ECONOMY

Insider Q&A: Ryan Marshall, president and CEO of PulteGroup

2016 is shaping up as another solid year for the new-home market, as a stable job market and low interest rates help spur new-home construction to its highest level since before the Great Recession.

These trends are helping big homebuilders like Atlanta's PulteGroup to thrive. PulteGroup's profit jumped 24 percent through the first nine months of 2016 versus a year earlier, and sales rose even faster.

Yet new-home sales are running below their historic averages as housing continues to heal from the foreclosures and disruptions that led to the Great Recession at the end of 2007.

Chief Executive Ryan Marshall took over PulteGroup's top job in September, after more than 15 years with the builder.

He spoke recently with The Associated Press about the builder's outlook for 2017, as well as how millennials' delayed entry to the home buying market is shaping the industry. Questions and answers have been edited for length and clarity:

Q: PulteGroup's sales and orders are up sharply this year, as are earnings. You've been opening up more home communities. How is that shaping your view of how to approach 2017?

A: Housing demand clearly remains on a sustained path to recovery, even though it is still running roughly below the 650,000 new home sale average over the last 50 years.

There are a number of other factors that we think continue to support sustained growth in the housing industry. We have outstanding demographics. We have pent-up demand. Low inventory of both new and existing homes. And when you combine that with historically low interest rates, I think that combination creates an environment that's going to be very favorable for our company.

Q: Which types of buyers are you catering to these days. And do you see any changes to that in the years ahead?

A: Our strategy is going to be to continue to have a balanced approach to who we're serving.

This particular recovery was really led by the move-up buyer, but in the recent few months we're starting to see very strong buying behavior from the first-time buyer as they re-enter the housing market.

Our research would tell us that as the millennial buyers are approaching the critical ages of 28, 29, 30, they're behaving very similar to the way their parents behaved. They're moving to the suburbs. They're looking to have a home. They're looking for schools. They're looking for safety.

We are seeing that the millennials are becoming first-time buyers, just later in the cycle than what their predecessors did.

Q: What are you doing to specifically cater to first-time buyers?

A: One of the key strategies in the way that we're buying land is to stay closer in to the city center. One example I'd give you is right here in Atlanta. We bought a Class C, kind of 1970s vintage apartment complex ... We demolished it all and are now in the process of building four different product lines that range from high-density, single-family homes all the way up to condos.

It's a strategy that we have deployed very effectively in a number of cities. It doesn't work everywhere, but when you look at your major urban cities — Atlanta, San Francisco, Washington D.C., Chicago, Boston — those are all places where we have a very healthy in-town business that is catering to the millennial, and even the downsizer that wants to be in the middle of everything.

Q: What do you now see as the biggest challenge for the new-home market?

A: Land. Getting entitled land is as difficult as it's ever been, so that's certainly a constraint that's keeping the industry somewhat in check and not allowing all of the demand that's out there to be satisfied.

And we simply have not seen the return of labor that left the industry to go find other work during the housing downturn.

There are not a lot of plumbers, drywallers, roofers, concrete workers, etc., with the skill sets that we need in the housing industry.

Q: Why haven't more workers returned to the construction industry?

A: There are some generational challenges. The millennials that are coming out of school with a heavy load of student debt, I don't know that for very many of them one of the careers they're considering is something in one of the trades, which I think is a simple demographic, attitudinal shift that we've seen in the United States.

And the last piece is really about immigration.

The country's immigration policies have not made it very easy to attract labor from other countries outside of the United States.

Q: What about affordability? Many millennials are saddled with student loan debt, which makes it more difficult to make a down payment. Is that a concern?

A: What we saw in this recovery because of tight supply, prices rose quickly because there was simply no supply there. And the growth in home prices has outpaced wage increases.

What we'll need to see over time is the growth in wages will need to keep up with the growth in home prices because certainly affordability has been stretched.

Interest rates are low, and that's helping to keep that equation in balance and make the overall value work.

We like the environment that we're operating in, but we certainly acknowledge that we need to see some wage growth to keep up with the average sales price growth.