Building giant D.R. Horton Inc. is known nationally as more of a a starter-home builder, but changes to the buying pool has it shaking things up. It is now starting to build slightly bigger homes with more amenities for move-up buyers.
"We've made a conscious effort in a number of our markets to move up into the move-up buyer market simply because we see more demand," Donald Tomnitz, Horton's chief executive, said on a recent earnings call. "We see a great opportunity . . . so we're beginning to expand that portion of our business."
Horton's move, the latest play as the beaten-down sector limps through the worst housing crash in generations, acknowledges that move-up buyers -- absent from the market for the last few years -- -are slowly crawling back into the game. While the number of overall home sales remains weak, desperate builders say they have to meet the market, whatever -- or whomever -- it is.
Repeat buyers made up 47% of sales in the first quarter, up from 40% a year earlier, according to the National Association of Realtors trade group. First-time buyers made up 32%, down from 42% a year earlier. While that covers existing homes -- the bulk of the transactions -- some builders report similar shifts. Investors make up the rest.
At Horton, the nation's largest builder by sales, 55% of first-quarter buyers using its in-house mortgage financing were first-timers, down from 58% a year ago and 66% at the end of 2009.
Second-place PulteGroup Inc. reports that 37% of its first-quarter's sales came from its entry-level Centex brand, while 28% came from its Del Webb adult communities. A year earlier, Centex accounted for 43% of sales, while Del Webb made up 22%.
First-time buyers have dominated the market in the last few years, largely because they aren't saddled with an existing home to sell in a down market. Sales surged last year as the government offered buyers a tax credit of as much as $8,000, a deal that expired last summer.
While it doesn't quite appear the Seattle real estate market is experiencing much in the way of move-up buyers, because we lagged the housing market downturn, this could be a good sign that a recovery is coming. While we have seen some price improvements in San Diego and Carlsbad housing market, the last couple weeks have been sluggish from a home seller's perspective, with pricing and inventory levels favoring home buyers.
Information from THE WALL STREET JOURNAL - Article By Dawn Wotapka