Although he would’t commit to a specific timeframe, The Ryland Group CEO Chad Dreier said lending on new homes will return to a more rational mix of products.
“Some day we will get to a more normalized market,” said Dreier, speaking to financial analysts this morning at the JPMorgan Homebuilding and Building Products Conference in Las Vegas.
“I think we’ll see 80 percent prime and about 20 percent government-backed loans,” such as FHA and VA loans, he added.
Dreier said the change in the loan market is under way. He noted that 69 percent of Ryland’s new homes in 2006 had prime loans, 7 percent were FHA/VA, and 22 percent were alt-A.
By comparison, in the third quarter of 2007, 78 percent of the big builder’s loans were prime, 20 percent were FHA/VA, and only 2 percent were alt-A. Just 3 percent of Ryland’s loans were subprime in 2006, and the company had no subprime loans in the third quarter of 2007.
“Guys my age learned a nickel and dime business,” said Dreier. “We need to get back to that,” he concluded.
Dreier said Ryland’s core gross margins are up over 15 percent — ahead of most competitors — because the company keeps land inventory to only four or five years worth, doesn’t put more than 10 percent of its money into any one market, and keeps debt low. The average cost of Ryland’s debt is 5.8 percent.
Learn more about markets featured in this article: Las Vegas, NV.
