Home Builder Enters 'Bargain' Market

The nation’s largest home builder, D.R. Horton, is changing its focus from higher-end homes to the entry-level market. The company will be launching a new brand, called Express Homes, which will offer properties priced between $120,000 and $150,000 – much lower than the national median new-home price of $290,000. D.R. Horton executives say demand for lower-priced homes is high, but supply remains inadequate.

"We wouldn't be getting into Express Homes if we didn't think it was the next segment of the market to recover," D.R. Horton CEO Donald Tomnitz told CNBC.

Express Homes will be concentrated in Texas, Florida, and Georgia. The homes will be offered in a turnkey manner, with no options or upgrades available.

D.R. Horton’s move comes at a time when other builders, such as Pulte Homes, are focusing on higher-end homes.

"We view it as the right move," says analyst Stephen East, senior managing director of research firm ISI Group. "Horton's cost structure and operational experience at the entry level makes them one of the few builders that can do this profitably. Also, we are firmly convinced the first-time-buyer segment is getting access to more credit, which will lead to more demand for this low-entry level product."

Source: “Largest U.S. Builder Bets on ‘Bargain’ Homes,” CNBC (April 24, 2014)