Thanks for the write up! You included some history I didn't know. I focused a bit more on unit economics and how their ASPs have trended compared to national averages: https://beelicapital.substack.com/p/nvr-inc
Don’t you think relying solely on land options isn’t the most efficient strategy? After all, they aren’t free—and if you end up canceling 100% of them, you’re not building anything at all.
Personally, I think a more balanced approach makes sense: owning lots for your core pipeline while using options for the more speculative projects. That seems like a healthier model.
Sure, companies like NVR and DFH have done well recently using options—but how much of their success can we really attribute to that strategy alone, versus other strengths they might have?
And isn’t it possible that in certain macro environments, owning land outright could actually be better? For example, if developers aren’t needing to cancel options, doesn’t that suggest they’re getting land at more attractive prices—and maybe those using only options are missing out?
I personally prefer the land to be optioned. But I also like plenty of companies that own land, $DHI $PHM are fantastic companies, kicking off a ton of cash.
Although I prefer the land optioned , that’s doesn’t make it optimal. As I mentioned in the risk section, it’s become more popular, demand is likely inflating option pricing, potentially enriching land bankers at the expense of builder gross margins.
I appreciate this bottom up summary. From the top down, homebuilding is a very cyclical industry. While industry fundamentals remain much stronger than 2008, the tide may be going out in its natural cycle soon. Could be a good buy in a few years time.
Thanks for the write up! You included some history I didn't know. I focused a bit more on unit economics and how their ASPs have trended compared to national averages: https://beelicapital.substack.com/p/nvr-inc
Don’t you think relying solely on land options isn’t the most efficient strategy? After all, they aren’t free—and if you end up canceling 100% of them, you’re not building anything at all.
Personally, I think a more balanced approach makes sense: owning lots for your core pipeline while using options for the more speculative projects. That seems like a healthier model.
Sure, companies like NVR and DFH have done well recently using options—but how much of their success can we really attribute to that strategy alone, versus other strengths they might have?
And isn’t it possible that in certain macro environments, owning land outright could actually be better? For example, if developers aren’t needing to cancel options, doesn’t that suggest they’re getting land at more attractive prices—and maybe those using only options are missing out?
I personally prefer the land to be optioned. But I also like plenty of companies that own land, $DHI $PHM are fantastic companies, kicking off a ton of cash.
Although I prefer the land optioned , that’s doesn’t make it optimal. As I mentioned in the risk section, it’s become more popular, demand is likely inflating option pricing, potentially enriching land bankers at the expense of builder gross margins.
I appreciate this bottom up summary. From the top down, homebuilding is a very cyclical industry. While industry fundamentals remain much stronger than 2008, the tide may be going out in its natural cycle soon. Could be a good buy in a few years time.