Walker & Dunlop, Inc. (WD) Earnings Call Transcript & Summary

Welcome to another Walker webcast, and it is my great pleasure and honor to have Stuart Miller joining me today. There's an article that just came out about an hour ago on Bloomberg entitled U.S. housing market becomes impossible mess with no end in sight by Patrick Clark, and I can think of no one that I would rather talk to as it relates to that article than Stuart Miller. I'm going to do a quick intro, Stuart, and then you and I can dive into our conversation. Stuart Miller is Executive Chairman and Co-Chief Executive Officer of Lennar Corporation and a member of Lennar's Board of Directors. Stuart has worked with Lennar for over 35 years, although I believe he mowed lawns at Lennar home site starting at age 11. He became CEO of Lennar in April of 1997 until he assumed his current role as Executive Chairman in April of 2018. In 1997, Lennar Corporation spun off its commercial real estate investment, financial and management activities into LNR Property Corporation and the company became separately listed on the New York Stock Exchange. Miller served as Chairman of the Board of LNR until the sale of LNR in February of 2005. Stuart serves on various professional and community boards and committees, including past Chairman of both the Joint Center for Housing Studies, Policy Advisory Board at Harvard University and the University of Miami Board of Trustees where he still serves on the Executive Committee. He is also current Chairman of the Miami Dolphins Foundation. Stuart is a graduate of Harvard College and the University of Miami Law School.

So, Stuart, I mentioned in your bio that you mowed lawns for your dad at Lennar home sites when you were 11. If entering the family business was always sort of the game plan, why did you go to law school and not business school?

Well, first thing I have to do is make a quick correction. I was 12. So off by a year. And I don't think I started on the lawn crew with the expectation that I would go into the business that was founded by my father, I did it with a more practical view that I wanted to buy a car when I was 16. So I'm not sure why I was thinking ahead that way, but I wasn't thinking so far ahead as to etch my career in stone. With that said, I did migrate through almost every position within the company you could imagine over the years. And by the time I graduated law school, I was quite sure that I wanted to go into the Lennar business as it had evolved, but in migrating from an undergraduate to a graduate program, I had studied government when I was an undergraduate. And interestingly, in today's day and times, wrote my senior thesis on factionalism in Palestinian political organization. So it's kind of timely today. But the natural progression for me seemed to be into the field of law. In hindsight, I would tell you that I think that the legal background, the legal study has been very constructive relative to my business career. And I would say that it's as valuable a path for those aspiring to the business world as a business degree, but I did feel that I would be able to pick up some of the business lessons from practical application rather than the migration to a business school and the rest is written.

Did your brother, sister either of them have any interest in growing the family business?

No, they really didn't enter the business at any point in their younger years, but they really didn't aspire to the Lennar business. And let's remember that public companies are not -- they really aren't family businesses. There might be a family founder and evolution to the public company world, but there is a fiduciary responsibility that the next generation doesn't get anointed the next generation in the public domain really has to go through quite a steep learning curve, and I would almost argue maybe it's self-justification or something. I would almost argue that the -- those that are part of what's perceived as nepotism might have to go through even a steeper climb to get to positions of responsibility unless they be criticized as just the boss' son or daughter.

Yes. It's funny. I'm asked often about whether any of my boys are going to come into Walker & Dunlop as I did, and I said as a public company. It's not -- I'm not -- I'm Chairman and CEO, but I don't -- I can't just anoint someone to be my successor. But interestingly, Stuart, Lennar went public eons ago. I mean it went public in 1971, with, I believe, the value was $8.7 million. When I read that, I made me feel really good that Walker & Dunlop, which was a nat when we went public with the $220 million market cap in 2010, made us look really big at that time. But why did your dad and his partner, Arnold Rosen take the company public way back when?

Well, a fascinating question, and I was definitely too young to be able to explore the way they thought about it at the time. And even in hindsight, I'm sure the facts have changed. But the fact is that public -- the public transition opens up doors to public finance and a more stable form of finance than the private companies have access to. And in those early years, and remember that $9-ish million in 1971 dollars is different than it is today and might even equate to that $221 or what your number was. But at the time, capital was dear. The ups and downs of a cyclical business, augered in favor of finding more stable access points to capital. And my father, Leonard was a sophisticated business participant. He had endured some very steep downturns in the marketplace and looked to stabilize capital availability and was always focused on preparing for the next downturn. It was almost a PTSD kind of sense of preparation because every time times got good, he seemed to know that a lesser time was lurking around the corner. Now that volatility is not as dramatic today as it was back in those days. There are a number of economic stabilizers that have lengthened the duration of better market conditions. But in those days, stable capital was very important to them.

And one of the sort of, I guess, hallmarks of Lennar during -- from when it went public in 1971, all the way until the turn of the century and millennium was that when things got distressed, Lennar kind of stepped in, one of the things I read in doing some research for this was that someone said that when things looked at their worst is when Lennar shines, and that's when you all step in. Clearly, having a, if you will, a countercyclical business model that allows you to weather the storms is something that's been ingrained in the company's culture for a long period of time. But I wonder as it relates to you as a leader, other than that having been the practice of the firm, actually doing it is very different than it having to be kind of a hallmark of a company. What was it that you either saw on your dad or did with your dad that has allowed you to continue to, if you will, step in when things looked at their worst?

Well, let's be careful not to rewrite history. So I guess I would say everybody has to scrape their own knee. And from that scrape knee, we learn lessons. If we go back to the late '80s or early '90s, Lennar was formidably positioned with capital when others did not to be able to lean into the distress in the commercial markets, which is the starting point, the genesis of the ultimate spin-off in 1997 of LNR. And that was a moment in time where I made use of that capital position. It was an area that I kind of defined myself -- and my father's Foresight has certainly positioned the company where that opportunity presented itself, and we levered that. But then as I go forward and look to, let's call it, 2004, 2005, 2006. As you go into the great recession, as it's called, Lennar was less perfectly positioned and I have to take ownership of that and recognize that, yes, there were lessons learned on my part. But nonetheless, the negative side of lessons that are learned that is stopping self for learning them, something that you kind of have to go through yourself. We had tried to fortify our balance sheet as we grew quite dramatically, but we did it with a lot of joint ventures, a lot of structured programs, where the structuring really did not work well as we went through what was ultimately a very severe downturn with a very long duration. And so there were new lessons learned. And so yes, I stand on the lessons that my father brought to me that I watched him indoor, watched him attend to. But lessons are learned on top of lessons on top of lessons. And so as we sit here today, in today's kind of turbulent world, I mean, Lennar is so nicely positioned with around a 10% debt to total capital ratio $4-ish billion of cash in the bank and a rock solid balance sheet, fortifying a really strong business position that situates us well for if times get good, we're well positioned. If times get tougher, we're well positioned, and we all know that there's a lot of uncertainty in the economic markets right now.

Stuart, I appreciate the let's not rewrite history piece of what you just said. But just because I think that the lessons that you've learned are so interesting. Like you mentioned that you sold L&R in '97, then you turn around and you go and you acquire U.S. Home Corporation for over $1 billion in 2000. I'm assuming that 2001, 2002 as the single-family market is beginning of its eventual explosion, but that updraft that you were feeling like, well, boy, were we really smart buying U.S. Home Corporation in 2000 to give us the added scale that it did in -- I think it was Mid-Atlantic and up into New England as it relates to the broadened platform, the Lennar had. So am I correct on that? Where you're sitting there on land. That was a great acquisition for us to have taken that capital and recycle it into the growth of Lennar at that point. And obviously, you didn't know that 2007 was coming up on all of us. but that was a tactically and strategically smart move to have been done at that time.

So let's go back to 1997, we didn't actually sell LNR. We spun LNR, which meant we took, we really took our balance sheet. We did a very interesting transaction. We spun LNR, which was about 2/3 of our balance sheet and remained with only about $200 million of equity on our balance sheet for the remaining company. We simultaneously merged that with a California-based company called Pacific Greystone and basically doubled the size of the equity balance in that merger. So it was somewhat dilutive, and we could walk through those percentages and everything. It turned out to be a really awesome deal for the company. But you now had a pure-play homebuilder configured and ready to run. And over the next couple of years, we did just that. We leaned into that pure-play configuration. And by 2000, as the market pulled back in the dot-com bubble, everything was kind of depressed, but we could feel and knew that the housing market was still strong and vibrant. And it did defy gravity during that period of time, we leaned in and we made a really strategic deal with U.S. Home. And I would argue that it is still today the best combination deal that was ever done in the industry. Now don't tell everybody else. I said that everyone...

I want to go to CalAtlantic next. So the care focus is we're going to really jump right to that.

No, it was -- it's a much better deal than CalAtlantic. But the U.S. Home deal was just really well-timed, well configured and set the company up for tremendous growth and opportunity and profitability as we went through those next years. So I mean, it was just an extraordinary growth and development time for Lennar. And I was very happy that my father and I were able to work through those times, as you might know, he passed just a couple of years later. But nonetheless, we worked through some really exciting times together.

I mentioned the CalAtlantic deal. One of the -- as you and I both having acquired companies as much of acquisition being strategic or financially accretive, the cultural issues are always sort of fundamental and super important. You've created a very unique culture at Lennar, which I want to focus on in a second. But before I go to that, when you brought CalAtlantic in, one of the things that I was curious about was not so much from a cultural standpoint but more from a strategic standpoint, the old mantra at Lennar of everything included that had started with your dad and carried through to you where someone was buying a house that had everything included, and now you're even making it so that WiFi is included in the house and things of that nature, which were always sort of add-ons for other people. And CalAtlantic, my understanding, Stuart, was much more focused on sort of the design of the house and then leaving it to the buyer to kind of customize it from there. From a sort of a product development/delivery standpoint, was that different type of strategy, hard to integrate to get to where Lennar was versus where CalAtlantic was?

Well, interestingly, the answer to your question really starts back with the U.S. home deal. Because U.S. home was very focused on design studios to appoint the home the way the customer wanted, which was directly opposite or everything is included mantra. And we actually built a dual marketing program where U.S. home communities would remain design-studio oriented and when our communities would remain everything's included communities. And we actually competed side-by-side under the same umbrella of different brands. We learned in that time because we were able to look side by side, just how valuable the everything's included model was in terms of making for a production-oriented program that would actually reduce cost and build value for the customer. So ultimately, we unified especially during the -- great recession, unified all that under a single banner of everything is included as we found that was a more efficient way to build. It worked better coming out of the great recession. And with CalAtlantic, we combined the 2 companies with a drive towards size and scale in markets as a way of driving costs or rationalizing costs for the benefit of value. And therefore, it was an immediate unification under one branding mechanism. And that -- so it was a different configuration built on lessons learned from the U.S. home configuration, which was less efficient but gave us a great learning tool. And by the time we came to CalAtlantic, that deal was much less a financial success, but was much more a combination of size and scale to build value for the customer and cost advantage in being able to bring that value to the customer through the way that we operated the business.

So I mentioned culture. And the first time I ever met you, you had a name tag on, which you have on right now, which has your name. It's my understanding that you did -- I don't know whether it was a training program where you were up at Disney and seeing the way that they treated all of their colleagues at Disney and sort of grab that idea from Disney. But there's no doubt that you, Stuart, have had an incredible impact on the overall culture at Lennar of having everyone feel like they are part of the team and open more plan as it relates to your offices, starting all company meetings reading the little red hand. Talk -- when I read about that, Stuart, first of all, I love it because I have the same challenge, and I'm not nearly as good as you are creating a distinct culture inside of a company and doing things differently that make people feel like they're on a special team. But being a family company and being as successful as your father was in building Lennar to where it was when you stepped into it, what was it that sort of drove you to say, "I got to either -- I got to put Stuart stamp on this company or there's something that the culture at Lennar when you stepped in was either lacking or needed to be moved to that made you implement all these different things?

So well, that's a really interesting and compound question. Let me start by saying that in all instances, I stand very comfortably on my father's shoulders. He built an incredible foundation and embedded in that incredible foundation, lower elements of culture that we still have woven as threats through our company today. His mantra was quality, value and integrity. Those were his 3 points of the essence of the company that he saw to build and quality, value and specialty integrity are critical components to everything we do at Lennar. And are woven through the way that we run to every hallway within the company. Next, I would say, no. I didn't need to put my fingerprint. Everybody brings elements of culture to a company and the company embraces things along the way that become cultural in nature. Through the years, the world has changed. From the time my father started the company to the time I came into the company. If you remember the old Tom Peters book in search of excellence. It was all about the customer comes first, and it's all about the customer and the way that we deal with customers. The times were changing, and I was bringing new elements of culture to a company that already had routes of culture of its own. And it wasn't just me, it was myself, it was Marshall Ames. It was Jon Jaffe, is Allan Pekor, the number of people who I still work with today, 40 years later, we went in search of the things that would create uniqueness, but at the same time, strength of spirit within the company. And yes, we did thank you for that remembering that we did go to the Disney School of Management. And we learned quite a bit from one of the most cultural organizations on the planet. How does Disney create such consistency throughout this network of parks and programs and everything in the Disney organization what we wanted to learn? And we did learn something about this name badge that we wear every day. And we don't do it as a mandate. We do it because it's an active friendliness. When 2 people meet each other, the first thing they do is introduce each other. The second thing they do is they forget each other's name. I want to make it comfortable for people, I don't want to set up a blockade. I want to set up a comfortable environment for people to know if they forgot my name, they can look down, it's right there for them, and I want to build bridges, not walls. And so it was that kind of attitude. We have a uniquely Lennar language that derived from that. Disney calls each person that comes to a park, a guest. We call each home that we build a home, it's not a house. What we call our communities, communities not developments. We don't talk about lots. We talk about home sites. We don't talk about employees. We talk about associates. Our language is very cultural. We do recite poetry. We read Dr. Su. We do some peculiar things, but it's all about how do we bring people together, how do we create commonality? How do we build the notion for each of our over 10,000, 12,000 associates? How do we embed in them? What they are supposed to do when no one is around to ask or no one is looking. How do our associates know what is the uniquely Lennar way of handling situations where they're out on their own, and they've got to make a split-second decision? Culture is the ties that brings those answers together and keeps people thinking about who we are and what we stand for. Integrity first, quality, value, kindness, customer orientation, all of the elements that make us Lennar. That's what we want each of our associates tied together with.

Has HBS ever done a case study on you?

No.

But, I said this a couple of weeks ago, I was out visiting with a client of ours in California. You said, really, I listened to all your webcast. But when you get into that soft stuff like HR and all that stuff, I don't listen to that stuff. I just listen when you bring on like Peter Linneman to talk about hard macroeconomic and where interest rates are going. And this guy has got a very successful company, and he's a really, really nice guy, but I was sitting there like -- it's the soft stuff, the stuff you just talked about that is what creates alpha. Nobody knows where interest rates are going to go. It's the culture that you built at Lennar that makes the company as successful and enduring as it is?

Well, look, there are many ways to find success. This happens to be our way. We're very connected with our people, and we think that our people are very connected with our mission.

So another -- a mantra that you talked about what your father stood for, if you will, and what the ingrain sort of ethos or culture at Lennar was from your dad, I've heard you a number of times, Stuart, say the mantra evolve or die and you're big on innovation, and you've always been big on innovation. People don't necessarily think about either a homebuilder, a single-family rental company, multifamily developer, et cetera, et cetera, is "an innovation hotbed" if you will. How have you built into the culture at Lennar evolving or dying?

As I noted before, over time, there are new things that are getting corporate into the business, Lexicon as I entered the business world, it was Tom Peters and in search of excellence. If you look more recently at the technology world, the evolution of the way technology has altered the landscape of every business. And the businesses that don't adapt that don't find their way to a modernized approach, whatever that approach might be, they find themselves at a disadvantage and sometimes disintermediated and left behind. And we concluded years ago that we were not going to be the ones left behind. We were going to be at the tip of the spear, and it might cost us money, and it might lead into profitability. But we were going to be at the cutting edge of the evolution of the way that our business would develop. We would be durable. We would be long-lasting because we incorporated modern technologies in the way that we work. We started years ago investing in technology companies that were evolving while we were building some of our own technology platforms, we felt that we could learn from others while we evolved ourselves. And that continues to be a core element of the way that we grow our business. If you look, for example, at we call -- at what we call the Lennar machine, and I've talked about it on some of our earnings calls, it is a configuration of a digital marketing funnel and Internet new home consultants and new home consultant sales engagement program and a dynamic pricing model kind of wrapped together. That machine is a highly digitized, highly innovative program for the way that we acquire customers handle customers, engage them, find the right product for them and make sure that we're at the right price so that we maximize the opportunity to make a sale. And that kind of technology is the kind of stepping stone technology that in our world will lead to the use of machine learning and AI, which are catch words today and definitely catch words in our industry, but the underlayment of the future applications is going to be built today on the way that we ingest data, the way that we process data, the way that we confirm its authenticity and then set up the use cases for what ultimately will be more advanced learning mechanisms that help us not just sell homes but build homes on a production kind of level, maximize efficiencies, bring down costs and build a better value for our customer and a better bottom line for our shareholders.

That type of technology. I know you have inside of Lennar, a group called it LEN X, which is your sort of innovation team. Are they focused Stuart, internally or externally?

Both -- and that's a very important question and notion. The external is critically tied to the internal. And what I mean by that is we've invested in a number of technologies always with adjacency to our core business. In other words, a company like Opendoor. It is completely adjacent, People come into our welcome Home Centers and they say, "I love your offering, but I got a home to sell. Well, we used to send them to a realtor and say, when you sell your home, let us know. Now we say, you've got a home to sell. We've got a solution. We have a partnership at Opendoor, Opendoor, will buy your home, enable you to purchase our home and we've got a transaction. In working with Opendoor, we look at the technology componentry that they have incorporated into a start-up company, and we learn from what they do and how they execute and then take some of those learnings and bring them back to our company internally to rework, rethink and make adjustment to our core executions. So that's why I say it's internally focused as well as externally focused.

Yes, I mean, as -- it's a huge challenge as it relates to this is a business development group looking for acquisitions? Or is it a team that's focused internally is driving it? It sounds like you've got it set up on both, which is great, but super challenging, at least from my experience from having worked with our business development group as well as trying to drive internal technology initiatives?

Yes. Most people have confused our initiative as becoming somewhat of a venture capitalist. And in fact, it was always secondary that we would maybe make money on the investments we were making, we knew that we would make the bigger money on the inclusions, the alterations to our core business that would drive some of the cost parts of our business down. And you can look at various pieces of our business, we can walk through those that where we've actually seen discernible reduction in cost structures because of the technologies that we've incorporated as part of our endeavors and LEN X.

One of the, sort of technologically driven companies that have had a lot of fanfare around it that is -- that failed was Caterra and the modular homes. Why? From your take, Stuart did Caterra fail because I want to take this to 3D printing. And so that's the framework I'm going to kind of innovation on the homebuilding front. But there was so much money and so much excitement around what Caterra could do to the homebuilding market given its modular sort of design, if you will. And why was it that a start-up that had so much behind it, ended up hitting the wall, if you will?

Let me start by saying, yes, yes, go ahead.

No, I was just saying, I'm not trying to criticize Caterra. I'm talking about really kind of the innovation of the business because you've been so innovative. And here was something that had huge capital to it and one would think it would have been able to at least survive as a homebuilder and kind of had its niche in the market, and it failed miserably. And so I guess that's really more of the question than you saying, "Oh, Caterra messed up on X, Y, or Z.

Yes. So I wanted to start by saying I don't want to disparage anybody's efforts.

I got it. That was what I was trying to say.

In -- and I do want to -- let me say, by way of amplifying that. I don't care what endeavor someone is looking to innovate or start up, it is hard. It's really hard to do. And so I want to embrace those who are bold enough to get out there and try and sometimes fail. And the fact that they do they provide a stepping stone for the learning process. And I want to admire the Caterra effort in that regard. Now with that said, I will say, Willy, that we were there in the beginning as a potential investor and chose not to. And it wasn't because the concept wasn't right it was more because the focus was on a broad measure of items in order to get some of the financial machinery to work it was broader rather than more focused and myopic in terms of the model of execution. So it just wasn't for us. Why did it fail? I suspect it was a combination of why we didn't invest and the fact that it's just hard. And if you're not just laser-focused on getting one thing done, it's very hard to find your way to a sustainable success. I don't know if you or your listeners have yet read the book, Elon Musk by Walter Isaacson. But if you haven't -- if they haven't, I'd recommend that everybody do, it's a book that as you read it, it makes me feel like I've accomplished nothing in my life because you just get that drumbeat of what it takes to be gritty and determined and to stay focused on what you're trying to do. Now Elon has some broader talents and abilities. It's hard to shoot off a rocket ship and build an electric car company at the same time. So that almost flies in the face of what I'm saying. But these businesses are hard to build. So as we migrated our conversation to 3D printing or penalize building that are initiatives that we're heavily invested in and that we're working with. We do those primarily to get in at the bottom floor to begin the learning process to see what we can learn from the evolution of those businesses and see where the stumbling points are along the way and hopefully became constructive in helping our industry elevate itself to a point where when labor is stressed, we can overcome that. When prices or costs are too high, we can find ways to bring them down. And if we don't start working in those directions, we're not going to be able to affordably provide the housing that this country needs. As you know, there's a great supply deficit right now. We are running hard to fill the gap, but the fact is we can't keep up as an industry with the growing supply shortage that exists in the country. We've got to find some new mechanisms and ways.

You're clearly running hard to supply in, if you will, all 3 food groups. So in single-family in single-family rental as well as in multifamily. As you look at the landscape right now with single-family mortgages and difficulty for people to buy that first home, given that right now, 1/3 of the supply is coming from new homes versus traditionally, it's sort of about 10% of supply comes from new homes and the rest is existing inventory. You said to me when we were last together, Stuart, which I thought was a fantastic question as I was talking about the fact that people who own homes today don't want to put them on the market because they've got these low interest rate loans on them. You said to me, but isn't it a zero-sum game? Like isn't housing supply, just housing supply. And you caught me there because I immediately in my own mind, we didn't extend the conversation on, but I went to, well, then that's going to household formation it's going to immigration policy and whether you think directionally, those have growth drivers in household formation for people to buy either single-family or to stay in multifamily. But as you look across that continuum, and where the macro market is today, where you and Lennar, if you will, over investing to meet the demands and where you're saying that market doesn't have great growth drivers over the next 5 to 10 years because of where rates are, because of where immigration policies, et cetera, et cetera?

Okay. Another really interesting compound question because all 3 of those areas require a slightly different discussion.

And you know I ask them because I know you can take them. So I'm giving you these comments because I know you're going to dip through them perfectly.

So let's do that. And first of all, zero-sum game on the 3% mortgage holder not being inclined to sell. Even if they sell, they're selling because they're going to look for another home. So they're adding to supply, but they're subtracting because they're also adding to demand. So that is what I meant by zero-sum game. And that means that the shortage has to be filled by new production. That's new production of single-family for sale, single-family for rent and multifamily homes. If we think longer term, we know that the demand for short supply is going to continue to be weighed in favor of demand is going to be bigger than supply. However, along the way, we have 8% mortgages right now. Higher interest rates make affordability more difficult so that pushes down on supply, the builders are bridging that gap by using either arm, adjustable rate mortgage buy-downs or 30-year fixed rate buy-downs to make for and create affordability for the homeowner to find access to the new home market. So you're seeing that the builders are still building at an accelerated rate. And if you look at housing starts were running at about $1.3 million. That's a lot stronger than the $600,000 that existed back in the great recession or in the aftermath of the great recession. So -- but still below the $1.5 million that people traditionally say is about what's needed for the country.

And you're supplying about $100,000 a year. Lennar is building about $100,000. Are you about $20,000?

Let's call it $70,000, $70,000, $70,000-ish, but growing -- so last year, we were at $66,000. This year, I think we're expected to do about 72. We're getting close to our year-end, so I can't really talk too much about.

No, no. I'm just -- so what I want to do is scale when you say about $1.3 million, you all are supplying into that 1/10 the market. Less than that. It's like 6 or 7 if I do my math, I'm sorry, but I just wanted people to understand your -- as the largest homebuilder, how much market share does the largest homebuilder have and it's a big number?

So on the single-family side, affordability is stressed but being made up by the builders contributing part of their margin to make for affordability for the customer and that's keeping that part of the market rolling forward. On the multifamily side, which generally averages about $300,000 multifamily for rent apartments to the market. That part of the market is really impaired right now. Now over the past couple of years, they've been -- that part of the market has been at a run rate of about $500,000 above trend. And that's still coming through the system right now. I think you're going to see a material slowdown in the construction of multifamily apartments as we absorb the 2 years of $500,000 and interest rates have definitely changed the dynamics, both in terms of debt service and in terms of cap rate relative to the value proposition of building new construction in the apartment world. And then single-family for rent, which we had thought as an industry would be a stabilizer for the new home market is suffering from some of the same attributes as the multifamily market, which is cap rates and debt service, eating up NOI or making the value proposition lesser for building single-family for rent. That part of the market is still rationalizing. Bottom line is when you look at all 3, they're all stressed in certain ways, but all 3 make up that $1.5 million home per year need, $1.3 million home per year production right now, $600,000 at the low end, we've got to make up production for rent, for sale, multifamily, single-family homes for the country. And so that means that the longer-term prospects for our business as long as we remain innovative and sensitive to affordability actually remains pretty good for the industry.

I find it to be really interesting, Stuart, as you talk through the 3, if you will, asset classes. It's -- I walked out of my meeting with you, I can't remember whether it was 2 months ago. And one of the things that came to me was you view the market as it's a housing continuum. Like the single-family world in the multifamily world are -- have been historically wildly segmented. We're Fannie Mae's largest multifamily lending partner, have been for 8 of the last 10 years. And honestly, I know 2 people at Fannie Mae who have anything to do with single family, the CEO and the Chief Investment Officer. But other than that, all single families over here and all multifamilies over there, and they don't kind of talk to each other, and they're totally different businesses. And I want that in my meet with you and I said, here's someone who understands that this is all housing. Like when you turned to me and you said to me, isn't a zero-sum game? And I was like -- it is -- the view of Lennar of playing across the continuum rather than just saying we are just a homebuilder and understanding where to deploy capital into the various -- to some degree, it is sort of a life cycle. To some degree. I mean you think that most people are they rent and then they form a home and then they move into a home and then sometimes they even look back to being a renter later in life. But I just -- I think that, that has significant implications to our industry, like single-family finance is set over here and commercial finance is out over here. The commercial services firms like Walker & Dunlop sit just on the commercial side and don't really play on the single-family side. And yet Lennar has played across everybody. It's really interesting.

Well, listen, it's given us an open-mindedness to the base narrative across the country. And that is, if you listen to the mayors and you listen to the governors, they need dwellings. They need homes. They need attainable homes, whether it's rental or whether it's for sale and ownership, they need places for people to live that are proximate to where the jobs are. They are dealing with cities that are pushing the workforce, the police officers, the firefighters, the teachers, the nurses. They're pushing them farther and farther away from where we need them to be. And the governors and mayors are dealing with this attainable home, affordable home issue across the country. And they're agnostic as to whether it's rental or for sale, it's just going to be a lifestyle that is attainable to people that they need to run their cities. Now at the national level, we don't really think about it that way, and we don't hear that much discussion about it. And that's a shame because it's a really important issue. And -- and listen, I've always been an advocate for homeownership, but it's for a reason. The average person puts 10% down, it's the only leveraged investment they've got and a 10% down. If appreciation is only 1% a year, it's still a 10% return on their investment. And over a 30-year period in the quiet of the night, the pay down of the mortgage is actually happening on a self-amortizing loan so that at the end of the 30 years, they own the home free and clear, and they've also enjoyed the appreciation of 10% a year over the -- or more over the ensuing years. It's an incredible retirement plan for the average American.

There are 2 things you just said. And I don't usually talk -- I got a list of questions for you, but I usually talk like this, but you just said 2 things that just -- when you talk about mayors and governors. Mayors and governors are the ones who have to make compromises and manage their cities in their states, blue or red as striking deals, making it -- you talked about it as it relates to housing, but across -- and I was sitting there thinking about how challenging things are in Washington and nothing is getting done at Wash in my thought when you were talking about mayors and governors as ought to get rid of everyone who's in D.C. And send every mayor and every governor to DC and have them run our federal government because those people know how to actually make compromises and work on both sides of the aisle, whereas everyone who seems to be sent various counties and states across the country seem to only go with a blue or red sweater on.

So can I just stop you there for a second and say that I see this across the country? And it's so interesting. It doesn't matter if you're talking to a blue or red governor or mayor, they all have the same refrain. We need affordable housing. And that's why I say people ask me, are you a Republican or a Democrat? I say neither I'm a homebuilder. And the bottom line is it's a unifying concept. We need affordable housing, we need attainable housing across the country. So sorry to interrupt on that.

No, not at all. I mean -- I mean, yes, it's very much -- and it is the issue that everyone wants to talk about. I mean I had a U.S. center to come through here last week for a luncheon that I hosted, and all they wanted to talk about was affordable housing and how do we make more affordable housing. Do you think just kind of looking back a little bit, Stuart, to the conversation about Caterra and 3D printing, do you think -- I mean I know you have a joint venture right now with a 3D printing company and you've got a community that has 100 3D homes in it, obviously, in the context of your business, a teeny little thing. But do you think 3D printing has, if you will, better legs on it than modular in the way that Coterra, I mean, obviously, in the way that Coterra was going about doing it, that's an easy answer. But do you think that 3D outstrips modular as it relates to kind of the homebuilding in the future?

No. I hate saying this, but I remain agnostic. Without belief one way or the other because there are lessons that are going to be learned from both. And I think that there might be applications that are differentiated for each of them. There are attributes of the 3D printed home. If you look at its wind load factors and things like that, there are applications there that are very attractive for different geographies. But additionally, the ability to take that product and be flexible with it, the opportunities abound for 3D printed product for a factory built analyzed program. This is -- this has a whole different set of attributes that are very positive and constructive. The question is, can you start to embed the mechanicals in the factory and really create efficiencies there and make it less costly to build and even assemble that on site. We haven't -- we haven't seen that consistently turn out economics, cost factors that actually make these things attractive yet, but it's going to come as we practice, as we learn and we incorporate scale. Scale is where you start to learn what the real cost factors are going to be, and that's going to take some time.

Switching gears a little bit. The Missouri court ruling against the National Association of Realtors as it relates to commissions. It will be appealed, but it looks like it will hold whether it gets held on appeal or whether the justice department steps in, a pretty big impact on the aggregate cost of housing in and, if you will, the cost of trading homes. So generally speaking, probably good for removing some of those friction costs, even though I'm certain as a homebuilder who relies on lots of realtors across the country. They're digesting that and it's going to have a big impact on the realtor market.

Yes. So listen, I speak with great respect of our realtor community that does -- that brings so many qualified customers to us each year -- and -- but I'd also say that what is reflected in that ruling is a notion that the cost of acquiring homes across the country is something that is under the microscope. Now we're talking about the judiciary here, but whether it's the administrative side of government or the legislative side of government, it has been talked about quite a bit, whether it's on the realtor side, the cost of transacting title insurance side, all of these areas are focal points because housing is becoming such a critical issue and making it attainable to more people is about rationalizing costs. So I don't know where that particular -- I haven't read the ruling. I don't know enough about it -- but what I do think, as I've read some of the writings about it is that, as a general matter, there is a predisposition to rationalizing the cost of acquiring homes. You've seen this in the banking industry where the customer has been favored in terms of eliminating fees that are overbearing, overpriced, and this has been over the past decades, I think that's coming to housing, and we all ought to be aware of that, that we've got to bring down the cost of acquiring a home.

I want to end on the philanthropic side in your engagement with the University of Miami, Stuart. I was interested that you have endowed shares for interdisciplinary chairs. And I thought that was interesting just given how you built Lennar and the diversity that you put at Lennar, and I'm thinking that you were sitting there saying, we need to support professors and chairs of departments that don't just think if you will, linearly on what they came and have they studied throughout, but that they're pulling from various parts and bringing together various departments inside of the University of Miami. Am I right in thinking about that? And is that reflective of sort of the way you built Lennar?

Well, Look, Lennar works as an integrated interdisciplinary environment that brings a lot of people together to solve problems and to build a better company. And I think that's a lot about what our culture has been about. It's a lot about the way that we've built durability into the programs and the configuration of the company going forward. You asked specifically about my engagement at the University of Miami, I've been the Chair of the University of Miami. I am and have been for quite some time now, the Chair of the University of Miami Health System. That's counterintuitive what's a homebuilder know about medicine. But the fact of the matter is.

You know how to run stuff. Is what you do -- you've got to run stuff.

Okay. And actually, we've elevated our program so incredibly, and I'm just so very proud of it. But in terms of interdisciplinary, medicine and business and law and the whole rest of what we learn within the university system, engineering. All of these things play together and universities really need to be bastions of bringing people together to solve big problems. Medicine, the cost of medicine in our country is one of those big problems. But another one is the cost of education in our country. Our universities need to be the tip of the spear in figuring out how to rationalize cost with excellence, bringing excellence to our communities and doing it at an affordable cost. I'd like to think that our university system in conjunction with our community hospital system, Jackson Memorial, we have a very unique partnership there. But we bring the best medicine to the broadest array of our community, and we're doing it better and better and better every year at a lower and lower cost. I'd like to think that our university will be tip of the sphere in rationalizing the cost of tuition. As we get better, financially better at running the business. And we bring quality education to a broad range of students. So it is a passion of mine. Health, education, the quality of community life, it's something that we at Lennar think is important. I personally think is important. I don't know if you know, we have a Lennar foundation. That focuses on good works for the community. We have job skills training programs and things like that. Lennar contributes $1,000 for every home we built. This year, it will be about $72 million to our charitable foundation. And all of that money right into our communities across the country. And it's not -- I hope I don't sound like I'm bragging about something because we're really pretty quiet about this. but it is another thread of our culture. It brings pride to our people that we rise above earning the dollar at the bottom line and we focus on what we can do to make the world a better place.

I was going to make a point, which kind of underscores a bunch of things of the pride, but then also the humility in it in that the Medical Center, the University of Miami, is named the Lennar Foundation Medical Center and not the Stuart Miller Medical Center.

Well, I'm sorry, I got to burst that bottle also, Willy, because it's actually -- the ambulatory center is the Lennar Foundation Medical Center and the medical school actually...

Medical school is after your dad. That I know. It's Miller Medical School.

It is after my father. And it was done after he passed away. He never would have allowed it to happen. But he had to be honored for what he brought not just in building a fabulous foundation of the company, but also in what he contributed back to his community. So we, as a family, we wanted to do that, and it was the right place to be. But it is the Miller School of Medicine.

Yes. I love it. Stuart, you've been super generous with your time. It's been a true joy. Thank you. Thank you for running through the history. Thank you for how you've built such a great company and then also your insights in the markets today. I greatly appreciate it, and I know everyone listens to this, will learn a lot.

Thank you. Thanks for having me.

Great to see you.