The entry-level market in Columbus, Ohio, just got more competitive now that NVR will be building homes on 139 finished lots that it purchased in three suburban communities from Beazer Homes USA, which has been shutting down its operations in Columbus for the past six months.
NVR paid $2.8 million for those lots in July, according to the Columbus Business Journal. That averages out to $20,144 per lot. In one development, Taylor Glen, NVR paid $682,900 for 65 lots, or $10,506 per lot, the Journal reported from county records. "That's low," says James Hilz, executive director for the Building Industry Association of Central Ohio. Hilz wouldn't comment on whether NVR's deal with Beazer establishes a new floor for finished lot prices here. But its latest acquisition is a continuation of NVR's longstanding policy of protecting its balance sheet by purchasing finished lots exclusively. Through June 30, NVR controlled a total of 60,500 lots via contract options, so that if it decides not to build on that land, all it loses is its deposit.
Through the first six months of this year, the builder reported pretax impairment charges of $12.4 million, considerably less than the hundreds of millions of dollars in quarterly impairment charges that other production builders have been reporting over the past year. Consequently, NVR is one of the few national builders still making money: Through the first half of 2008, its net income was $94.8 million, a 46% decline from the same period a year ago, but in the plus column nonetheless.
NVR's return to the Columbus area, after years away, follows Fischer Homes, the Cincinnati-based builder that bought Centex's developments in four Columbus suburbs last January. Hilz is buoyed by the confidence these builders, by their acquisitions, are showing in a market where new-home sales are still slow. "The one good thing is that [home] values have been holding pretty well here," Hilz says, "and when the market turns around it will look different" with two new builders in the mix.
On its Web site, Fischer shows floor plans for homes in several communities in the Columbus area, ranging in price from $130,000 to $550,000. NVR, on the other hand, promotes itself as a "value" builder specializing in more-affordable product. The Journal reports that NVR's homes in two Columbus suburbs will start at prices that, at $130,000 to $150,000, are $30,000 to $70,000 below what local builders Dominion Homes and M/I Homes are asking for their homes in nearby neighborhoods.
However, M/I, which is based in Columbus, doesn’t plan to alter its marketing strategy in response to this new competition, says Bill McDonough, the builder's director of marketing. "We will remain competitive in Columbus at every level [of home] we offer there," spanning from entry level houses through its Showcase products, which include those featured in its Pinecrest neighborhood that range from 2,573 square feet to 3,875 square feet and start at $411,900.
John Caulfield is a senior editor at BUILDER magazine.
Learn more about markets featured in this article: Columbus, OH.