One Builder Banks on Going Cheaper

January 27, 2016

Building giant DR Horton's focus on cheaper homes and the entry-level market appears to be proving profitable.

“We were first movers, and we were aggressive first movers,” David Auld, the company’s CEO, said during the company’s quarterly earnings call this week, adding that DR Horton’s Express brand “had been the driver of market share gains.” The builder says its high-end brand, Emerald, has been seeing slower movement while Express and Horton—its mid-level division—are gaining traction.

DR Horton launched Express in 2014, offering homes between $120,000 and $150,000 at a time when most builders had been catering to the luxury market. Prices on Express homes have moved higher since the launch—slightly over $200,000 in many markets now—but the brand has been strengthening its foothold in Texas, the Carolinas, Florida, and Southern California, the executives note.

"They are doing the best job of any of the large builders executing at entry level, and I think you have to have that as you go through '16," Stephen East, a homebuilding analyst for Evercore ISI, told CNBC.

A limited supply of existing-homes for-sale is pushing prices higher at an unhealthy pace, according to the National Association of REALTORS®. "A housing shortage is in the cards for the spring buying season," NAR’s Chief Economist Lawrence Yun said in a recent statement.

Source: “Why One Builder Thinks Cheaper Homes Work,” CNBC (Jan. 25, 2016)