D.R. Horton considers building more upscale homes

Posted Tuesday, Jan. 29, 2013  comments  Print Reprints
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FORT WORTH -- An improving housing market has Fort Worth-based home builder D.R. Horton considering a "higher-end business line," the company's CEO said Tuesday.

Donald Tomnitz briefly mentioned the new concept during an earnings call with analysts Tuesday but offered no details regarding when and where the business would begin building, or what size and price of homes. He said the company would "roll out in different U.S. markets."

Horton became one of the nation's largest builders by offering homes for the first-time buyer. Only in the past couple of years, during the downturn in the housing market, has it shifted its focus to the move-up buyer, the segment that kept buying homes during the recession.

"We are in preliminary stages on that front and haven't made any other public statements outside of what Tomnitz mentioned on the call," said Jessica Hansen, vice president of communications.

The possible expansion was disclosed as Horton reported its best quarterly profit in six years: $66.3 million, or 20 cents a diluted share, for its first fiscal quarter ended Dec. 31, 139 percent more than a year ago when income totaled $27.7 million, or 9 cents a diluted share.

Shares (ticker: DHI) of Horton gained more than 11 percent, or $2.51, to close at $23.82 a share.

Tomnitz said the housing market has improved enough that it has started hiking home prices in some communities, with its average home price rising 10 percent, Horton said.

The strong quarter also resulted because the supply of new home inventory are low, Tomnitz said. Buyers are also trying to buy the biggest house they can afford while interest rates remain low, he said.

"We're clearly raising prices," Tomnitz said. "People are being driven to new home purchases. We have pricing power out there today."

Homes prices in Dallas-Fort Worth rose 5.7 percent in November from the previous year, according to the Standard&Poors/Case-Shiller Home Price Index released Tuesday.

In the 12 months ended in November, prices rose in 19 of the 20 cities followed by Case-Shiller. Phoenix led with the fastest price rise, up 22.8 percent in 12 months.

"Housing is clearly recovering," said David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. "Prices are rising as are both new and existing home sales."

For Horton, home building revenue in the quarter was $1.2 billion, up 39 percent from $885.6 million in the same quarter of fiscal 2012.

Horton said it closed sales on 5,182 homes between October and December, a 26 percent increase from the previous year.

"We experienced broad improvement in demand in most of our markets this quarter, and we significantly increased our investments in homes under construction, finished lots, land and land development to capture this increasing demand," Chairman Donald Horton said in a statement. "D.R. Horton is the best positioned it has been in its 35-year history."

Sales orders for the first quarter increased 39 percent to 5,259 homes from 3,794 homes in the year-ago quarter and the backlog of homes to be built increased 62 percent to 7,317 homes, the company said.

Horton said it ended the quarter with $643.1 million of unrestricted cash and securities on hand.

Sandra Baker, 817-390-7727

Twitter: @SandraBakerFWST

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