When Meritage Homes CEO Phillippe Lord took over the helm of one of the biggest home builders in America, he was almost immediately faced with an existential crisis. The COVID-19 pandemic was unlike anything in living memory. After ensuring everyone in the Meritage family was safe and stayed that way, Phillippe realized they would have to change to navigate this new world. Not only would they need to change due to the current crisis, but they would need to embrace permanent change and ingrained flexibility as the surest way to manage long-term success.
Phillippe joins New Home Insights podcast host Dean Wehrli on the latest episode.
Phillippe Lord, Chief Executive Officer, Meritage Homes
How to lead by letting go
- VUCA—volatility, uncertainty, complexity, and ambiguity—guides Meritage through the endless changes and surprises of the housing market. Understanding that these factors define the world better enables you to respond to them.
- It’s not for everyone. This approach requires an agile mindset and checking your ego at the door. When COVID hit, for instance, Phillippe relates how leadership didn’t know what they didn’t know. But the more smart people they let into the room, the better the information, the better the solutions, and the better the outcomes.
- This strategy is a means to an end, however. The goal is to have an organization that can roll with the proverbial punches, with clear strategic goals and the ability and willingness to meet change and react.
- This approach has helped Meritage grow organically into the country’s fifth-largest new home builder (by sales volume).
Now for that clear focus
- Meritage’s success has been honed on affordability. The company has a laser focus on the entry-level space. In an era of higher mortgage rates, this focus is more necessary and successful than ever.
- One of the keys to affordability is keeping an eye on costs. But this does not mean sacrificing quality. Meritage has long been an innovator in energy efficiency. This goal fits well within current global trends and helps keep money in the hands of buyers instead of the energy companies.
- But let’s be clear—if push comes to shove, between those twin goals of affordability and efficiency, getting a customer into a new home is going to win.
Where to next?
- Putting the principles and change into action is key going forward for Meritage. This means a few things:
- They are expanding into new markets to continue to grow organically.
- They are pursuing new endeavors like build-to-rent (BTR), a sector that, like attainably priced for-sale homes, can also help solve the riddle of affordability.
- They are land banking and looking to increase margins to manage risk.
- The “golden handcuffs” of locked-in low rates from past purchases have dampened overall demand. At the same time, it has led to a spike in new home market share. Phillippe argues that the creative financing the bigger players in the new home sector can bring to the table is a huge opportunity for continued growth.
- What are the biggest challenges to building and selling homes? Phillippe cites mortgage rate volatility, continuing supply chain problems, and hiring new talent. It has to feel good to have a strategy to face whatever factor is not on that list because no one saw it coming.