All right, everyone, we're gonna try to keep it on schedule. Appreciate you joining us for the 9:50 session. I'm thrilled to be able to welcome back PulteGroup to the Raymond James Conference. My name's Buck Horne, the Home Building and Housing Analyst for RayJ. To my left, I've got Jim Ossowski, the CFO of PulteGroup. We've also got Jim Zeumer is the Chief Investor Relations Specialist. Thrilled. I mean Pulte is the third-largest home builder in the U.S., I'm sure many of you are familiar. Also one of the most successful in terms of the profitability metrics, consistent performance, consistent returns of capital to shareholders, best margins in the space or best-in-class margins in the space that have kinda preserved through this housing down cycle. We think are poised for a lot of improvement.
Well, certainly, profitability can improve quite a bit if we get some relief on the mortgage rates and some other things that could go in the demographic direction for housing. I'm gonna turn it over to Jim, we'll do a presentation, and we should have plenty of time for Q&A. With that, Jim, I will turn it to you.
Thanks, Buck. That's a drop-the-mic moment. You took all my thunder. Yes, PulteGroup, we're a premier national builder. You know, our operating margins, best in class in the space, and then what I tell you is even more important, we have a relentless focus on generating high through-cycle returns for our organization. I'm gonna touch on today, some of the different things that we believe differentiate ourselves, as well as our key strategies and priorities that we believe deliver long-term shareholder value. You know, in the past year since I took over this role as the CFO, I get asked from time to time, "What's the secret sauce for PulteGroup to generate long-term shareholder returns?" What I would tell you, it's interesting.
If you look back over time historically, for many years, we thought it was to be the biggest builder with the highest top-line growth. You know, however, back in 2011, we took a really good hard look at our organization and our results, and what we determined was what really drove shareholder value were returns. Coming out of that moment, we created something called our Value Creation initiatives, and it was really about what can we do to improve the returns of our organization, and more importantly, how do we operate our organization day in, day out. What I'm happy to say is 15 years later, those value creation tenets, are still part of our DNA, and I'm gonna get into those in a couple minutes. We call this our value creation formula slide.
There's really three ingredients to it. I'll try and move through some of these quickly and dive into them in future slides. It really starts with our disciplined land underwriting process. You know, when we look at it, we create a proprietary model that looks at returns for every single transaction we're gonna evaluate. It creates a common language from our field operators up to our home office and our corporate team that approves it. Really what I tell you is most important is we look to mitigate risk in our underwriting process. More importantly, we underwrite to returns. We compensate our operators for returns. We really get alignment around that. The second ingredient, I'll talk about design and build process.
Really what I tell you is we have a very targeted segmentation strategy. We talk about it often, both geographically and in the consumer segments that we attack and that we go after. The other one that we'll touch on a little bit later is our build-to-order model. There's always a balance. Are you a build-to-order builder? Are you a spec builder? We think we've got a really good, healthy balance between that as we serve the different consumer groups that we go after. Lastly and most importantly, the third ingredient, generating and allocating cash. I would tell you that this is probably one that we didn't spend as much time 15 years ago talking about.
What we talk about all the time today is we're like, "We need to generate significant operating cash flows to reinvest in the business." After that, we look for things like growing our share dividend as well as looking at share repurchases, which we've done very consistently for the past decade. Looking at our underwriting, I'll boil it down. It's pretty simple. Really what we do is every transaction we look at, we create a risk-return threshold for that. Really, if it's a riskier transaction, it requires a higher return. Really what it does is it drives kind of a consistent message from both our corporate office all the way through the field.
If you're an operator in our markets and you're trying to do a new land deal that you wanna buy, you're kinda balancing the risks and rewards. Again, it's striking that balance of getting the best deal you can to drive the highest returns for the organization. Really the most important thing is the field teams or our operators are the ones buying the property, but it needs to be approved at a corporate level. Again, we get buy-in all the way up and down the food chain. Sticking to the front end of the pipeline, one of the things I always say is land is the lifeblood of our company. It's really where it all begins. When you look at our organization, we've got a very healthy pipeline.
We have about 235,000 lots we control. A little bit under 60% of those are under option. When we talk about how do we approach the land market, we look for optionality with underlying land sellers. It's about 80% of the lots that we have under option are with those. Really what we talk with our teams a lot about is it's not only about generating the highest returns that we can get, but it's a risk mitigation tool. The best thing about having a healthy land pipeline is that if the market's in a good spot, you can very easily lean into it and take advantage. On the other hand, if the market's a little bit softer, you can pull back from the investment. That's something that we had to do in 2025.
Again, I think we've got a very healthy mix in our land pipeline.
Sensitive cost here.
Invest to get the option, if that makes sense.
Oh, it's a great question. Typically you can go ahead and you can get an option. It's between a 5% and a 10% deposit. If you'd rather say, "Would I rather own 500 lots than I'm gonna monetize over the next five to 10 years?" Would you rather walk from a 5% option? I would rather walk from a 5% option if the market's a little soft. Geographic diversification. We're gonna talk a little bit about both geographic diversification and consumer segmentation. From a geographic, you can see we're spread out around the country. We have over 1,000 communities that are open today in 47 different housing markets. What I would tell you, what we like about this diversity is that, each market ebbs and flows over time.
You know, if I rewind the clock a couple years ago, our California and Texas markets were some of the strongest markets that are out there in the U.S. They were a little choppier in 2025. The good thing about it is we have a very healthy Florida business, Midwest business, and Southeast business that kind of picked up the load last year. Again, I think sometimes people have said, "Well, why don't you invest more in Florida? Why don't you invest more in California, for example?" What we like to say is we like to be balanced, because again, you're never gonna be able to predict the ups and downs, and so diversity in our portfolio is very important to us. Buyer segments. There's really three different buyer segments that we pursue.
First one is first-time buyers. We have move-up and active adult that I'll touch on in a minute. You know, that first-time buyer was about 38% of our business in 2025. It's the deepest part or biggest part of the overall market. With, you know, mortgage rates going up, affordability being stretched, it's been a little bit harder in that particular part of the market. What we always talk a lot about is when we go after that segment, we need to be nimble. We need to have financing incentives for those consumers. We need to have inventory units that are ready and available for them to move into. This is a part of the market that if you go back kinda pre-COVID, it was about 30% of our business.
We've actually increased that over time, and really what we do is we like to index that to the markets that we operate in. First-time's a little bit choppier now, but in a couple years it could be the strongest performing segment that's out there. We like to be balanced, and we never like to starve any one of our segments. Our move-up business. About 40% of our volume last year came from our move-up business. This is typically under our Pulte brand, and I would tell you that this has been Pulte's bread and butter for many, many decades. We serve move-up consumers, family buyers who, you know, they worry about things like the location, schools. These are consumers that have more financial wherewithal than that first-time consumer, and so we've taken opportunities in this space.
I would also tell you one of the things that we like to do in this space is we talk about our build-to-order model. You know, this is where a consumer can come in and they've got choice. They wanna pick out a particular lot. They wanna go into their home. They wanna pick their counters, their cabinets, and their flooring, and so we offer them opportunities. Again, this has always been what Pulte's always been about, and we serve it very well. The last segment is active adult. This is a little bit over 20% of our business last year. This is our highest margin part of the business. Almost 50% of the customers who buy in our active adult space are paying cash. They really pay attention to things like the stock market. They know what they want.
It might be the last home that they ever purchase. We've got a phenomenal brand. I'd argue it's the most powerful brand in all of home building under Del Webb. It's been the leader in this space for 65 years, and through our Del Webb brand, we've always gone to market, and it's, you know, age-restricted communities that are 55 plus. Again, this has been a very attractive one. Even through 2025, when you read a lot of the headlines about first-time business or entry-level being a little choppier, our active adult business performed very, very well last year because these people, again, have the financial wherewithal. I'd like to say I'm actually a Del Webb homeowner myself.
Before I leave segmentation, I'd be remiss if I didn't take a second to talk about the evolution of Del Webb. What I mentioned earlier is Del Webb has been geared for age-targeted communities that are 55 plus. What we've done is we've looked at that same concept, we've expanded it now. We've got what we call our Del Webb Explore communities. This is targeting a slightly younger age. Think 45 plus Gen Xers. They still want amenities. They still want lifestyle. What they've said is, "Look, we want an all-ages community." We've introduced a couple of these already. We really see this as an opportunity not to take away from the original Del Webb business that we always do, we view this as supplemental in the coming years. Balance sheet.
One of the things we talk about at Pulte, I talked about it earlier, strong operating cash flows. We have a rock solid balance sheet. We've got low leverage. We've got investment grade ratings. We've got a really strong cash position. I think what we always talk about internally is, look, leverage is an output of the decisions that we make. If we wanna increase leverage, we always could do that if needed. Again, we're in a healthy pipeline. We feel like we have the opportunity to do everything that we need to do in our business today. When we talk about what we spend money on in our business, first and foremost, I said it earlier, we wanna reinvest in our business. We wanna have a healthy land pipeline. We wanna put our money to work.
We wanna put it into high-returning projects that we can put under contract. After that, we talk about things like we wanna grow our dividend, and we wanna have money available for share repurchases. Over the last decade, we've repurchased about 50% of the company or a little bit over 50% of the company. Again, that's something that we've been very consistent and we will continue to do. Buck, I will wrap it up for any questions. If you ask yourself why invest in PulteGroup, I've gone through a lot of them.
I always go back to when I think about the strategic priority for our company, we talk about things like we want to generate strong operating cash flows, we want to have high returns on equity, we want to have a responsible balance sheet, and we want to profitably grow over time. That's part of our DNA. It's what we talk about all the time. It's done well for our shareholders, and we believe it'll continue to do well for our shareholders. Buck?
All right, Jim. Great overview. Great start. We should have plenty of time for questions as well, so if you guys want to queue some up, feel free to chime in. Let me start with the mortgage rate outlook is starting to improve finally. We've got feels like 5 handles and, you know, starting or getting close to 5 handles on mortgage rates. We'll see how that, you know, stimulates some demand. I was wondering if you can talk through a little bit of, you know, what works in terms of the incentive structure that you guys are rolling out.
Mm-hmm.
How do you adjust that if mortgage rates do roll a little bit lower? You know, what kind of differentiates, you know, what you guys are doing versus some of the maybe peers that are, you know, really rolling heavy these mortgage rate buydowns? Just talk us through that strategy.
Yeah. Well, it's a, it's a great question. Mortgage rates are important, I've heard other people say this, and I use it a lot as well. You know, mortgage rates are as much mental as they are math. I think for the normal consumer that's out there today, they may not know what a mortgage rate is. They may not know what their monthly payment would be. If you start to hear things in the news like mortgage rates have started to go down, you hear about it, you go out to dinner with your family and friends, and they say, "Hey, you know, now's a good time to buy because mortgage rates have gone down." Your wife's elbowing you over there saying, "Our house is too small.
I told you I want a new house." I think those are the kind of things that if you have a good, healthy mortgage rate environment that's going down, and you've got a good employment, you've got a good job base, and you feel comfortable in your job, that's all good news. You can almost see that as mortgage rates come down, and it starts to get in the news, you'll see a little bit more foot traffic come into your communities. I would tell you that mortgage rate, or buydowns are important to our organization, but maybe not as much as some of the competitors. If you think about it, I showed some of the slides. Over 60% of our business today are move-up consumers and active adult consumers, and so they have more financial wherewithal.
I said Del Webb consumers, 50% of them pay cash. When we get into, like, mortgage rate buydowns, you know, our buyers, we have to figure out how do we get them across the finish line? How do we solve for their monthly payment? We don't have to get as aggressive. You know, Everybody asks us, "As mortgage rates go down, do you keep buying rates down further?" We really don't. We've been very static. What you end up saying is, "Look, you can stick a little bit of money into your pocket. You can use it for other incentives." A lot of customers really like it when you say, "Look, I'll give you $5,000 to go pick options out at your community." We just kind of move around the incentives in order to hope to get the monthly payment solved for them.
Yeah. Yeah. What is the, kind of the sweet spot for that entry-level buyer that you typically see nationally? What gets them most often over the finish line?
You know, everybody asks.
Gets them over.
Yeah. Every consumer is slightly different. I would tell you that what we've talked about for the past year, and it still holds true today, is if you can get consumers in the 5s, pick a number, if it's five and a quarter, five and a half. If you've got a good employment status, you feel good about it, and you can get into that five and a quarter to five and a half, feels like it kind of fits the right balance. You can get consumers across the finish line or across the threshold.
Yeah. It feels like You know, It's interesting you mentioned how Florida's held up. You know, you're seeing
Mm-hmm
Signs of strength in Florida. You know, we look at Florida and Texas kind of, you know, I kind of think of them as canaries in the coal mine to a certain degree.
Mm-hmm.
B ecause of the COVID inflow of population.
Mm-hmm.
I mean, you know, post-COVID Florida, Texas, we just saw just massive inflows of population, and we saw the builder response to that with aggressive new starts and entry-level you know, we saw a ton of housing starts. Now we're starting to see a little bit of differentiation maybe. It feels like Florida's coming out of it maybe a little bit faster than Texas. I'm just wondering what you're seeing on the ground in terms of what differentiates those two regions of the country.
Yeah, it's a great, it's a, it's a great point, and, you know, if you've looked in the last, you know, last 12 to 18 months, there's always headlines about Texas and Florida. It's interesting because even within, I'll start with Texas, and I'll pivot to Florida, which has been very resilient for us. Even within Texas, you've got different markets. You've got an Austin market. They had a lot of in-migration in tech space there. There have been resetting of prices there. You've had Houston that's more affordable. Dallas, you've had a lot of, like, IT jobs that are there. San Antonio's been different. Even within the states, it's different. I would tell you that what we started to see in the back half of 2025 is you started to see some of those Texas markets get a little bit stronger.
We started to see some green shoots come out in places like Dallas and San Antonio. Florida's an interesting one because everybody talks about Florida, and they talk about the amount of inventory that was out there in Florida, and I would tell you that a lot of that inventory were probably in locations where we weren't building homes. They were a little bit farther out, a little bit more affordable. Our Florida business has been the most resilient of all of our operations in the past year, and we have a really healthy move-up business, and we have our active adult business. If you go back to what I said earlier, those are consumers that today, as the stock market expands, active adults feel much more comfortable with their nest egg, so they might be willing to transact.
A move-up buyer who said, "Look, I bought my house in 2018. It's appreciated 40% over the past so many years. I can sell it. I have more equity in it," they're not as impacted. Our Florida business has been really well, and again, I look at places like Orlando, Fort Myers, and even the Tampa area. They've been very strong for us all year.
Yeah. Yeah. Fantastic. Speaking of land, I'm curious if we're seeing any signs that land sellers are starting to negotiate a little bit more. Are you finding any pockets of price relief or extending terms or deals? Maybe just talk through, like you said, PulteGroup's made a, you know, very intentional decision to stay very close to population centers and premium locations, and kind of paying up for that. You know, how is the kind of the A ring versus the B ring, C ring? How are things playing out in the land market right now?
Yeah, it's a great question. I always say land sellers, they have long-term memories. You know, they know that, you know, you bought a piece of property from Jim a year ago at $200,000 to the acre, and darn it, my property's better than his, so I want two and a quarter. I would tell you in the land space, what we saw in 2025 is you started to see some landowners get more open to it. Typically, what they're usually willing to do is if you approach them and say, "Look, I've tied up your property, I've entitled it, I'm open today," they'll usually give you time.
You know, time is our best friend when we're going through that because the seller at the end of the day says, "If I have to throw you off of the dirt and walk from it, walk from my contract, I have to go find somebody else. That's gonna take a year, then they're gonna entitle it." Usually they'll give you time. Even this year, we saw land prices start to, in 2025, you start to see some opportunity on land prices. What I would tell you is if you have an A-plus cherry on top location, you're not seeing the movement there. As you start to get to the B rings or even the C rings, that's where you start to see land sellers get a little bit more opportunistic and more willing to-
Mm-hmm
T o play the game with you.
Yeah, yeah. You mentioned you still have a target of getting up to about 70% of kind of land optioning so far.
Mm-hmm.
How do you get to I mean, you know, is there enough traditional land or, you know, I don't know, you know, I guess core land sellers, but or do you have to pivot to land banking in a larger fashion? How do you think about land banking fitting into the equation?
It's a great question. you know, if you go back maybe five, six years ago, we used to be about 30% optioned. We got ourselves up to about 50% optioned a couple years ago, and what we said was, we started to feel a resistance point, where every deal that we go into, we want to negotiate an option with an underlying land seller or a landowner in a market. Why? It's the most flexibility, usually smaller deposit requirements to your question earlier. Those are the most ideal. The good thing about it is about 80% of the lots that we have under option today are with underlying land sellers. It gives you great risk mitigation, and it's capital efficient. We have had to supplement it with land bankers.
Those are transactions that we look at, and when we approach them with land bankers to say, "How do we get from 50 up to 70 in the coming years?" Is what we wanna do with land bankers is, first and foremost, you can get some capital efficiency off of it, but we wanna make sure there's risk mitigation, because at the end of the day, if all we're doing is paying for financing charges, we can go out and borrow a lot cheaper than that. If there's true risk mitigation, and even in a land banking transaction, if the market's not in a good spot, I wanna renegotiate with that land banker, and I wanna see if there's opportunities to either get additional time or potentially change the price. That's the way we do it.
We've got about 7% of our overall lots that we control, or about 16,000 lots are under land banking. As we look over the next couple years, we wanna increase that. The one thing I would tell you, though, we don't wanna be myopic about it. If, if, you know, tomorrow I said, "Hey, let's turn into a 70% option book," we could do that. We could find people willing to loan us money and help us. We're not looking for that. We, we wanna look on a deal-by-deal basis, how do we programmatically continue to increase that percentage?
Wanna make sure there's time for any questions. You guys wanna chime in? Anybody have a? Yeah.
Just as a follow-up. I don't get it from the land seller's point of view. Why would they ever want to sell an option? It must be a really last resort. They're getting delayed cash that's huge. All the risks on them because they can't find a seller, they can't find anyone else to buy.
I mean, it's.
They have to keep their eye on the prize overall for that.
It's interesting. You would think everybody would say, "No, I want my cash today. I want it now. I want to cash out of this." What you find is a lot of the times land sellers are very sophisticated, what they say is, "Look, I'll sell it to you under an option, but I want a financing component to it," so it's a little bit higher. Really sophisticated land sellers, a lot of times what they'll say is, "I'm really proud of my land, and what I'd really like to do is we negotiate where maybe you have kind of a participation in profits." When you actually close that home three years from now with a customer, maybe they get a little bit of additional profit. It's always interesting. Some of them are motivated.
Maybe you have six family members that own a piece of property. They can't get along. They wanna close that property now. Sophisticated land sellers might say, "Look, I'd rather sell it to you over time." They can maximize the value of their asset.
I think there was one more. Did anybody have a hand up over here? Oh. Oh, go ahead.
There's been a lot of talk about the potential with deregulation, and what that could do to ease home prices. How optimistic are you that anything material can happen?
There's a lot of talk out there. I guess first and foremost, it's good that people are talking about housing. It's an important one. What I would tell you is that there's been a lot of ideas that have been thrown out there. I don't think there's any short-term fixes or anything like that. I think as you think of, you know, the State of the Union and recent comments, I think there's been some positives that risks have been taken off the table. At one point, there was talk of, you know, getting more supply into the market, new home supply into the market, which that's not a good answer. That creates pricing pressure for new homes. It also creates pricing pressure for existing homes. I think some of those risks have been taken off the table.
I would tell you if longer term in the coming years, there's abilities to impact local municipalities, whether it's density or zoning changes that will allow to build more affordable homes, that would really be the unlock. Again, that's probably a multi-year, before we get there.
Yep. Go ahead. Right here.
Can you give us some insight into costs of raw materials and like, things like you put in homes, like appliances and stuff?
Mm-hmm.
You know, during COVID we had that big run up. Is that starting to come back? I mean, they're coming back at all for you? Where do you see it going?
It is, yes. I mean, you go through that supply chain disruption that we had, you know, things are being delivered out of order. What I would tell you is that as we looked from the middle of 2024 till the end of 2025, our cost per square foot, what we were building, they stayed flat. We were at about $79 a square foot. They held. I think our procurement teams did a great job looking for alternative suppliers and really squeezing it. As we look at 2026, we've said that we expect our house costs to be flat to slightly down. I think, again, our teams are doing a good job. We're seeing some different savings, whether it's in roofing or siding or maybe some of the drywall. We started to see that start to come down.
The other thing that's there is if you think about it from a labor standpoint, you know, as builders slowed their start rates or their production last year, it created a little bit more availability of labor. That can change on a dime if the market accelerates, but we've seen some opportunity there. Not that the trades are being paid less, but probably squeezing some of the profit margins for the owners.
Some people claim that the immigration challenge is making the labor situation change. You haven't seen that?
We have not seen that in any of our local markets today.
Thank you.
Mm-hmm. Thank you.
Yeah, go ahead.
Just a quick one. What's your view on sort of overall market inventory? The official statistics suggest that you're in a pretty good place. You have some independent research suggesting that there may be at least pockets of sort of inventory that's difficult to move. Can you share us?
Sure. Maybe I'll split it into two. Resale inventory, again, this is hard to describe for the whole country, but I think resale inventory in most locations today is in a good spot. You know, it's not one month or two months of supply like we had kind of in the middle post-COVID, but I think most inventory's in a good spot, and I think a lot of that is because you have consumers that are locked into their home. They're sitting on a 3% or 4% mortgage rate, they're like, "Well, I don't want a 7% mortgage rate to move." I think resale's okay. I would say new home supply has really gotten almost to equilibrium where you'd want to be in most markets, not all of them.
What I would tell you is that builders, ourselves and many others said, "Look, they slowed their production rate." We trimmed our spec inventory, for example, by 18% year-over-year. I'd say that we're probably, in my book, we're about 500 units higher than I wanna be. If we can get that last 500 units out, I would tell you we're at a very good, healthy state, and I'd say most builders have done the same thing and kind of followed suit.
I wanna go back to, kind of the materials questions too. I mean, you guys made a decision, on ICR and to get out of the, kind of the offsite manufacturing business.
Mm-hmm.
You guys have put a lot of time and effort into that. Maybe you're seeing some different things or new entrants into that market. Can you walk us through kind of the?
Sure.
what you're seeing or the change in decision on that strategy and what's kind of the future of building technology or, you know?
Mm.
You know, offsite manufacturing, anything else?
Yeah. You know, we're as excited about offsite manufacturing as we were, you know, several years ago when we first pursued ICG and we acquired it. You know what I would tell you though, what we've learned over time is, one, ICG has been a great producer for us. High quality, gotten the material to our home sites on a timely basis, so it's been really good. It's, it's time intensive. You know, there's a lot of capital investment, a lot of time and focus that you have to do. As we've seen other entrants come in, they're making significant investments in it. What we decided is, look, we want to take advantage of technology and innovation in this space going forward, but we'd rather do it as a buyer than an owner of it.
We see opportunity, whether it's with ICG or with other facilities that are out there or other suppliers. We think we can take advantage of that better going forward.
All right. Sounds good. Well, I think we're running on time, so I just wanna keep us on schedule. Thanks again, Jim. Great presentation.
Thank you.
Thanks again, and we have a breakout session downstairs.
Thanks, Boston.