Steve Francis, Division President, PulteGroup
In an interview with Invest:, Steve Francis, division president of PulteGroup, discussed the company’s milestones in expanding its footprint across the Charlotte market, addressing construction challenges, meeting consumer expectations with smart home designs, sustainability efforts, philanthropy and future priorities amid affordability concerns in the housing market.
What have been the most significant milestones and achievements for PulteGroup in the Charlotte region over the past 12 to 18 months?
For us, it’s all about community count and growing our footprint across the Charlotte market. We’re opening several new communities, including our latest Del Webb project in the Town of Belmont. This project, aimed at the 55+ buyers, has been in development for four years and consists of 809 lots. We’re set to begin signing contracts this month. Additionally, we have a handful of other flagship communities, ranging from 300 to 600 lots, that we are currently opening. Expanding our footprint has been a significant focus for us, especially since these projects began planning back in 2019. It’s a long labor of love to finally see the fruits of our labor.
How has the Charlotte market evolved in terms of construction over the last couple of years?
In recent years, the Charlotte construction market has faced significant challenges, particularly in terms of affordability. The cost to develop land has nearly tripled since 2018, making it increasingly difficult to offer homes at prices that were possible five years ago. This escalation in costs is largely unaddressed, yet it fundamentally alters what we can provide to the market. The shift towards more affordable housing options, such as attached townhomes, is a direct response to these rising costs. Additionally, some local municipalities, like the city of Charlotte, have tried to address these issues by revising their ordinances to allow for a wider range of products allowing for greater density in developments, but the challenges of affordability remain.
Institutional investors have played a transformative role in the housing market, especially post-recession. These investors have been purchasing distressed assets and now, more actively, engaging in the build-for-rent market. This influx of institutional capital has tightened the supply of available homes, making it even harder for individual homeowners to find affordable options. The pandemic initially shocked the market, but it quickly rebounded with a surge in buying activity, which was further fueled by institutional investments.
Interest rates have also influenced the market dynamics. After a spike in rates during mid-2022, there was a temporary slowdown in purchasing, but the market rebounded quickly. Currently, we are adjusting to what seems to be a new normal of around 6% – 7% interest rates nationally. This rate, combined with high barriers to entry for new projects in markets like Charlotte, suggests that significant price reductions are unlikely in the near term. These factors contribute to a unique set of challenges that differ from previous market cycles, where supply and demand dynamics played out more predictably.
How does PulteGroup ensure that its smart home designs and innovations meet customer expectations?
At PulteGroup, our primary focus is the consumer. We begin with identifying potential locations for new communities and then consider who the target consumer will be. This process involves extensive consumer testing and validation at our Atlanta headquarters, where we explore various architectural designs and product offerings. This includes testing new floor plans and elevation designs to ensure they align with modern livability standards. Specific consumer demographics and income bands inform our designs to tailor spaces to their needs while providing flexibility for all of our consumers.
Technology is integral to our design process, especially considering the increase in remote work. Our homes are designed to support this lifestyle, ensuring spaces are functional for people working from home, often with young children. We maintain a catalog of desirable floor plans and offer various permutations to cater to individual needs for flexibility within their living spaces. Once these designs are validated, they typically remain relevant and popular for five to 10 years in our product portfolio.
How is sustainability incorporated into your products?
Sustainability and energy efficiency is an area where different builders have varying approaches. At PulteGroup, while we build energy-efficient homes, we have not historically pushed the level of energy efficiency of our homes as a core marketing message. This is in large part due to the high costs associated with significantly enhanced energy-efficient features, which would ultimately be passed on to the consumer. Our approach involves building homes that meet or exceed state and local codes for energy efficiency while offering options for consumers to upgrade their homes with features like high-efficiency appliances, improved insulation, and radiant barrier sheathing. With evolving standards, what qualifies as an Energy Star-rated home today will likely become the norm by 2025. Although this increases costs, it is a step in the right direction for sustainability, albeit challenging to balance with affordability.
How does PulteGroup incorporate giving back into its culture?
PulteGroup deeply values philanthropy, which is a cornerstone of our corporate culture. We’ve consistently been recognized as a top place to work, both locally and nationally, reflecting our commitment to employee welfare and community engagement. Our primary philanthropic initiative is our Built to Honor program, where we provide mortgage-free homes to veterans who have had challenges reacclimating to life after their service period ends. This program, now in its 15th year, offers not only stable housing but also significant emotional and financial relief for veterans and their families. Beyond this, we engage with multiple community projects like partnering with the Boys and Girls Club, participating in food drives with Second Harvest Food Bank, and organizing volunteer activities with Samaritan’s Purse during the holidays. These efforts are crucial to our team-building and community presence, even though coordinating such large-scale volunteer efforts can be challenging due to our size.
What are your thoughts on the state of affordability in the housing market?
Affordability remains a critical issue in the housing market, particularly in thriving areas like Charlotte and other parts of the Carolinas, which are attractive due to our climate, relative affordability, and strong business environment. While the fundamentals of residential real estate are strong, with solid demand and limited supply, the challenge lies in making housing affordable for many potential buyers. The financial calculations required to offer affordable housing are increasingly difficult. A starter home for an individual or a young couple or family looks very different in both make-up and price today versus even 10 years ago. In some instances, this might mean moving further away from work or social networks in order to quality for your desired home or compromising on the type of home a consumer can purchase in a desired corridor. In the end, the trend is leaning towards more attached living arrangements, like townhomes, rather than the traditional single-family homes on large lots. This shift will require innovative approaches to product design but also local municipalities that are agreeable to shifting their paradigm on what affordable housing looks like in their market. The industry is well-positioned for growth, but meeting the broad housing needs of the population will be a significant ongoing challenge.
Looking ahead, what are your near-term priorities in the Charlotte market, and what is your general outlook for that period?
Over the next few years, our primary goal is to expand our community count and increase our annual closings, aiming to reach 1,000+ new home closings per year, up from this year’s projection of 800, which will be our highest since the recession. The Charlotte market presents significant challenges due to its competitive nature, with many of the top national homebuilders actively expanding here. Despite these challenges, our focus remains on growing our footprint and enhancing our market presence. Although the market has contracted since the last cycle, the intensity of competition has not diminished. Our strategic efforts are aimed at not just sustaining but expanding our market share in this competitive environment.
