Shaping the Future of Housing with Ryan Marshall, President, and CEO of PulteGroup Inc.
Willy Walker: Good afternoon everyone. It's really a pleasure to have Ryan Marshall join me today. Let me do a quick background on him, and then we will dive into talking about the housing market, which is obviously, Ryan, a hot topic in the presidential election, as well as where we sit today and looking into 2025. I'm really looking forward to the discussion and am super appreciative of you joining me.
Ryan Marshall has been President and Chief Executive Officer of PulteGroup, Inc. since September 2016. Pulte is the nation's third-largest home builder, with operations in 26 states. The company serves all major consumer groups through its family of national brands, which include Pulte Homes, CENTEX, Del Webb, DiVosta Homes, and John Wieland Homes and neighborhoods. Pulte stock was at $20 a share when Ryan became CEO and is sitting at $130 a share today, an impressive 6.5 times return. Pulte's market cap has grown under Ryan's leadership from just over $7 billion to $26.4 billion today.
Those are some impressive numbers, Ryan. Quite honestly, I thought I'd done pretty well at Walker & Dunlop, and then I read the numbers on you and Pulte, and I said, “Man, I got some work to do here.”
Let me jump in here. I have so much that I want to talk to you about as it relates to the company and the way you're running it, housing markets, supply, demand, the age of the average consumer, and all sorts of stuff. But let's back up for a moment, Ryan, to when you came in as CEO. Elliott Management had taken a position in Pulte in the summer of 2016, and with the chairman of the board leaving and the CEO leaving, you were put in to be CEO. And I guess my question is, you've been in Pulte for many years. You weren't an outsider coming in to say, “Hey, there's a new sheriff in town.” How was it to be put in as CEO or, if you will, that chief change officer at a company where you had been a senior executive for 15 years before taking over as CEO?
Ryan Marshall: Yeah, that's a fantastic question, Willy. And what I would tell you is while I wasn't sitting directly at the table when Elliott came and approached us, I was certainly in a lot of the conversations behind the scenes. Our conversations were quite productive with Elliott. They came in; they sought to understand our business model. They certainly had some things that they wanted us to achieve. I think when we articulated the plan that the management team was on, they generally agreed with those things. There was already a bit of a succession plan and a transition plan in place. When I stepped into the role, I didn't know that it was necessarily all that chaotic or that unforeseen. It probably happened a little bit sooner than maybe any of us were expecting. But really, what we did was we continued to focus on the playbook, focus on the things that we said we were going to do. And as a result, I think it worked out incredibly well for Elliott. I had many positive conversations with them, including the day I got the phone call that they said, “Hey, we've sold, and we're out, and you've done a great job.” That was certainly gratifying. In hindsight, maybe they wish they would have hung on for a little bit longer.
Willy Walker: When was that phone call when they said we're out?
Ryan Marshall: That was in October of 2017.
Willy Walker: Oh, wow.
Ryan Marshall: Actually, I took it back in October 2016. It wasn't too much longer after I became CEO they called and said they were out.
Willy Walker: Wow. I've heard you talk about a number of people who played a big life on you from a leadership standpoint. One of the ones that I didn't hear you say was Bill Pulte, who obviously founded the firm in 1956. How much had you worked with Pulte prior to his departure from the company? Obviously, he had a role in working with Elliott to force the changes in leadership, both on the board and on the senior executive team. But how much did Bill Pulte influence you and your career at Pulte Homes?
Ryan Marshall: As you know, Willy, he was a true visionary and started this company building his first home in Detroit, Michigan, at 18 years old. And it's just a true American entrepreneurial story. And he was a real visionary and leader in the industry. I met Bill for the first time in early 2002 in Tucson, Arizona. At that point in time, I had just joined the company. I was down in our Tucson division, and Bill was doing a retirement tour. I met him as he came in. He spoke to our division. I went to our corporate office for the first time in 2003 to take a job on our asset management committee, our land committee, and I I'd see Bill quite a bit in the corporate office when I was there as a member of our asset management team. And then I'd seen from time to time he's a really big personality. He loved the business. He was engaged in everything. I probably got to know Bill the most was when I was the division president of our South Florida division, which we ran out of Naples, Florida.
Willy Walker: And that's where he lived, right?
Ryan Marshall: And Bill had a winter home there. That's where I would tell you that I really got to know Bill as a person. He would come into the office, and he would want blueprints printed out from time to time. You always were excited by the phone call and also dreaded the phone call. Sometimes, when our office manager would come and say, “Hey, Bill's on the phone,” the conversation would typically go something like he'd been in a model. He had seen something that he either really liked or didn't like. And then you'd have a conversation about how you could make it better. Willy, I relish and I cherished every moment that I have had with him. I learned a ton. I was also fortunate to sit down and have a really nice chat with Bill about six months before he passed, we shared a meal together in northern Michigan. He was a tremendous individual, and we certainly miss him at the company.
Willy Walker: I believe he had 14 children. Are there any Pulte’s in the company today?
Ryan Marshall: No, not direct children. We've had some nephews and some grandchildren from time to time that have worked in and out of the company, but not any of whom I'm aware of today.
Willy Walker: Yeah, that's interesting. You talked about meeting Bill for the first time back in the early 2000s. One of the things that I found to be interesting was back in that period of time, Pulte was very focused on growth in the number of units you were developing, building, and delivering. And then, obviously the commensurate growth in EPS that you had. But in your last earnings call, Ryan, there's a graph where you backed up to the 2000 - 2005 period and then the 2020 to 2025 period. And what I found to be so incredible about it is that you were growing deliveries that got up to, I believe, 48,000 deliveries in 2005, which if you look at where you are right now, you're at about 28,000, 29,000 deliveries on an annual basis. You brought deliveries down tremendously. But at the same time, you've been able to maintain EPS growth. I think your CAGR from ‘20 to ‘25 was somewhere around 38% compound annual growth rate on EPS. And today, you're running at 36 over the last five years. How is it that you've been able to pull back growth so much yet continue to grow earnings?
Ryan Marshall: It really goes back to a complete retooling of strategy that we undertook as a management team that started in 2010 and 2011. We were on the tail end of the great financial crisis. Fortunately, the company had barely survived. We went through some really tough times. And as a management team, we said, “There's got to be a better way to run this business.” We did a deep dive. Out of that, we realized that we had been a top quartile revenue company. We were at the time, we had been the biggest company in terms of unit deliveries and revenue, but we were in the fourth quartile when it came to return on invested capital. The short story is the work and the analysis that we did, said, “Value is created for shareholders in housing by delivering high return on invested capital.” We went on this journey in this path of completely retooling the way that we think about how we buy land, how we manage capital allocation, and the things that are important. Certainly, market share and scale are important. We have that, as the third largest builder, will deliver 31,000 homes this year. We definitely pay attention to our market share because it matters. It allows you to buy more effectively, to get better deals with land sellers, be a more attractive employer, etc. But the number one thing that we believe creates value drives some of the stats that you talked about at the beginning, taking the share price from $20 to almost $130 today. That value's been created because we've delivered high return on invested capital. The way we operate, the way we think about things, the markets we go into, and the way we invest capital it’s always with North star being a return on invested capital.
Willy Walker: Let's double-click on that a little bit. And I don't want to sound too much like an analyst here, but I'm fascinated by all this stuff. I want to understand. You're going to spend about $5 billion this year in acquiring land and building homes. You're a company that uses a ton of capital to go buy that. And then I think it was your Q2 earnings call you talked about the fact that you're seeing low single-digit inflation in your materials cost, and you're seeing low double-digit inflation in land cost, and yet you continue to run the highest gross margins in the industry. Help me understand that because you're talking about return on invested capital. You invest a ton of capital, yet you've got low double-digit inflation on land costs. And at the same time, you're also running these very healthy gross margins. Where's the magic in all that? Because if you just look at it on its face, it's just, “Wow, that's a real trick.”
Ryan Marshall: Yeah. Certainly, as a company, we've prioritized gross margin over growth. They're both important. But we think that we get a bigger bang for our buck out of gross margin. What goes into that is buying communities in the right places, designing communities where the customers that come into those communities see the value, and they say, “This is a place I want to be, and I'm willing to give you my hard-earned dollar to be in your community.” We completely retooled the way that we think about home designs. We absolutely know that we're putting a better-designed home on the market than our competition. And our consumers are seeing value in that. We've completely changed the way that we run our pricing strategy. We have more spec inventory today than we've historically run at, and I'm sure we'll get into that. But historically, we've been a build-to-order builder. The combination of how we buy land, how we develop it, the floor plans that we have, and the way we price. All of that has translated into an offering to the consumer where they see value, and we've been able to command a premium price. That premium price combined with really efficient allocation of capital means you've got your numerator at the top of your income, and the denominator is your capital base. The net result of that is your return on invested capital, that has been incredibly high. And we think that directly correlates. I don't know what the exact R-value is, but it's really high in overlaying that return on invested capital with TSR.
Willy Walker: Talk about the home you're building; I've heard you say that, “Design is at the top. Then build quality.” Then, the final one is that you're very focused on net promoter scores and what your consumers are thinking about. If you messed up on one or two, you're not going to get the third one coming in there. Talk for a moment about that. Only in that. I think it's helpful for people to understand what types of homes you're building. Your average home price last quarter was $548,000. That's interesting; we'll get into this in a second. But interestingly, the number of first-time home buyers has increased dramatically for you. And we know the dynamics that are playing there. Let's stick on design and building quality. How can you be focused on design and building quality without watching margin degradation?
Ryan Marshall: Willy, maybe I'll first start with one of the things that makes us unique, which is the consumers that we serve. We're the most geographically and most consumer-diverse national builder there. We have three distinct brands, starting with our CENTEX community, which is about 40% of our business and that predominantly caters to a first-time entry-level buyer. 35% of our business is first move up and second move up. And that mostly comes under our Pulte Homes brand. 25% of our business is our active adult communities, which are predominantly under the Del Webb brand. There are a lot of really valuable brands, obviously in the home building space. I think few rival the brand value and the brand equity that we get out of Del Webb. That really stands for something, and we're super proud to have it as part of our family of brands.
As it relates to design, Willy, one of the things that we realized going back to 2010 or 2011 is we needed to actually be a better homebuilder. And when I say, “A more efficient home builder that runs more like a manufacturer, a really efficient manufacturer as opposed to a custom builder.” Certainly, there are plenty of custom builders out there that do really well, but it's hard to do that on a national level. We started thinking about housing at a national level, the way a manufacturer would. One of the most important things for manufacturers is throughput and efficiency. We started studying the number of times we built individual floor plans, and we realized that our throughput was atrocious. Sometimes, we were building; we had 3500 different floor plans that we were managing. You're managing the cost, the engineering, and the specifications. And on average, we were building those homes like four times each. Terribly inefficient. So, we started a project called Our Commonly Managed Plans. The goal was to take those 3,500 floor plans down to about 500 and then build 80% of our deliveries out of those 500 floor plans. There's been a lot of things that I think have contributed to our success. But that single-handedly has probably been one of the biggest unlocks because, number one, we've gotten a ton of value engineering, the behind-the-walls engineering, the amount of material on the truss layout and the truss design, and the HVAC runs. All of those things have been optimized. And we've got really good building costs. The other thing that we did was we really got into the mind of the consumer and said, “Hey, what we think is interesting. Yeah, we're homebuilders, and yes, this is our field of expertise, but what does the consumer want?” We had a board member, Tom Schoewe. Tom was the former CFO of Walmart. And Tom always preached you've got to get inside the head of the consumer. We started this mantra around being consumer-inspired. And we would go and rent out 75,000 square foot warehouses. Inside those warehouses, we'd take a potential floor plan, build it out of two-by-four and paper walls, and put fake furniture in this home. And when you walked into the home, you felt you were walking into a model home. But it only took us a day to build. You'd walk a consumer through it and then we'd sit them down in a focus group and say, “What works? What doesn't work?” And then, we'd use that feedback to quickly refine and iterate the floor plan. The next day, you could walk the same consumers through the updated floor plan. The net result of that is when we actually went and built the house for real, you had an unbelievable floor plan. That methodology and discipline still exists in the company today. And that's one of the big unlocks that I think we have that allows us to put better designs on the ground.
Willy Walker: As you talk about that shift in the simplification or the rationalization of the floor plans and everything that goes into it. It makes me think about technology. And we both know about Katara, which is a pretty high-flying modular builder that crashed and burned quite famously. Anything happening in the homebuilding space as it relates to modular or rented homes or things of that nature that people ought to be thinking about today?
I was talking to Stuart Miller about this issue probably about a year ago, and he said, “Anything going on?” He said, “Look, we're trying to invest everywhere, and we've got a lot of technology that we're trying to put into it, but there's nothing as it relates to a major kind of disruptor to the single-family home industry that we were either invested in or implementing today. That's going to materially change the overall cost of either construction or delivery.” Where are we a year later? Anything, Ryan, that's going to materially change this industry?
Ryan Marshall: There's a lot of activity, Willy, and I know Stuart well, and Stuart and I spent a fair amount of time together working on industry things. As you know, this industry is really collegial and really works together on big industry problems. It's one of the things I love about the housing space. We're fierce competitors, obviously, but I think we work together on the right things.
As it relates to innovation, the industry needs to do more and better. If you look at it over the last 40 years, housing is probably the one industry where we haven't seen significant gains in labor productivity. We're still basically at a factor of one where, if you look at every other major industrial industry, there's been progress in labor efficiency. I think we need to continue to put investment toward it. Speaking for us specifically, we've done a couple of things. First, we've made some pretty big investments in some of the prop tech funds that are directly out-investing and incubating in various technologies. And the idea was, “Hey, we want to have a seat at the table. We first want to have first access to some of the technology. And if we can use it to make our homes better and more efficient, then we will.” And we've got some small wins. We've also made some direct investments into a couple of unique companies. One that we're probably most excited about is an HVAC distribution company called Ria. And instead of distributing heat and air through the great big giant pipes that run through unconditioned space in the attic, you can run it through small tubes that go in between the walls in conditioned space. It is way more energy efficient and takes up a lot less space. We've made some direct investments into companies like that that I think are innovative and will definitely pay dividends. We've got two of our own offsite manufacturing plants where we're building floor cassettes, wall panels, and trusses. We're using a bunch of technology, 3D modeling, robotics saws, robotic nailers, and robotic material handlers. We get a lot of efficiency out of that, and we think we're the tip of the iceberg of what can eventually happen when building components in a factory. Building an entire modular home in a factory can be super-efficient but 90% of what you're transporting down the road is air, and it's really expensive. We think by making some investments in components, you can transport and distribute them much more efficiently.
All that said, Willy, I'd agree with Stuart. There have not been any major breakthroughs yet, and we need to find them.
Willy Walker: As we talk about home affordability, it's been a big issue. Political campaigns just had a lot of talk about both inflationary pressures as well as the cost of housing. I have to say, “There was one thing that I, I don't think the Harris campaign articulated very well as people talked about the lack of home affordability, which is that 65% of Americans actually own their home. 80% of them have a fixed-rate mortgage on it. And that asset has appreciated over 50% in the last four years.” And for most people's largest asset growing over 50% over the last four years is actually really good for them. And they never figured out how to spin that as it relates to the value of that asset going up and, therefore, being able to do other things.
But I want to talk a little bit here about where the market is going right now, given the higher cost of financing. You all have done a fantastic job of continuing to move through your inventory by putting rate buyback in. I think you were on a 5.75 30-year fixed-rate mortgage last time I checked. And obviously, with mortgage rates over 7%, that's a significant discount to someone coming in. And that's also in your gross margin, which means that you're able to keep margins high as you're buying down those rates, which is absolutely fantastic.
However, for the first-time homebuyer versus the move-up home buyer, that mix has changed dramatically over the past couple of years. And I'm curious whether that's due to the cost of housing or whether it's due to that time in one's life when they want to actually go buy. You've gone from 31% of sales going to first-time home buyers in 2020 to 41% year to date. A very significant uptick in first-time homebuyers. As a result of that, your active seniors have stayed basically stagnant, which means that your move-up sales have come down commensurately from 45% in 2020 to 37% today. Talk about what's making that first-time homebuyer be able to transact and how important that is versus the move-up buyer that you typically were focusing on much more previously.
Ryan Marshall: Yeah. Willy, number one, your research team is unbelievable. Thank you for having all the stats handy. It makes this conversation super easy.
What I would tell you is the shift when we went from 31 to 41% that was deliberate. We made a decision about six years ago to say we want to index our business to what we believe the size of the prize is. In most markets, about 40% of the transactions were first-time. And we deliberately set a target to say, “That's what we want our business mix to be.” Lands a very long cycle business. What we started six years ago by buying more land that was specifically purposed and intended for that first-time buyer, you're seeing that come through the revenue line in our mix of business today. It's been very intentional. And every builder makes decisions on what they want their mix of business to be. One of the things that we like about our strategy is that we never have all of our eggs in one basket. And most housing cycles, at least healthy housing cycles, have participation from every consumer group. And depending on what's going on in the broader economy in the job market, those different buyer groups will behave in slightly different ways. Sometimes, the first time is the hottest. Sometimes, move-ups are the hottest, and sometimes, they are active adults. We like having a diversified portfolio. Maybe not too much different from somebody that's investing in the stock market that wants a mix of stocks. They want a mix of bonds. Maybe they have some mutual funds, but they've got exposure to the full market. And we think that's what we have.
I'm going to talk about all three consumer groups. What we really like about first-time buyers is that they don't have a home to sell. By definition, it is their first time owning a home. There's still incredibly high desire to own a home, which we think is great for the industry. But they're not sitting on a sub-3% mortgage rate that they don't want to let go of. Candidly, the biggest challenge that we have is that first-time homebuyer is affordability is strained. But we're using that really powerful incentive of mortgage rate buy-downs to help that buyer get into their first-time home, and they're ecstatic. The move-up buyer has actually been our best-performing group over the last couple of quarters. And we think it's because of what you highlighted. They've had tremendous wealth accumulation in the value of their home, and there's been such low inventory on the market. If you've got an existing home, it's well-built and well-maintained and you put it on the market at a reasonable price, it sells quickly. Then they're able to take that equity and go do something else that they want: a bigger home, a different part of town, something nicer, more expensive, or newer. And we're able to help that buyer with mortgage rate buy-downs as well. There's a lot of nice things going on there. And then, finally, the active adult consumer, that’s a buyer group that is, in most cases, building the last home that they'll ever buy. They've got a tremendous amount of wealth, both from being a homeowner but also from doing incredibly well with their investment portfolio. They come to the table and buy the things that they want to buy. If they want the best lot in the neighborhood that's on a cul-de-sac that backs up to a lake and a golf course, they're willing to pay for that. Part of the reason that we have been able to maintain high margins in the entire company is because of the outsized margin contribution that we get from our Del Webb business.
Willy Walker: All super interesting. I've got two slides that I want to share here, Ryan. If I really mess this up, I don't usually do this, but I want to show them because the data is so interesting. Let me see if I can pull these up, and you can see them. This one I just saw today which is the characteristics of home buyers. As you can see on this slide, the average age of a first-time home buyer right now has gone up to 38 years old from what has been a historic average of 31 to 32 years old. We're seeing this significant uptick in when people are actually buying their first home. And then the second one, this won't surprise you at all. But this is the Wells Fargo Home Affordability Index. And as you can see on this one, for anyone who's not listening to this on a webcast rather than watching the slides. This shows that if you go back to 2014, the average median home price in America was affordable to someone making the median income for about 65%-66% of Americans. And this graph just shows that as it's gone along, it stayed pretty consistent until about 2021, and it has just fallen like a rock and it’s now only 40% of people in America are able to afford a home if they make the median household income.
Ryan, as you look at those and you think about it, with the average consumer getting older and the affordability index being down as low as it is. How do you deal with that from a home-building standpoint as it relates to both what you're building and what your expectations are from a volume standpoint?
Ryan Marshall: Two things that I'd highlight, and I think they are correlated. We've seen changes in behavior from adults. I was going to say kids, but they're not kids anymore. But the typical homebuyer that was maybe in their mid-twenties or late 20s is now in their 30s. I think some of that is societal change. People are getting married later. They're waiting longer to get married. They're waiting longer to have kids. And by definition, I think everything shifted four or five, maybe even six years from what it used to be. I bought my first home when I was 24 years old. My oldest son is now 24 years old. I can't even imagine him thinking about buying a home at this point in time.
Willy Walker: Yeah, but hang on a second. You bought your first gas station when you were in college. Comparing what you did as far as buying your first gas station in college versus your son not buying his first home. I don't know that's a fair comparison, Ryan. But anyway, keep going.
Ryan Marshall: I did have a good time with the gas station. There are a lot of stories there.
I think things have shifted there for sure. The other thing contributing to the shift in the age of when people are buying their first home, I think, goes to the second chart, which is things are more expensive. Its affordability is so pinched right now that I actually think people have to wait longer to save more money, get more established, and get further along in their careers so that they feel they've got the financial stability that they can make the commitment of buying a home. The unlock here, and I'm sure we'll get to this: we need more homes in this country. We are so chronically undersupplied with housing. Willy, there were a lot of things about the recent presidential election that were tough to watch. With the vitriol, the back and forth, and the divisiveness between the two campaigns, it was hard as an American to watch it. I'm grateful that we're on the other side of it. We can kind of get back to business. One of the things that I was really encouraged by though, was the fact that both Vice President Harris and President-elect Trump were both talking about the need for more housing. They're going about it or suggesting that we go about solving it in different ways. But it's the first time that I can remember as an adult that there's been that level of conversation about housing supply and housing affordability. And I think that's a net positive for the country.
Willy Walker: When you hear Vice President Harris talk about the need for three million new single-family homes, other than that is pro-growth, which is great, and that's the only way we're going to bring prices down. Talk for a moment about the sizing on that. The single-family housing industry and multifamily are delivering about a million units a year. She was calling for three million; you and I both remember the great financial crisis when we got a little oversupplied as it relates to single-family housing. What's that sweet spot, Ryan, as it relates to if you're delivering 30,000 homes a year what would you need to raise it to? What would the rest of your large cohort have to take it to get to a point where we were delivering enough housing to start to make a meaningful dent in the cost of housing?
Ryan Marshall: The number of homes that are needed in the country is fiercely debated. However, the number that we typically anchor a lot of our long-term planning around is the country needs a million and a half homes a year, that is including for sale and rent. Traditionally, 750,000 were for sale. Half of those were multifamily. We've been underbuilding that million-and-a-half number for the last decade, maybe even going on 15 years. We believe that this dynamic has created the housing deficit that we have today in the country, which I think is at least several million. There are estimates and numbers out there from different economists and different governmental agencies that suggest the deficit of housing ranges from two million all the way up to seven million. I tend to anchor somewhere around three. Ironically or coincidentally, that is the same number that Vice President Harris was talking about as well. The short story is that we need more houses. And if we're only building a million and a half a year and we've got a, let's call it, a three million unit deficit. We've had to build a lot of houses for a lot of years, and we've almost got an oversupply; a million and a half per year is needed in order to catch up. If we could supply a little bit more of both single-family and multifamily, I think that would probably be the single biggest and most powerful tool that we could have to bring down prices and make housing more attainable and more affordable for more buyers. Now, the trick is, as a country, we're not in my backyard population. And everybody loves the idea of growing the economy and growing more jobs until it relates to putting new development next door to you or across the street from where you currently live. And then all of a sudden, we become anti-growth. Until we figure out how to solve that as a country; I think we're going to continually, perpetually have a chronic undersupply of housing.
Willy Walker: It's interesting because those numbers, everything you just ran through all resonate. They're numbers that I've seen and think are very similarly on. If you look at the multifamily industry, we've got about 600,000 units delivered in 2024. There's a massive new supply that has put downward pressure on rents, but you're still going to get 1.5% to 2% national rent growth this year, even with that huge amount of new supply. But then you look at the forward pipeline on multifamily, and it's dropped down to 250,000 units right now that are under construction and are to be delivered in ‘26 or ‘27. And it's really interesting, Ryan, because unless something changes materially, you say, “I'm going to go from building 30,000 homes a year to building 45,000 homes a year,” and all of your cohort companies also do that. We're going to find ourselves back in an undersupplied housing market in 2026, which is going to push rents. It's going to push prices, and we're going to be back with the same inflationary pressures in housing that we have just started to work ourselves through as we've had this big supply of both single-family and multi-family. And it all seems, if you will, quite short-sighted. There are plenty of investors in the multifamily space who are chasing exactly that setup in which home affordability is at an all-time low. Making it hard for people to go out and buy your homes. At the same time, you're oversupplied in multi today, but you're going to be undersupplied in two years. Therefore, it's a good time to buy now and ride through that wave. Do you see anything changing in that dynamic?
Ryan Marshall: I don't, Willy. I think we've all got a lot of land under control and in the pipeline. But there's a limit to how much land can be brought online in any given year, mostly controlled by local municipalities. So as encouraged as I was by the conversation around housing at a federal level, we've got to get that to trickle down to the state. More importantly, the city and municipality level determines the way land zoning and land entitlements work in this country. It's controlled by city councils. That's dependent on schools. It's dependent on the availability of sewer, water, and roads. And that infrastructure is old. It needs more investment. It needs repair. There are a number of constraints that make it tough to bring on a whole bunch more than what we're currently building. Now, we've talked about our company. We've got the ability, based on the land investments that we've made and what we have in our land pipeline, to grow our deliveries by about 5% to 10% a year. We're really optimistic about what our company can continue to do. Several of our national peers are talking about very similar numbers. I think certain players within our industry can deliver more. But I'm not sure that the industry as a whole, including the really small, single-market builders. I'm not sure that as an industry as a whole, we deliver much more than a million and a half in total. And to your point, I 100% agree with you. We have a massive gap in multifamily deliveries coming in 2006 [sic]. That gap or that air bubble started when interest rates went up. The multifamily developers simply couldn't make their deals pencil in and started putting new deals on the ground. That is absolutely going to put a pinch on the consumer. It's going to keep prices high because supply is low. And I think the net result of that is the industry will, in an odd way, benefit from continued higher margins and higher prices. I don't think it's necessarily a great thing for the country. And that's why I think we all need to work together to make sure that we're putting the right influence on local leaders to say, “As we're growing the economy and we're creating jobs, we also have to create new homes to go with it.” I always like to tell my politician friends, “As you create new jobs, you have to create new homes to go with it. By definition, a new job is a new person. And that new person, a new job, needs a place to go sleep at night. And that's a new home.” And if we can think about how to balance all of the growth objectives, I think we'll have a healthier economy.
Willy Walker: You have a market research group, Ryan, that studies markets and figures out where you all are going to both buy land and then build homes. I was interested that three of your new markets are Denver, Salt Lake, and Portland. I live in Denver, and you love the great state of Utah. That makes sense to me because there are great demographics in both Denver as well as Salt Lake. I was surprised by Portland. I went out to Portland a year ago and gave a speech there, and I basically put up some slides related to the lack of development in Portland because of local government and all the things that you and I talked about. They didn't quite throw tomatoes at me on stage, but I don't think they were really happy with my tone, which was that if you all want to get investment to come to Portland, you all need to make some changes locally to make it a more investor-friendly place. Why Portland? None of the multifamily developers are there for all the reasons that I just talked about, and therefore, there's a real opportunity for a single family.
Ryan Marshall: Yeah, we saw it as an opportunity to build 400 to 500 homes a year in Portland, at a minimum, maybe more. And for that reason, it was attractive. We weren't there. It's definitely on the list of top 50 major housing cities in the United States. There are a lot of big companies that are based and headquartered in Portland. And those employees of those big companies need places to live. We also saw it as an opportunity to leverage the skill set and the expertise of our team in the Seattle area, that's not too far of a drive for that team to reach down into Portland. We felt we had some nice economies of scale by leveraging the operations between those two cities. We don't see it as probably the fastest-growing market where we operate. But it was definitely a place that we felt like we needed to be.
Willy Walker: And one of the other things that I find to be interesting about your industry, Ryan, is the massive consolidation into the large public homebuilders, the economies of scale that you're getting, the ability to finance new home buyers. I don't have the stat that Ivy Zelman told me at one point. There's been a huge migration, if you will, from a lot of smaller regional developers into the large national developers. As I think about that, I wonder whether M&A for you is something that is still out there for you. I went back and listened to your earnings call in 2019 to get a sense of the pre-pandemic tone because, obviously, everything has changed dramatically in the housing industry since 2020. And you made an acquisition that quarter. The quarter, I think, was Q4 2019. Was that the last acquisition you've done? On the back of that is whether you are looking at organic growth now or if there is the opportunity to continue to consolidate the industry?
Ryan Marshall: Yeah. Number one, Willy, if Ivy gave you the stat, I believe it and I would take it to the bank and she is a real friend of the industry.
We've got the view and the philosophy that M&A will always be part of things that are on our radar screen. There has been massive consolidation. If you look at the top 50 housing markets in the country, for the most part, the top ten builders in those markets have somewhere between 70% and 80% market share. If you compare that with 15, maybe even ten years ago, the concentration inside the top ten builders in a top housing market was not that high. There has been consolidation, and more of it is concentrated within the top ten builders. As a company, we've done big M&A, Del Webb, CENTEX, John Wieland, those are bigger deals, sometimes megadeals. We've also done things like Dominion Homes, which was headquartered in Columbus, Ohio. They had a few other markets there as well. But predominantly Columbus, that's how we got into Columbus. And then the 2019 acquisition that you mentioned was American West in Las Vegas, and of all the M&A that I've been involved with directly or around, it's the single market or maybe double or dual market or triple market type M&A that I think makes the most sense. It gives us the ability to get into a particular part of town, which we got in the American West acquisition. That builder had a dominant market share in the southwest part of Las Vegas, which we weren't there, but their land holdings and the things that they owned and controlled gave us a phenomenal added element to our business in Las Vegas. I like those types of acquisitions a lot. As you can imagine, given our size, we see a lot of deals, our M&A team and our Treasury team are always talking to the investment bankers, seeing what's out there. But we know that we can grow organically just as effectively and maybe even more effectively. We're choosing exactly the places that we want to be and the deals that we want to do. Where if you do an M&A deal, you inherit a lot of stuff; some of it you'll like, and some of it you won't. I've often joked a little bit with investors that M&A is a little bit like the old Forrest Gump adage of life's like a box of chocolates. Sometimes you're going to like the chocolate, and sometimes you aren't. And you avoid that when you can grow organically. There's a role for it. But given a choice, I'd rather grow organically.
Willy Walker: Tariffs is a topic that's come up a lot both during the campaign and now that Trump is president-elect everyone's bracing for the impact of tariffs. And I think, at least on my side, it's what it could do to financing costs, and where interest rates could go that obviously has a big play on your business. One of the tariffs that the Biden administration kept in place was a pretty hefty tariff on Canadian lumber. How much has that impacted the housing industry? And would you like to see those tariffs go away? Or is having protectionist tariffs between the United States and Canada protecting the U.S. lumber industry, which net-net has worked itself out? What's your take on that? It's one of those specific ones, Ryan, that everyone's talking about. What if tariffs on China go from 20% to 60%? What have you, but that one on Canadian lumber has been a pretty significant tariff and kept the cost of operations as it relates to lumber, which is obviously one of your key raw materials, at a pretty elevated rate over the last four years as the Biden administration kept that in place.
Ryan Marshall: Yeah. If we went back 18 months ago, when the random pricing for lumber was at an all-time high. In fact, highs that I don't think I ever remember seeing in my career. It was painful. Today, lumber prices may not be at all-time lows, but they're pretty manageable. And lumber prices have actually been a tailwind for us over the last 12 to 18 months as it relates to our house costs. The philosophy around tariffs is complicated and tricky, and I'm going to try to stay in my lane and not get out on the skinny branches around tariff philosophy. We do think about the impact on our business, obviously. As it relates to China and China tariffs we're certainly in a global economy. The good news is most of what's in our homes is domestically sourced or domestically produced. There are components of certain things that go into our homes, which certainly come from China and other countries and will be impacted by tariffs. We're paying attention to it, we are watching it. My hope is that as we think about tariffs and the impact on affordability and interest rates, there's not one single industry. We don't over-index to one single industry, and we think about what's best for the American economy and the American people.
Willy Walker: And as you think about leading over the next five years, Ryan, you've done an incredible job growing this company. And what was the number I used previously was almost doing 4X and market cap over your tenure as CEO. What's the exciting thing? I know you plant a garden on an annual basis. If you think you're planting a garden at home and those flowers are going to come up in the spring or the summer, the gardens you plant at Pulte have a little bit longer gestation period. What's the exciting thing you're planting at Pulte now that we might see come up in five years or so?
Ryan Marshall: Willy, I recently planted some beet seeds. I love beets and beet salad. I planted some beets. I failed to water them because I went out of town for a few weeks on some work trips, and I'm not going to have any beets this winter. We're going to make sure that doesn't happen at Pulte. The thing that we really focus on is making sure that our land pipeline is full, stocked, and programmed for the future. The lifeblood of any homebuilder is a good land pipeline. We're in an unbelievable position. We have 230,000 lots that we control, of that about 55% of those lots we hold under option. The thing that I'm most excited about is that we have the opportunity to continue to grow this company in a meaningful way. I'm really excited about that. It'll be great for our shareholders. It'll be great for our employees. One of the things that's been so gratifying to me as an employee of this company and in this industry for almost 24 years is that as the company grew, I had opportunities to grow my own career and do more neat, exciting things. Going into Denver, going into Salt Lake, going into Portland, and a handful of other new cities that we've gone into creating more career opportunities for our employees, which is exciting. It's also really exciting for our investors because we'll continue to grow this company and operate it in a way that's going to deliver a high return on invested capital, which we think will create some real value.
I'm also incredibly excited about the culture of this organization. Pulte is an unbelievable place to work. It always has been, and it's as good as its ever been. For the fourth year in a row, we've been recognized as one of the top 100 best companies to work for by Fortune magazine. And it's because of years and years of investing in our people. I've got an unbelievable management team. We've got an unbelievable group of division presidents, and we've got 7000 employees companywide that bring the best version of themselves to work every day. Not only do they love being here and working with each other on a team, they're incredibly committed to our customers. That feeds back into that philosophy of doing the right thing, which goes back to an original bill Pulte tenant. It's something that we still live and breathe here in the company today. And we take care of our customers, which translates into that philosophy around Net Promoter Score. What am I most excited about? Life, in general. I love what we're doing. I love being alive. I love this industry. The company's growth opportunity is really exciting as well.
Willy Walker: Yeah, I hear what you said, and having studied your company, I know that it's all true. At the same time, I would say that it's because you say things like that, that make your leadership so unique at the company and get the team doing what the team's done. I started this conversation by saying in 2016, “There was an activist shareholder who pushed out the CEO, who pushed out the board chair and brought you in as the agent of change.” And while clearly, the macro environment for the home building industry has been fantastic post-pandemic, those numbers that I talked about, your TSR, Ryan, I looked at it, your TSR on a one, three, and five-year basis, your number one in the industry on one year you're number one on three years and your number three on five year TSR. It takes a lot of work from your team to be able to put up that type of total shareholder return. And a lot of it comes from the way that you're leading the organization. You mentioned a great place to work. At W&D, we've looked at being, and we have been a great place to work in. And as I typically say, “It's the most important metric, but it's very evident that that's what you've instilled into the company.”
Ryan Marshall: Yeah, we have a really robust training program, Willy. We bring all new hires through a training program here at our corporate office in Atlanta. I normally go down as long as I'm in town. I go down, and I spend a few minutes with those new hires. Welcome them to the company, and I talk about our core values. One of the things that I talk about is that we have a team-first mentality. If you're not a nice person and you don't want to work in a collaborative team-first workplace, this is not the place for you. We spend more of our lives at our workplace than we do at home. And you want to do it with people who are committed and dedicated to the same vision and the same strategy, and they enjoy doing that together. And then you have a little success along the way. And it ends up being a perfect mix of you're working hard, you're having success, you're playing hard, and you like the people that you're doing it with. It makes for a more fulfilling life.
Willy Walker: You mentioned your Atlanta headquarters. When I was looking at when Elliott came in and when your predecessor left the firm, one of the things that Bill Pulte was not happy with was that the headquarters was moved from Detroit to Atlanta. Any chance Pulte finds his way back to the what is it? Detroit's not the Iron City. Pittsburgh's the Iron City.
Ryan Marshall: Motor City.
Willy Walker: The Motor City.
Ryan Marshall: Look, Willy, I lived in Detroit for a brief period of time. My middle son was born in Detroit, and I really enjoyed living there. It's a great place. I also enjoy living in Atlanta. We've been here for ten years. And fortunately for me, I wasn't involved in the controversy around making the decision to leave Detroit or stay in Atlanta. We're here now. And as you know, the cost of moving company headquarters is tremendous. And I think that one of the things that our founder was critical of was the amount of money that was spent to relocate. We're in Atlanta. It's a great city for business. The state of Georgia is a very business-friendly, business-first state as well. And we've got a ton of investment in the Southeast Sunbelt part of the country. I think we're here.
Willy Walker: My final question for you, Ryan, and you've been super generous with your time. I know that as a kid because your dad was a vet, you always wanted to grow up and be a cowboy. When do we find you out on the ranch in Utah with a couple thousand acres of land and riding around on your horse?
Ryan Marshall: My wife often reminds me, I sometimes say, “I'd love to have some chickens at home.” And she's like, “You're not home enough, and I'm not feeding your chickens, no chickens.”
Willy Walker: She's also not watering your beets, obviously.
Ryan Marshall: We need to automate that. I should be smart enough to install an automated watering system, but yeah, look, I grew up in a rural part of Utah. My dad was a veterinarian. At one point in time we had about 2500 head of beef cattle. And that lifestyle and some of those things, not only did I learn the value of work ethic and of living off the land from my parents and living in that environment, it's something that I enjoy. I've got a very different life today, doing what I do and doing things in this business. And I'm sure there'll be a time and a place for all of it, but I probably need more time before you'll see me riding around on a horse chasing cattle.
Willy Walker: It's great. I'm sure the shareholders of Pulte are very happy to hear that response. Ryan, it's been a real pleasure. I'm super appreciative of your time. Let's go make some turns together. I'd love to get on that this winter and go ski some. Thanks very much. Thank you to everyone who joined us today.
Ryan Marshall: Thank you, Willy.
