The Exit Option

The American homebuilding industry has a business model. Buy land. Sit on it. Pray the market holds. When it doesn't, write down billions.

NVR doesn't buy land.

The company options lots instead, putting down roughly ten cents on the dollar. If the market turns, they walk away from the deposit. If it holds, they build.

They don't own the risk. The sacrifice everyone else refused to make.

In 2008, competitors filed for bankruptcy. Tousa. WCI. Others wrote down billions in land they couldn't sell and couldn't build on. NVR posted a profit. Then it gained market share while the industry contracted, because it had capital when nobody else did.

NVR emerged from Chapter 11 in 1993. Today its stock trades above $8,000.

The homebuilding industry's espoused strategy is building homes. Its actual strategy is land speculation. NVR is the only major builder whose execution matches what it says it does.

Everyone else buys the thing that kills them. NVR buys the exit.

Go deeper: Execution Reveals