Stephen Kim: That’s really helpful. Thanks very much, guys.
Stuart Miller: Okay. Thanks, Steve.
Operator: Next, we’ll go to the line of Carl Reichardt from BTIG. Please go ahead.
Carl Reichardt: Thanks. Good morning, everybody. Stuart, I hope you feel better. I have a question on dynamic pricing. I think it’s fair to say, if we ran the tape last year, that using dynamic pricing allowed you to make — find elasticity, make — find homes at market clearing prices really quickly and across the platform quickly. So, if you look at the model today and look at sort of a histogram across your geographies and markets, where do you see pricing power? Where are things still weak? And do you effectively say more markets are stable than we have more markets where we’re making a lot of adjustments up or down?
Jon Jaffe: Hey, Carl, it’s Jon. In every market we are using closing costs, mortgage rate buy-downs, pricing to hit that desired pace. Clearly, we don’t have to use it as much in, say, Florida, the Carolinas, parts of Texas, other markets around the country where there’s immigration, strong job growth. In some markets, where you’ve seen a shift, in Austin, in Boise, parts of California, we have to use them a little bit more. But as I said earlier in my comments, we’re able to achieve our desired pace by managing those levers with each individual buyer, at each community, home by home basis, to find the right monthly payment for them to deal with their mortgage qualification issues, get them locked into a loan, and to hit our production levels.
Carl Reichardt: Okay, thanks, Jon. And then, on SG&A, again, long-term strategy for the company has been to lower buyers’ brokers’ commissions, probably more aggressively than any other builder, at least that I cover. Market got weaker, buyers’ brokers have come back. So, where does that strategy sit now in terms of your reliance on those brokers or your desire to continue to effectively disintermediate them or rely less on them? Thanks, all.
Stuart Miller: We pretty consistently said that the realtor community that supports the industry and that comes in and does the work of bringing customers to our sales center and actually engages the process is a friend of Lennar. And we’re always trying to work with the realtor community. But at the same time, what we’ve tried to do is eliminate the friends and family component that is basically just giving away. So, we’ve done a pretty good job of creating a constructive relationship with the broker community while not overspending. And it migrates up and down as traffic is represented more and more by realtors. Now, of course, as the existing market has been more constrained, the realtors have been more focused on the new home market, and that means that we’re getting a lot more traffic from the realtor community than we were getting when the existing market was more normalized.
And with that said, you’ll see our brokerage spend go up and down a little bit, which affects our SG&A.
Jon Jaffe: But it’s all highlighted, it’s at very low levels compared to our historical norms. And the way that we use the broker community is really just where we have completed inventory homes to move. We’re very disciplined about what we make available to the broker community so that we maintain that focus and control of our SG&A.
Stuart Miller: And let me just say lastly, we’ve talked an awful lot about our digital sales funnel together with our dynamic pricing level and sales engagement. We are really striving to drive more and more of our customer engagement through our digital world where we access customers, meet them where they want to find us, and engage them very directly. That’s where we think we can have the very best engagement with our customers. And so, we’ve talked about our digital sales machine. It’s an important part of the way that we’re creating a process around our sales program for the future, and it is evolving.
Carl Reichardt: I appreciate that. Thanks, guys.
Stuart Miller: Okay.
Operator: Next, we’ll go to the line of Alan Ratner from Zelman & Associates. Please go ahead.
Alan Ratner: Hey, guys. Good morning. Really strong results. Nice job. Stuart, first question. When you kind of talked about the net price declines in that kind of 10%, 11% range, historically, the typical spread between a new home and a resale, I believe, has been around 15%. I’m not sure you see it that way, but that’s kind of what the data would show roughly. And we clearly haven’t seen that level of price declines in the resale market, which it feels like to me when you compare the strengths we’re seeing in the new home market today versus the resale market, I think there’s a thesis out there, it’s all inventory driven, but it feels like some of that historical spread is definitely narrowed this year as you and other builders have been more aggressive on pricing to market.
So, when you think about that and you think about some of your other comments with your land cost is probably going to continue to rise, construction costs, while — there’s been progress made there, it’s probably stable from this point forward. If you don’t see resale prices rising, can you maintain that progress you’ve made this year as far as now closing that spread versus resale? Or do you see that spread returning just as a function of higher costs over time?
Stuart Miller: Well, I’ll tell you, Alan, that you’re kind of sitting in a very strange configuration of the housing market right now. The resale market is inventory very, very constrained. It’s been well documented that interest rates rising as much as they have left existing homeowners with two assets. They have a home that is valuable and they have equity. They also have a mortgage that is at a very low interest rate and that also has great value. So, they’re just not bringing existing homes to market as much as or at the rate that you would traditionally see. And that short supply of existing homes has enabled that part of the market to stay a little bit more robust in pricing as the new home market has used incentives to meet the market where affordability actually exists.
So, that configuration is creating an anomaly in the way that existing homes and new homes are priced. I’ve said in the past that I still think that the existing home market is kind of a zero-sum game in terms of the supply and demand, because every time somebody sells an existing home, they go out and they have to buy another home. So, you add inventory, you subtract inventory. And I think that’s kind of how that’s configured. But from a pricing standpoint, I’m not surprised to see a little bit more parity between new and existing homes at this point. And yes, I think that we can continue on our trajectory depending on the overall macro environment, the interest rate environment. And where affordability is down, I think we can continue on our existing trajectory even as the existing home market remains relatively strong because of short supply.
