Days after its earnings call during which Ft. Worth, Texas-based D.R. Horton's management pledged its commitment to reduce the 9,800 specs in standing inventory, details of an aggressive "Un-Auction Sale" are coming to light.
Unlike other publics including K. Hovnanian and Standard Pacific which, over the last few months, launched nationwide initiatives to spur sales in all their active markets, Horton is focused on Southern California, where the company's new orders plummeted by 72% last quarter.
Promoting "unheard of savings" of up to 50%, the company is hoping dramatic pricing on Saturday, Feb. 16, and again on Saturday, Feb. 23, will move the 399 homes the company has carried in standing inventory for more than 12 months. Under the terms of the sale, buyers must close before the company's quarter ends on March 31.
Townhomes, condominiums, and single-family homes are being offered in select neighborhoods in Kern, Ventura, Riverside, San Bernardino, and Imperial Counties. Details on the 25 specific neighborhoods included can be found at http://DRHortonUnAuction.com.
Stephen East, home building analyst at Pali Capital, thinks the sale is a good idea. "While we don't like to see sales prices cut as much as 50%, we believe this is the right move to clear too much spec inventory DHI has sitting on the ground," he said. "Spec inventory has been stubbornly static for DHI, which prevents the company from re-establishing a normalized pricing environment in many of their markets."
During last week's earnings call, CEO Don Tomnitz speculated that a recovery in California is more than a year away. "We have closed and merged a number of divisions in California," he said. "We have consolidated a lot of back offices and we feel like we are close to being properly structured. We have the core operators in place to take us through to a recovery in California, but I don't see that coming in the next 12 months.
"Going forward, salespeople have been empowered to move inventory at market price," he said.