Homebuilder D.R. Horton is finding strong demand for its Express Homes line that caters to first-time buyers and is expanding the brand nationwide.
Sales volume for the Express Homes line has exceeded the company's expectations, while the average sales prices have also increased, D.R. Horton CEO David Auld said during a Jan. 25 conference call to discuss the company's latest quarterly earnings. When D.R. Horton launched Express Homes in Texas and a few southern states in April 2014, the average sales price was $169,000. Since then, prices have been inching up and the expansion into Southern California has increase the average price of Express Homes units to $199,000.
"Everywhere we go we see good absorption and margins," Auld said.
Horton's mortgage company is benefiting from the increase in Express Homes sales. "First-time homebuyer represented 43% of the closings handled by our mortgage company, compared to 40% last year," according to Jessica Hansen, vice president of investor relations.
Loans guaranteed by the Federal Housing Administration and Department of Veterans Affairs "accounted for 50% of the mortgage company's volume, compared to 42% in the year-ago quarter," Hansen said during the conference call.
Hansen also noted that borrowers using DHI Mortgage had an average FICO score of 714 and average loan-to-value ratio of 89%. The mortgage company financed 51% of the builder's homebuyers.
The decision to expand Express Homes nationwide comes at a time when the Fort Worth, Texas, builder has seen a decline of its luxury brand, Emerald Homes.
"We are driving capital to the programs that are driving the best returns. And right now Express is driving a great return," Auld said.
The CEO acknowledged that Horton has not faced much competition in the first-time buyer segment from other builders, but he expects there will be competition in the future. The lower-cost Express Homes are also attractive to retirees and other buyers as well.
D.R. Horton completed 8,061 home sales in its
Emerald Homes comprised 4% of closed sales in the first quarter, compared to 3% in the prior year. Sales of Horton Homes, its mid-price brand, slide to 74% in the first quarter from 87% a year ago.
Meanwhile, D.R. Horton executives are optimistic about the upcoming spring selling season. And in January they have been seeing a week-by-week acceleration in sales. "We are excited and prepared for the spring selling season and opportunities ahead," Auld said.
He expects most of the Texas market will be very strong this spring. The Dallas-Fort Worth market is "very good," he said. But in Houston, "there is a lot of uncertainty and volatility within the oil and gas business which is making people more conservative about buying homes."
