Standard Pacific Homes CEO Ken Campbell is cautious about getting excited over improving home sales contracts in the last quarter. They could be, after all, just a fluke of seasonality and pent-up demand from the abysmal fourth quarter 2008.

"I wouldn't jump to the conclusion that the market is improving" despite numbers that show it is, he said during the company's conference call Friday, May 8. "I think it is kind of dangerous to extrapolate from current conditions."

Yet there are a lot of positives. "Where we are today is ahead of where I thought we would be," he said.

"If you wanted to be rosy, you could look at things like the cancellation rate in the first week in May is in the single digits. That hasn't happened since we've started keeping track, five years ago."

"In the first week of May, we sold more houses than we did in the first week of May last year," he continued. And, while traffic is down by half, it's improved in quality." We are getting less window shoppers. People aren't doing it for fun as much anymore."

"We've actually raised prices in a couple of communities," he said. "You probably remember when some of us used to do that in every community every month."

Still, he's not convinced those signs of improvement will continue. "I'm still kind of nervous for the second half of the year as unemployment continues to grow."

So the company that Campbell has shrunk to roughly 900 people, down 380 since the end of 2008 and more than 50% since the end of 2007, will continue to cut positions and costs.

"We took a pretty big chunk out of it," Campbell said. "We have got to finish that." Soon the company's head count will be closer to 800, he said. Standard Pacific is also continuing to try to build the same quality house less expensively through value engineering and supply chain improvements.

It's not doing what many other builders are doing--building smaller homes for a lower price point.

"We are going to reinforce our positions at the higher end of the non-BobToll business," he said. "We are going to stay at this price point that is slightly higher than others. We think the market for this product is big enough."

And the company is holding the line on deep discounting. While that might lower the number of sales, the improved margins should make up for it, he said.

It has also mothballed communities that it thinks have future promise rather than sell homes for less there. It left the Chicago market completely, spending $7.3 million to exit a joint venture it has there. It's also moved out of Jacksonville, Fla., and parts of South Florida until things get better.

"If we can't make money, we will just get smaller," he said.

Campbell's also thinking about ways to improve Standard Pacific's high debt margin to give the company a "longer runway." Separately, he's considering seeking investment cash so the company will be able to invest in land in 2010 when he expects land prices will be better.

"If I see a great opportunity [this year], I might get frisky and go do something," he said. "But we think it's going to get better next year."