This article published in the Phoenix Business Journal.
April not as painful as expected for Valley home-builders amid Covid-19 stay-at-home orders
While home-builders were expecting a strong selling season this spring before Covid-19 hit. The impact of stay-at-home orders wasn’t as painful as expected as they pivoted to offer virtual and appointment-only tours.
From entry-level to luxury properties, home-builders experienced better April sales than they did in March. When the first stay-at-home orders were enacted and most home-builders closed their sales offices.
“We actually lost business in March,” said Rod Cullum, president of Scottsdale-based Cullum Homes. Which builds luxury homes mainly in Scottsdale and northeast Phoenix.
Usually, Cullum averages 20 to 25 home sales a year, priced between $1.5 million and $5.5 million. This time of year he’s usually seeing one to two sales a month.
“We did better than that,” he said. “We did over $11 million in sales in April. In March it was about a third of that. March was more tenuous.”
Cullum, who has offered virtual tours of homes for the past four years, said he’s seen fewer lookie-loos and more serious buyers.
“The quality of that buyer is way up,” he said.
Demand for new homes
Doug Fulton, CEO of Tempe-based Fulton Homes, said he also is seeing demand for new homes and sales continue to be strong as he opens a new community with 822 homes in the southeast Valley.
Newport Beach, California-based Landsea Homes, which has been gobbling up local home-builders to become a major player in metro Phoenix. Also said it saw a higher quality home-buyer during the Covid-19 pandemic.
The company sold 100 homes and closed on another 61 during April in metro Phoenix, said Michelle Byrge, vice president of corporate marketing for Landsea.
Scottsdale-based Taylor Morrison Home Corp. (NYSE: TMH) also is seeing an increase in traffic sales, CEO and Chairman Sheryl Palmer said during a first quarter earnings call with analysts on May 6.
“Even now in early May, the landscape certainly looks a lot different since a national emergency was declared nearly seven week ago. When we transitioned a majority of our team members to a work-from-home status,” Palmer told analysts.
While she is limiting all nonessential cash expenditures and working with developers to push deals into the future. Palmer said she’s encouraged by the sales paces she’s seen.
Similarly, Steve Hilton, chairman and CEO of Scottsdale-based Meritage Homes Corp. (NYSE: MTH), reduced spending and is being more cautious in future land purchases.
Setting up virtual tours has been instrumental in keeping sales alive, Palmer said, with 20% of sales coming virtually in April. Between 80 and 85% of appointments made online were to meet with a salesperson.
“This is going to evolve when we are fully open, allowing our customers to self-service the way they want to work with us,” she told analysts.
Taylor Morrison finished the first quarter with 3,466 sales orders, up 33% from the prior year quarter.
Like most home-builders, Taylor Morrison experienced strong sales during January and February. With sales up 46% in January and up 64% in February compared with those months in 2019.
That pace continued during the first half of March, but started slowing during the last 10 days of the month as the home-builder industry adjusted to a new reality, Palmer said.
For the three months ended March 31, Taylor Morrison reported a loss of $31.43 million on $1.35 billion in total revenue. Compared with a net income of $51.13 million on $925.1 million in total revenue. The financials had little impact on the stock on Tuesday.