Homebuilder Says It’s Upbeat Enough to Raise Prices Again
D.R. Horton, the largest U.S. home builder by homes sold, announced that strong sales will allow the company to raise prices for an early start of the spring home-selling season.
The homebuilder announced a 4 percent increase in sales contracts in the first fiscal quarter ending Dec. 31, and a net income of $123.2 million — its highest since 2006.
“In January, and especially in this last week, our sales have been better than expected,” says Donald Tomnitz, D.R. Horton’s chief executive. “I feel that we’re right on the cusp of a strong spring-selling season.”
In November, the builder had said that if sales signaled a slow start to the spring selling season it would try promotions such as free upgrades and assistance with closing to spur sales. But D.R. Horton says that sales are strong enough that it will mostly forgo incentives and raise home prices in some markets.
The average price of D.R. Horton homes under contract last quarter was $275,600, up 10 percent from last year.
The National Association of Home Builders predicts that new-home sales will increase 40 percent in 2014 over 2013. But any steep rise in mortgage rates and aggressive price increases from builders could derail that, housing analysts and economists warn.
The fact that D.R. Horton has “struck an optimistic chord gives us incremental confidence that the spring-selling season is off to a good start,” says Robert C. Wetenhall Jr., managing director of equity research at RBC Capital Markets.
Source: “D.R. Horton Says Strong Sales Allow It To Raise Prices,” The Wall Street Journal (Jan. 28, 2014)