie and Freddie.

B (52:25)

Right.

C (52:26)

So, yes, they are really important to the success of our company. And you know, the good news, Willie, if, if there is kind of good news in all this is I really believe in this country and I believe that as Americans, we're going to find a way to keep the American dream of homeownership alive. So whether it's Fannie Freddie, you know, in the form that it is today with the government or Fannie Freddie privatized or in some kind of semi privatized manner, I think we'll find the right outcome. I'm very optimistic and hopeful that we'll do that, but I can't tell you exactly what it looks like.

B (53:09)

So at the top, I talked about your desire to be a cowboy and then getting into the oil business right out of graduate school. I also mentioned that you have a garden that you take care of as you think about Pulte 5 and 10 years out. What are the, what are you putting in the garden at Pulte right now that's going to show up in five or 10 years? That are things that you're planning right now as it relates to the future of Pulte.

C (53:32)

Great people investing in our culture, making sure that we're doing everything that we can to be an employer of choice. We want the best and the brightest talent working for us and more importantly, taking care of our customers. So great talent. The second priority for us is really taking care of our customers. So high quality homes and great experience, buying a home, getting a mortgage, it's exciting, but it's also very stressful. So whatever we can do to invest in kind of the process of making it easy and exciting and keep the stress out of it, super important. We spend a lot of time on land strategy, making sure that we're buying in the places where people want to live at the right price, putting the right product there. And then lastly, is the quality of the homes that we build. Not lastly, it's like, super important. Super important. And. And we've been maniacal inside of the company in ensuring that the quality of the homes that we're building are enduring. We're not perfect, but. And things do go wrong. When they go wrong, we always talk about we're going to be responsive, we're going to be accountable, and we're going to be empathetic to whatever the issue is. If we've made a mistake and something's gone wrong, we're going to stand up and make it right, and we're going to make it easy for you as the consumer to get warranty in your home. You know, I think that's a commitment that we make when we enter into this grand bargain with a homeowner about. About buying a home for 500, you know, $75,000 on average from us. So those are, you know, those are a few of the things that we're thinking about. I think we have such a structural deficit of housing in this country that if we do those things well, I think we've got a, you know, tremendous opportunity to not only help build the American dream, but to also, you know, add a lot of value for the shareholders and the stakeholders that are invested in our company.

B (55:31)

Final question. Where are you and I going skiing this winter?

C (55:35)

We need to figure that out, Willie. I didn't get very many days last year, but as I think you know, my home state is Utah, so if I had my pick, it'll be somewhere in Utah.

B (55:46)

Oh, you mentioned Sinclair.

C (55:48)

Snow on Earth. Greatest snow on Earth. By the way, you.

B (55:50)

You mentioned. You mentioned Sinclair Oil earlier, and the owners of Sun Valley are the founders of Sinclair Oil. So maybe we need to go to Sun Valley this year. I want to thank everyone. First, I want to thank the Nick conference for having Ryan and me here today. Second, thank you to everyone in this large conference hall for listening to the two of us for the last hour. I hope you found Ryan's responses as insightful as I did. And third, thank you to people watching on the Walker webcast for tuning in this week. Thank you very much, everyone.

C (56:23)

Sam.