For 2015, Lennar Will Wait-and-See about Houston

Lennar has noted a slight pullback in the higher-end housing market, and the company expects “further reconciliation” within the housing market. The dip is no doubt attributable to the recent drop in oil prices, as much of the city’s job growth was related to the energy sector. In last week’s fourth-quarter earnings call, Lennar Corp. CEO Stuart Miller is hopeful that Houston’s diversity will offset the petroleum decline, but also said the company would adopt a “wait-and-see” approach to the Houston homebuilding market. The following excerpts from the earnings call were provided to the Houston Chronicle from Seeking Alpha.

In response to queries about Lennar’s position in Houston, Miller acknowledges that there are more questions than answers at the moment. “Houston, of course, is at least in part, as an economy dependent on the oil complex and the oil complex is going through a reconciliation,” says Miller, “we haven’t seen a significant change in that market condition. We are seeing a little bit at the higher end of a pullback but we have anticipated in our internal projections that there will be further reconciliation in that marketplace.”

When asked about the potential for a housing market slowdown for the entire state of Texas, Miller cites that existing cross-currents are affecting the economic picture for the state which should negate the impact of the oil slump. “I think that the downside, even in a market like Houston, the downside is kind of defined by a change in the employment structure of the market where you start to see the oil complex really shed some jobs and that affects confidence and home sales,” says Miller, “but I think that there are some countercurrent kind of considerations.”

Miller does go on to add that, “while the oil complex moves down, gas prices come down and Houston is a more diversified platform than it has been in prior oil downturns. So we are not looking, we are not expecting a very sizable downturn, but I think that the way that we have configured our company and we have focused on purchasing assets.” The real estate assets Lennar has acquired have demonstrated that, “even in a downturn scenario, are the locations that hold up the best, that continue to perform the best in the market and we think that any downturn ends up being fairly shallow and we move forward.”



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