Citing improvements in existing-home sales and new-home inventory, a flattening of the pending sales index, and a greater number of completed homes sold in comparison to those added to inventory, director of investor relations Brent Anderson said, “There's some consensus around expectations that we'll see some improvement in the latter part of next year.”
But just in case the indicators are leading toward a false bottom, Anderson added that management would be continuing its “asset efficient” strategy—and thanking its lucky stars for a concentration in Texas, where local housing markets have fared better than those in many other parts of the country. Of Meritage's $2.3 billion in housing revenue last year, Texas operations accounted for more than $1.0 billion.
Furthering the company's asset efficient model relies on three key factors:
Anderson and Seay also pointed to the fact that the company was looking to purchase new land as an early indication of a housing recovery. However, the company is pursuing that course of action with caution, targeting smaller parcels that would include anywhere from 50 lots to 100 lots. Seay said that the company had purchased as many as three new land positions and was actively seeking parcels in Orlando, Northern California, and even Phoenix. The deals were happening at significant discounts, but the company was going to have to hold the lots on its books. With land bankers caught in the credit crunch, access to option deals is restricted, forcing more builders to buy rather than option new land. But that risk is reduced by purchasing smaller parcels.
“Sure, we may need to put some [lots] on the balance sheet, but we're keeping a short-term perspective,” Seay said.