Not only does Mike McElroy not back down from a professional challenge. He seeks it out.
The new president at Mattamy Homes Charlotte Division went straight to work at Centex Homes, a national homebuilder in Tampa, Florida, after graduating from the M.E. Rinker Sr. School of Construction Management at the University of Florida.
McElroy spent 10 years in Tampa with Centex, which was acquired by Pulte Homes, and helped his team take home a Builder of the Year award in 1996.
But that meant it was time for a new challenge.
“I was looking on the company performance matrix sheet and I saw Charlotte at the bottom, and I raised my hand and said, ‘Can I go to Charlotte?’” he said.
The Florida native still has ties to his home state; he spent the Fourth of July with his wife and daughter at their vacation house on the Gulf of Mexico. When he’s not working, McElroy enjoys hunting, fishing, tinkering and restoring old trucks and riding motorcycles.
Read on to find out what’s kept McElroy in Charlotte for nearly 20 years, and what he is seeing in the homebuilding world these days.
When you first moved here, what were the biggest differences you noticed between Charlotte and Tampa?
Charlotte was a more dynamic city. It had some what I’ll call city or community benefactors that really had a vision for the city – the Belks and the McCrorys and Hugh McColl (former Bank of America CEO). Those men are all kind of still active – you know, Allen Tate who just passed away (was one of them). There was a group of those men who had been in Charlotte that had a vision for the city, and that wasn’t true in Tampa. Charlotte’s active community leaders had a vision for the city, and it was a pretty exciting environment to be in. And Charlotte was not a service-oriented city like Tampa, you know, a lot of the jobs there are service-oriented, (such as) call centers. Charlotte had a lot of finance and manufacturing, so it was a little more diverse economy, and it was a growing, exciting city. It had a very high number of young people coming here in banking and legal and insurance to work, so people closer to my age – there were a lot of them. So it was an exciting city in that way.
How has Charlotte changed since then?
I think if you look at the demographic of the population in the 20 years I’ve been here, I think the MSA has almost doubled in size – don’t hold me to that – but the population has grown a lot. And you’re beginning to see where you had a very clear vision for the city, I mean I still think that’s there, but each municipality now is fighting for its own identity and to protect itself from becoming a city they don’t want to be. So there’s more concern within the different little cities. You know, if you go to the north side with Cornelius and Davidson and Huntersville (and ) Mooresville, they’re stronger in protecting their town and wanting to grow like they’ve envisioned it. Twenty years ago the vision was there, but you weren’t bumping into that when you were trying to develop and build; it was a little easier.
Why do you think that’s happened in Charlotte’s surrounding municipalities?
Because they’ve had the chance to look back at Charlotte and say, ‘We don’t want to be that,’ because Charlotte grew first and fastest, so they can see the mistakes that were made inside the city of Charlotte – or in Mecklenburg County – and can say, ‘We saw what you did, we’re not going to repeat that.’
Which municipalities are you referring to?
All of them. Everybody. That’s occurring in all the municipalities. You started hearing it just before the downturn in 2007 (or) 2008, and you had about a five-year respite where people were just kind of trying to figure out what was going to happen with the economy and now that the housing boom is back, you’re hearing it again.
Since you brought up the downturn. When do you think the leftover effects of the recession will go away?
I think fundamentally, housing is strong and it will continue to be strong and it will continue to get stronger. I think if you look at Charlotte through the downturn, we took a huge hit, but it wasn’t nearly as bad as some other cities in the U.S. And I think by those standards, we survived it and got through it pretty good. What I do see is — in particularly the investment community and inside the individual companies – there’s a hangover, and it’s an emotional hangover. It’s not financial, meaning, ‘Can we go build and make money?’ Yes. Everyone’s right on edge, thinking how easy it would be to fall. For example, with the Greece issue and the stock market dropping 350 points. So you are seeing that emotional concern, but yet you see job growth and you’ve seen all the indicators over the last 12 months continue to get better and better and better – unemployment, job growth, etc.. But still, something as small as Greece to impact the stock market 350…the same things happening in the investment community, and within the building community. We’re not that far removed from the downturn. It’s still fresh. So I see people making decisions more out of – not fear – but they’re looking at their exit strategies a lot stronger than they used to. It used to be you’d talk about, ‘Well, what if we have to exit this community?’ OK, you kind of talk about it. Now, when you’re putting up a new community and investing, you’re looking at an exit strategy if you have to get out.
What needs to happen to make people feel more secure?
Time slash generation. You know, I read all these articles about your generation – maybe people a little bit older than you – they’re wanting to live in apartments or are living with their parents. They don’t want to buy housing because they saw that first hand, and they’re going to be on the sidelines longer than normal. So in the early 2000s, the 25- to 35-year-olds were forming households; they were buying a lot of housing. Today they’re not, and that’s the other hangover; they saw that, so they’re saying, ‘Hey, we’re not going to go back into that,’ yet they could and they’re probably safe to do it. So it’s going to take some time before they re-enter the housing market.
Switching gears, how has your experience varied at each big homebuilder you’ve worked with?
Mattamy is a privately held company. I haven’t been here long enough to tell you the differences. Most of the nationals like M/I (Homes) or Centex (Homes) are very similar. You know, they have stockholders that they’re responsible to. So…they have to answer to stockholders and sometimes – based on stock price and economic pressures – the company has to react quickly. So instead of being focused maybe on the longer term, sometimes they get short-term focused, which they have to be because of the stockholders…I’m not sure that’s going to be true (at Mattamy). I mean, it still will be to some extent, but I think – from what I’ve seen just in my short term here – Mattamy probably has a little longer vision. But they’re all companies; they’ve got to make money at the end of the day.
Did that difference play into your decision to come to Mattamy?
No. The opportunity I had at Mattamy was to come grow a company. You know when I started with Centex (Homes) in Charlotte they were doing 300 homes in 1997; when I left in 2008 we did 1,010. So we grew to 1,000 closings.
What is your No. 1 goal at Mattamy?
We want to grow profit, number one. And we want to establish ourself as a top-five builder in the market place. You put those two hand-in-hand…you can do volume and not make money, and you can make money and not do volume. The art is to do both: where you can grow your volume and your profit so that you have a larger impact in the marketplace. Anytime you have a larger footprint in the marketplace there are benefits to that. It’s people looking for a career; it’s access to capital; (it’s) getting better opportunities to look at land. You’re just on the short list. We want to be on the short list so when people think about careers, selling us land, where they want to go work, those sort of things, people say, ‘Hey, Mattamy Homes is a pretty big homebuilder in town. Let’s go see them.’
How have you seen homebuilders react to the growing number of renters? If at all?
I don’t know any builder that’s directly attacking the rental market…I’m sure there’s programs – we don’t have one right here active today; we’ll probably need to develop one. Like I said, I’ve only been here three weeks so there could be one, I just haven’t had time to look at it yet. But, again, part of that is going to be, when you’ve got that echo boomer – 24 to 35 (age) group – there’s a certain magnitude of people that are in there, and as time goes by each of them are a year older. And time will solve part of that problem because they’re going to eventually say, ‘We probably need to own,’ because they’re going to change their lifestyle. They’ll get married; they’ll start families or whatever, and they’ll move back into the marketplace. So you can attack it through marketing and other things. You know, used to be you’d always show someone the cost of rent versus the cost of owning – that was a primary marketing campaign that people would do. But today, you know – again – that overhang from the downturn is very heavy on the young first-time homebuyers’ conscience. They want to be able to afford a new home, but they are also very in tune with, ‘Where am I buying that home?’ And they’re going to want to be pretty sure that that area is going to have appreciation. So they’re not just going to move in and say, ‘Hey, I live in a home and I don’t rent.’ They’re going to say, ‘I live in a home and I don’t rent. By the way, I’m in a great part of the city where I’ll see appreciation, so that if the economy does stumble I’m not going to lose as much.’ All that goes hand in hand. It’s stronger today than it’s ever been.
What would help put more homes on the market?
Well, at the core of that is you’re probably still fighting a lot-delivery problem. Charlotte did not produce any new lots for about five years, but we were still building and permitting 5,000 homes a year. So…say you’re building 5,000 homes a year over five years, that means we built 25,000 lots in five years; 25,000 lots were not developed in five years. So your lot supply went down by 25,000. As the market’s recovering, people are trying to develop lots, so part of the inventory problem is there’s just not enough lots. The other is what I mentioned earlier around people’s caution in just coming out of the downturn…some, not all, are going to be less aggressive about putting that capital out to build new homes as – quote – inventory. Because they’ve got to be able to stop quickly. If the economy were to turn, they (say), ‘We’ve got to stop because we don’t want all those houses out.’ So there’s that going on too. It probably originated as lot supply, and I think lots…we’re going to see more and more lots, so that will kind of take care of itself, but then it’s going to be, how far out do you take your capital and put it in unsold homes?
What advice would you give to people looking to buy a home in Charlotte right now?
Buy a home, but be smart about it. So all the things I’ve talked about, (such) as where you are buying in the city, understand you want to make an investment. You’re going to try to protect your value against any depreciation, and there’s ways to do that. There’s tools that you can use; Realtors are a very good tool for that. You can look at property values in parts of the city; you can access that by zip code and look at where you’re at…I would say go buy a new home; it’s a good time to do it because you still have – historically – very low interest rates – very, very low. You know, 3.5 (percent) to 4.5 (percent) interest rates. So financially, from that perspective, there’s never been a better time, just be smart about where you’re buying.