This is Part One of the Industry Primers audio program on homebuilding, published by Latticework from MOI Global. It is the first of two audio programs that accompany the written primer on the homebuilders, and it is the story of the industry, told for a general audience. The account is built from documented scenes, with the people named, the dates given, and the participants quoted in their own words. It assumes no background in housing or finance and explains its terms, from a balloon payment to a rate buydown and an option on a lot, as they arrive. This episode is public.
The program runs from the balloon loans of the 1920s to the Federal Reserve's increase of September 16, 2026, and from Long Island's potato fields to Bucks County, Fort Worth, Phoenix, Port St. Lucie, and Omaha. Its people are builders, among them William Levitt, Donald Horton, Robert Toll, Tony Pidgley, and Dwight Schar; a Black family who moved onto Deepgreen Lane in 1957 and the governor who sent the State Police; judges who ruled on racial covenants, fair housing and a builder's pledged subsidiaries; and buyers who kept their contracts with a bankrupt builder in 1992. It follows the land and the mortgage, which set what a family could pay for a house and, for a generation, which families could buy one at all.
Part One stands on its own. It tells how the industry took its present shape, from the federal mortgage of 1934 to the builders that now hold their lots by deposit. The economics of the business, and the companies as investments, are the subject of Part Two and of the written primer.
The program runs in fourteen sections:
As Long as the Suppliers Keep Supplying. On Monday, April 6, 1992 NVR, the Virginia parent of Ryan Homes, files for Chapter 11 after its 8 banks decline to keep funding it, and of 410 buyers holding deposits on Ryan houses in the Baltimore region, only 3 ask for their money back.
The Balloon Payment. In the 1920s a lender put up about half the price of a house on a loan that fell due in one payment within 3 to 5 years, and on June 27, 1934 Franklin Roosevelt signs the National Housing Act, whose insured loan covers up to 80 percent of the appraised value and is repaid every month until nothing is owed.
The Dice Were Loaded. With the GI Bill backing veterans' loans and, by Time's count, 5 million houses needed at the war's end, the Levitts pay $3,600 an acre for Long Island farmland, twelve times its prewar price, for a town Harper's counted in 1948 at 6,000 houses.
A House Every Fifteen Minutes. By 1950 the Levitts have broken the building of a house into 26 operations, every house in Levittown sells at one price, $7,990, and a veteran can own one for no down payment and $56 a month.
Deepgreen Lane. On August 13, 1957 William and Daisy Myers become the first Black residents of Levittown, Pennsylvania, and after the crowds, the stones and three burned crosses Governor George Leader sends the State Police; on February 9, 1960 the New Jersey Supreme Court rules unanimously against Levitt that houses sold on FHA-insured or VA-guaranteed loans count as publicly assisted.
Eighteen Point Six Three. In the week of October 9, 1981 Freddie Mac's thirty-year rate reaches 18.63 percent, the highest in its history, when each $1,000 of a loan costs $15.59 a month against $6.88 in April 1971, and builders begin paying lenders to lower their buyers' rates.
Long and Wrong on Land. Donald Horton opens for business in Phoenix in late 1987, in the middle of the Texas housing collapse, takes D.R. Horton public in June 1992, two months after NVR files, and from that listing to his death on May 16, 2024 the shares return 134.5 times the money invested, 16.6 percent a year against 10.45 percent for the S&P 500 with dividends.
The Speculative Buyers. New-home sales reach a rate of 1,389,000 a year in July 2005, the highest since the series began in 1963, and on August 22, 2006 Toll Brothers reports net contracts down 45 percent and writes that "the speculative buyers of 2004 and 2005 are now sellers."
If We Can't Do This. On July 31, 2007 TOUSA settles with a joint venture's lenders for more than $421 million, borrowed on liens against the subsidiaries that held its healthy business, and files for Chapter 11 on January 29, 2008 with about $2.24 billion of debt; of 27 builders and land developers listed on American exchanges in 2005, six fail in or through Chapter 11.
Every Site, Every Plot, Every Sale. Tony Pidgley, who left school at 15 and founded Berkeley in 1976, judges land by its share of the price, "If the land is 10% of the sum total, you've got a chance," and on February 26, 2009 Berkeley sells £49.6 million of new shares at £8.40 to spend on land near the bottom of the market.
We Optioned the Lots. Dwight Schar's NVR emerges from bankruptcy on September 30, 1993 and buys its lots by deposit from then on, and from its first close of $10.25 to $4,685.09 on May 4, 2022, the day he left the board, its shares return 457 times, 23.9 percent a year against 10.2 percent for the S&P 500 with dividends.
Forty Cents on the Dollar. On November 30, 2007 Lennar sells about 11,000 homesites carried on its books at about $1.3 billion to a venture managed by Morgan Stanley for $525 million, and by the end of fiscal 2025 it holds 98.0 percent of its homesites by option, against 19.1 percent in 2010.
Like an Accordion. On December 15, 2022 Stuart Miller tells Lennar's analysts that margin will be "the so-called shock absorber" while the company keeps its pace, and Lennar's gross margin falls from 25.3 percent in the quarter to November 2022 to 17.0 percent three years later, with incentives at 14 percent of the price.
The Doors Stay Locked. Berkshire Hathaway buys Clayton Homes on August 7, 2003 for about $1.7 billion, after a class of Tennessee finance students gives Warren Buffett its founder's autobiography, and on July 24, 2026 it completes its purchase of Taylor Morrison for $72.50 a share, about $6.8 billion, about 1.09 times book value.
The program runs 1 hour 29 minutes (1:29:04). The written primer and its companion slide deck are on the Latticework Substack under the title Industry Primer: Homebuilding. Part Two, the deep dive for professional investors, is a separate episode, available to members of Latticework: Industry Primers Podcast: Homebuilding, Part Two: The Deep Dive.
This audio program is published by MOI Global for educational purposes only. It is not investment advice, an offer, or a solicitation, and no security mentioned herein is recommended for purchase or sale. The publisher and contributors may hold positions in securities discussed. Figures are believed accurate as of the dates stated but are not warranted; listeners should verify all data against primary sources before relying on it. Nothing herein constitutes legal, tax, or accounting advice.
Transcript
The transcript is available for download to members only.
