With the President’s signature on the housing bill barely dry, Centex Homes CEO Tim Eller told analysts that the company is looking at ways to leverage the $7,500 tax credit in the bill into sales, perhaps by turning it into a program similar to down-payment assistance.

"We don't have a solution yet, but we are looking at ways to monetize that tax credit early, especially as we approach the end of the tax year," Eller said during the company's first-quarter-earnings conference call.

The bill, now law, does away with seller-funded down-payment assistance (DPA) programs on FHA-insured mortgages this fall and will have a significant negative impact on Centex business, which is entrenched in the entry-level marketplace.

Management told analysts that during the quarter, about 25% of Centex buyers utilized DPA, equating to roughly one-third to one-half of the company's total FHA mortgages. Since the use of FHA loans has increased, the company has seen the overall number of buyers using DPA increase as well. But CFO Cathy Smith notes that the one-third to one-half metric of those total loans using DPA has remained stable.

The bill signed by President Bush Wednesday morning eliminates FHA backing for mortgages originated with down-payment assistance programs and offers a $7,500 temporary tax credit for first-time home buyers. That credit, however, will have to be paid back by the taxpayer within 15 years, and the actual taking of the credit could not be realized until taxes are filed in April.

On the home building front, Eller said that the company is still dealing with "different behaviors" as it continues to transition from building spec homes to its new asset-light and built-to-order model.

"We aren't going to try and chase someone generating sales in a specific community through a weekend sale, and we won't chase foreclosures," said Eller, who described the Centex approach as "thoughtful pricing."

As a result, there has been some fallout in the form of fewer yields per neighborhood.

In recent months, the company has moved to what it calls a transparent pricing strategy that sets price to the affordability level of customers instead of motivating with incentives.

Prior to this most recent quarter, the company was selling at an average pace of three sales per neighborhood per month. But with dour buyer sentiment and traffic down substantially (dropping 40% month-over-month in June alone), sales have fallen closer to 2.5 per neighborhood per month.

Still, as Eller pointed out, the average community yield per neighborhood for builders is about two sales per community per month, so even with the slip, Centex is performing above the average.

"I think [the move to transparent pricing] allowed us to outsell the market for the last six months," said Eller. "But now, most other builders are doing the same thing."

The different behaviors inherent in this model also hamper the company's ability to compete with spec home sales. Eller, however, said, "We find our buyers are pleased with the notion of building a home. They are more satisfied and it's a business model decision we feel confident we can execute. It will offer better margins and be smart as it builds to a cadence. We can't compete with a builder who dumps specs on the market, but very few are doing that today."

Even if sales slip further to a level of two per community, Eller said he is confident the company can continue to be cash-flow positive. In fact, the company's ability to show stronger cash-flow generation than was anticipated was a high point of the released quarterly data.

Eller said Centex is seeing benefits as a result of cost initiatives and processes in addition to market share gains as the company moves into the build-to-order mode. In the recent quarter, those were heavily attributed to process over share, but the company is recognizing gains in "most markets it participates in." Specifically mentioned were Central Texas, San Antonio, the Midwest, Carolinas, and D.C., which are "growing nicely."