At the beginning of the year, woes in the energy sector made Texas a potential problem spot for the building industry. In the earnings reports that just wrapped up, the state indeed turned out to cause a blemish in an otherwise strong earnings season for many builders.
But energy woes, generally, haven’t been the problem. Instead, it was the weather wreaking havoc on starts and orders. Spring’s torrential rains kept buyers at home and, perhaps more importantly, delayed starts for many builders.
“I think one thing that everyone can intuitively understand when it’s raining like crazy and you can’t get on construction sites, it’s very hard to finish houses,” said Beazer President and CEO Allan Merrill on the company’s recent earnings call. “What’s a little bit less obvious is, when you can’t even commence development, you’re creating delays in projects, where you’re not even vertical yet. And that’s really one of the things, it’s not just a Beazer issue clearly, it’s [affected] land development in a very significant way.”
On his company’s earnings call, Century Communities CFO Dave Messenger said he expects the Spring showers to push closings back further in the year, since the company missed about 70 days of pouring concrete in Texas (and another 75 days of pouring concrete in Colorado).
For Beazer Homes, May’s rains cost the company about 50 closings in its third quarter, but the problems will be felt into the future.
“Many of the weather-related issues we faced in the third quarter will continue to impact us in the fourth quarter, leading us to push another 100 closings out of the fourth quarter for a total of 150 into fiscal 2016,” said Robert Salomon, Beazer’s CFO and Chief Accounting Officer in the company’s earnings call.
Though its not public, David Weekley Homes is one of the largest builders in the country. Chairman David Weekley says the company will come in with fewer closings than it had in 2014, when its 3,168 closings ranked 16th on the BUILDER 100. Delays are a big part of the reason why.
"Its not just our weather," Weekley says. "It’s the developers and utilities. We were planning on getting lots in March and they don’t show up until August. A lot of start ups got pushed back. I think that’s a challenge for a lot of builders."
With so many builders attempting to catch up, others issues arise. “We are working hard to catch up now that we are in the summer months but contractors are in high demand, and short supply,” said Phillippe Lord, COO at Meritage Homes Corp. in the company’s earnings call.
But things are looking up. Meritage expects to increase its Texas community in the second half of the year and the company said in its earnings call that its sales per average community count in the second quarter was as high as last year. And, best of all, the company hasn’t seen the energy sector’s problems impacting sales.
“We still have not seen hardly any impact from the lower oil prices in Houston, actually our sales per community in Houston were better this year than they were last year,” said Steven Hilton, CEO at Meritage.