Lennar Corporation (LEN)’s 4th Quarter 2014 Financial Results Conference Call Transcript

Operator

We have a question from Megan McGrath from MKM partners your line is open.

Megan McGrath, MKM Partners

Good morning, thanks. This is a little bit of follow up to that last question and the last commentary there is partially an answer but I think just looking at Texas now just looking at any market where you are starting to perhaps see some sign of slow down or you see some writing on the walls can you talk a little bit about leverage that at your disposal and maybe lessons learned versus the last down turn. Are there things you would likely do quicker, let say you start to see things slow down say perhaps try to pick up pace quicker or related to the last comment is your inventory different than it was say let’s say 9, 10 years ago that would just perhaps limit the over building that we would potential see in some of these markets in we see a vast slowdown in employment.

Bruce Gross, Vice President and Chief Financial Officer

I think that I noted in my opening comment that on the downside even in a market like Texas, like a Houston the down side is kind of defined by a change in employment structure of the market where you start to see oil complex sheds some jobs and that affect confidents in home sales. But I think there are some counter current kind of consideration, you know while the oil complex moves down, gas prices comes down and Houston is a more diversify platform that it has been in prior oil down turn. So we are not looking, we are not expecting a very sizeable down turn but I think that the way we have configured our company and we focused on purchasing assets, the locations that we have focused on as we have gone through even in the down turn scenario are the location that holds up the best that continues to perform the best in the market and we think that any down turn being fairly shallow and we move forward. So from a lesson learned perspective we clearly not gone out to the B-, C locations we have not gone out over our skis. We already have been tapering back on land supplies, the tail of land supplies and I think that we are really well positioned to be just in an orderly fashioned work through inventories even in a fairly aggressive down turn scenario and be positioned with strong cash.

Rick Beckwitt, President

I guess one comment on the Texas market being hat it have brought up a number of times. The overall economy in Texas is very strong you know if you look at just going back to Stewart opening remarks, job growth across the state have been incredible strong, inventories in the neighborhood are in 1 to 2 month of finish home supplies and the new side retail inventory is extremely low as well and you have just outside of Houston has a very strong economy with excellent job growth. Houston in particular as Stewart said we haven’t in particular seen too much of change in Houston yet but we are smart enough to know that if oil prices continues to be depress there will be some negative reaction in the market. It generally happens that it is price point focus and one of the things we been focus on is making sure we participating in all of the price point in the Houston market in order to insulate ourselves to as much as possible with the changes in the market demands. We are well position and smart enough to know that as oil moves down, there may be some job loss, primarily more on the higher end and it could impact pricing and that’s why we have given guidance a little bit lower margin.

Megan McGrath, MKM Partners

Great that’s helpful. Just to follow up around the commentary on some of the government initiatives, clearly too early to see anything on the FHA, you know it’s been a month or so since the announcement arrives from the FHA, FHSA, 3% down mortgages and any kind of early indication that that’s taking hold.