Centex Steps Up Promotions

The homebuilder offers up to $100,000 of discounts in Northern California.
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Updated from 11:12 a.m. EST

In an aggressive push to move its housing inventory in Northern California,

Centex Homes

(CTX)

is offering up to $100,000 discounts on its stock of new homes in the region.

"Turn off the tube. Drop the rake. Next Saturday is your chance to buy a Centex Homes in almost any Centex Northern California neighborhood and take $40,000 to $100,000 off the price on selected homesites," says

the ad promoting the sale.

"New construction or one of our ready-to-move-in homes, it doesn't matter. Next Saturday's the day. 10 a.m. till 10 p.m. is the time. Every model will be open in each of our neighborhoods. So why not let the leaves blow into the neighbor's yard, you're gonna be moving away," the ad says.

The incentives demonstrate how pricing is becoming an issue in Northern California and other coastal areas of the country. The San Francisco Bay area has shown rapid price increases over the past few years, which has boosted margins at builders. But with land prices rising and the use of incentives increasing, margins will eventually come under more pressure.

Dallas-based Centex has 11 new-home communities in Northern California, in the outer suburbs of San Francisco and the East Bay.

Centex spokesperson Neil Devroy says the discounts are being offered on less than 20% of the company's inventory in Northern California. The incentives amount to 5% to 8% of the sales price, as some of the homes being sold are listed for more than $1 million. Similar price cuts -- although not one-day-sales -- were offered in Northern California last year to drive traffic at the communities.

Devroy adds that other incentives are being offered elsewhere around the country. In Florida's Palm Beach area, Centex is offering incentives of up to $100,000 for homes with a list price of $350,000 to $550,000, according to Mike Morgan, a Realtor in the area.

"It's nothing unusual. We offer promotions all of the time. It's part of a process to manage asset turns," Devroy says. "This is just an effort to make sure that we are selling some inventory that we want to sell in certain select neighborhoods at the end of the fiscal year." Centex's fiscal year ends March 31.

Home sales in the Bay Area have been slowing in recent months, according to DataQuick Information Systems, which tracks California housing sales.

A total of 9,717 new and resale houses and condos were sold in the region in November, the latest period for which data is available. That was down 7.5% from 10,508 in October and down 10.8% from 10,897 a year earlier.

"The California market is no longer a red-hot sellers market. It has moved back to more normal conditions," says Greg Gieber, an analyst with A.G. Edwards, which doesn't provide investment banking services to Centex.

"There is still a shortage of single-family housing ... but price has become an issue, and that is slowing down the sales rate. And that means the builders have to return to their normal procedures of always doing some incentive."

In late October, Centex offered a

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employee discount plan that offered discounts of 5%, plus up to $20,000 in additional incentives, for buyers who closed on certain of its Atlanta-area homes by the end of the year.

Centex reports earnings for its fiscal third quarter after the market close on Jan. 24.