Beazer Homes Integrates Solar, Smart Tech, and Sustainability in New Builds Nationwide

Cheddar News

Beazer Homes CEO Allan Merrill talks company's commitment to building 100% Zero Energy Ready Homes by 2025.

Transcript

00:00As housing demand remains strong amid interest rate uncertainty across the U.S. economy and

00:05increasing climate pressures, one major home builder is leading the industry towards a more

00:10affordable, energy-efficient future. Beezer Homes, a national home builder with a century-long

00:15legacy, is at the forefront of building sustainable, Energy Star-certified homes

00:20designed for modern buyers and a changing climate. The chairman and CEO of Beezer Homes

00:26joins me now, Alan Merrill. Alan, thanks a lot for being here. It's great to have you.

00:30Nice to see you, J.D. Thanks for having me.

00:32Of course. Talk to me about the core mission of Beezer Homes and how you think the mission,

00:38the vision, the values of the company have evolved over the last decade.

00:43Well, we've been building energy efficiency for more than a decade. We're the leader in

00:48the country in doing that, but we've really embraced sustainable and healthy living as

00:53our vision. We want to make that the capability of every home that we deliver and at an attainable

01:02price point. And that has been a series of raising the bars in terms of energy efficiency

01:09and indoor air quality. And I don't see any reason for us to pull back. I mean, we're going

01:15to keep moving forward.

01:18How do you describe the current U.S. housing market, the challenges and the opportunities

01:22in it?

01:24Well, it's certainly constrained by affordability with rates where they are and the cost of

01:30inputs and land and zoning restrictions and everything else. It's very difficult to reduce

01:35the cost of housing. And that's the biggest constraint. I do believe we're underbuilt from

01:42a supply standpoint. We have been for more than a decade. So there's a lot of demand out

01:47there. And frankly, because the employment market is still fairly strong, unemployment

01:50rate is low. There's a lot of interest in housing. It's all about affordability.

01:56And I know it's not just affordability that's a top priority for yours. It's energy efficiency

02:02as well. Talk to me about the ways that Beezer's approach to sustainable home building stands

02:07out from the space.

02:08Well, when you think about affordability, actually, a big cost of ownership is how much does it

02:14cost to operate your home? So by being a leader in energy efficiency, we're able to take hundreds

02:19of dollars off of monthly utility bills. That's a huge enabler for people to attain homeownership.

02:26So, you know, we can't do anything about mortgage rates or the price of lumber. Those are

02:30commodities or prices that we don't influence. But by building a better home, better indoor

02:35air quality, it costs a lot less to operate. We're putting ourself in a position to deliver

02:40a more affordable and attainable homeownership opportunity.

02:44Yeah, Alan, speaking of interest rates, the market right now seems to be pricing in or expecting

02:50two short-term interest rate cuts on the short end of the yield curve between now and the

02:55end of the year. But that's no guarantee necessarily that those long-running mortgage rates

03:00will necessarily immediately fall. What are some of those big macroeconomic pressure

03:05points that you think most need to be relieved to help bring a little bit more sustainability

03:11to the overall home-building space right now or home-ownership space?

03:16Well, I appreciate the question. And I'm not a macroeconomist or an expert. I do think that

03:21the country's fiscal deficit is front and center when we think about where long rates are going

03:26to settle out. And if we can get stronger than expected growth in GDP, that will help.

03:33But I definitely feel like that's a major factor. I think the second factor is what happens with GSE

03:39reform, if anything, because I think there is a spread to treasuries that really informs the

03:45mortgage rate. And I think if we can create clarity, certainty in the GSEs, I think that might help the

03:52mortgage rate spread. How has climate change shifted the demands for resilient housing that's

03:59also energy efficient? Well, certainly we operate in a lot of places that can have high wind or rain or

04:05hail or fire. And so the awareness of consumers of homes that are built in a more durable, resilient

04:13way has skyrocketed. It affects our site selection. It affects the way we develop land. And it certainly

04:20affects the materials that we use. It doesn't come up in every conversation as a first point of

04:26conversation. But most buyers have some familiarity now with advanced resiliency techniques. And we're

04:34proud to be able to offer those. How is Beezer Homes overcoming the supply chain related pressures?

04:41I mean, what a headwind for the builders, especially as we've attempted to still climb out of the

04:45pandemic era related challenges. All right. So the COVID era definitely challenged the entire

04:52industry. And we benefited from having deep, longstanding relationships with national partners.

04:57They worked with us. And it wasn't easy. Our customers suffered because our cycle times

05:02definitely elongated. We've been able to kind of get back to a pre-COVID, almost back to pre-COVID

05:08cycle times, delivering homes in six or seven months. You know, there are some near-term challenges,

05:13but they really pale in comparison to the ones from several years ago. And again, it's all about

05:18having the allies, having the partnerships with our national suppliers. We are very intentional about

05:25what we specify. And I think that's been repaid in the form of good control of supply chain by our

05:32partners. Now, how do you maintain margins for the company while attempting to keep homes affordable?

05:38I mean, costs change. Materials fill in the blank here. The amount of money you have to pay home builders

05:45themselves. Those wages are all in flux. What does those conversations look like and those considerations for

05:51you at Beezer?

05:52Well, we're certainly trying to buy land right because that's a big part of the input cost for us, being very

06:00intentional about what markets, which buyer profiles we best connect with. And when we're in at our best, we're in a

06:08location where our buyers understand the home that we're building. That's where our best margin opportunity is.

06:14There are sub markets and buyer profiles that maybe other builders are better suited to serve, and we're fine with that.

06:21I know that you don't often get into the general macro economic conditions, but I wonder any kind of guidance

06:28that you see for the company for the second half of 2025. And additionally, are there particular markets that you see

06:35as maybe being a bit more advantageous to your growth strategy than others right now?

06:40Well, we're in a quiet period with earnings due next week, so I want to be a little careful about making

06:44forward-looking statements about the back half of the year. And I will say that we're very happy with the

06:50footprint that we have from the West Coast and the East Coast and a nice number of markets in the Midwest.

06:58And honestly, we see demand in all of those markets. They can differ week to week, month to month, but there

07:04isn't, there's no place that we're operating that we're not really confident in.

07:08Yeah. Finally, before I let you go, what most excites you about not only where the marketplace is, but where

07:14you feel Beezer Homes is most uniquely situated in the ecosystem of housing today?

07:20Well, we're building a home, frankly, that others have chosen not to build or can't build. And I think

07:26as we are able to communicate that, Joe, the extraordinary value in the homes that we're

07:30building, I'm very excited about how we have the opportunity to really appeal to a broader and

07:35broader group of buyers, and frankly, to be compensated for the effort of assembling all of

07:42the technology that we've assembled to build homes that perform as well as ours do.

07:45Alan Merrill is the chairman and CEO of Beezer Homes. Alan, thanks a lot for taking the time

07:51to stop by. Best of luck with the earnings call coming up and grateful for your time today.

07:56Thank you very much.

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