By Angela Gonzales | Phoenix Business Journal
As COVID-19 has put a damper on what originally was going to be a hot spring selling season for homebuilders, Meritage Homes Corp. has reduced spending and may cancel some land purchases in certain markets nationwide.
Steve Hilton, chairman and CEO of the Scottsdale-based homebuilder, told analysts in a first quarter 2020 earnings call on April 29 that he is reducing Meritage’s total spending as a result COVID-19 and shelter-in-place orders that began in mid-March .
Hilton said he’s working with land sellers to extend purchase and feasibility deadlines for deals nationwide.
“Most sellers have been willing to work with us and are offering acceptable terms,” Hilton said. “We’re closely monitoring other deals for potential termination if the economic recovery is more protracted than currently anticipated.”
These decisions will be made not just to conserve cash but to put the right product in place at the right time, he said.
“We’re not just gonna completely blow up our land pipeline,” Hilton told analysts. “Every market is different. We don’t want to be in a position where we overpay for land. This is not 2008, where we’re just throwing pots and pans off the ship to stay afloat. This is a different situation.”
As other homebuilders walk away from certain land deals, Hilton said he might buy up that acreage.
But business in Arizona is holding up well, with the strongest absorptions across the company at an average of 17.8% sales per average community for the first quarter. That’s up 44% year over year and resulted in 25% sales growth for the quarter, he said.
“Arizona demand is stellar even through the last six weeks,” he said.
Like many publicly traded companies, Meritage is withdrawing its previous full-year guidance and won’t provide future guidance until later in the wake of market uncertainties due to the effects of COVID-19.
Read More (subscriber content)