The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Susan Marie Maklari - Goldman Sachs Group, Inc., Research Division - Analyst
: My first question is you talked about the focus that you have on ROEs and improving that. And when we think back to the last housing
cycle, your ROEs were at least in the mid-20s, maybe even the high 20s in our model, and granted there's changes in the business
today relative to then. But back then, it was more of an output of what was going on in the housing market.
When you think about the focus that you have today on expanding those ROEs and all the different elements of the business that
are coming together, where do you think your returns can get to this time? And how do we think about that path relative to the
past?
Question: Susan Marie Maklari - Goldman Sachs Group, Inc., Research Division - Analyst
: Okay. That's helpful. My follow-up question is on lumber. Obviously, we've seen that come down in the last week or so. You talked
about the benefits that you expect to see from that in the back half of the year. But can you talk to what you're seeing out there in
terms of the lumber market? How sustainable do you feel like this pullback is? And how are you kind of planning for cost as we think
about the future quarters and going into '22?
Jonathan M. Jaffe - Lennar Corporation - Co-CEO, Co-President & Director
With respect to lumber, I don't think anyone felt at the high level that it was that sustainable and it was sort of the perfect storm.
We've seen, I think, at the beginning stages of the pullback in lumber costs, a pullback in demand from the big box retailers as the
do-it-yourself market postponed projects for 2 reasons. One is for post-pandemic, they're spending money and their time elsewhere
and they didn't want to pay that high cost. So there's been a pullback on demand on the lumber supply chain, which has started to
bring costs down from the unsustainable levels.
So as we think about it, every 10% reduction in random lengths equates to about plus or minus $1,700 of our average size home.
And same thing for OSB, about the same, about another $1,700 per home. So as you see it drop from the level of a high of $1,500,
we'd expect probably our August starts to see a benefit of $200 to $300 a thousand board feet in random lengths. OSB, less than
that, as it has not started coming down yet, but it should follow suit.
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