IRVINE, CA—Locally based homebuilder Standard Pacific Homes has been reaping the benefits of the luxury residential market. In a recent first-quarter earnings call, president and CEO Scott Stowell reported that the firm’s average selling price for quarter was up 20% over first-quarter 2013, and 70% of its deliveries were from the move-up and luxury categories.
“The strong operating performance we achieved during the last two years has continued into the first quarter, with pretax income, backlog value, home-sale revenues and new-order value up 74%, 39%, 26% and 16%, respectively,” said Stowell. “In addition to these solid results, I am particularly pleased with our operating margin from home sales, which was 13.4% for the 2014 first quarter, a 500 basis-point improvement from the prior year.”
Revenues from home sales during A1 increased 25% to $446.9 million, as compared to the prior year period, resulting primarily from a 20% increase in the company’s consolidated average home price to $449,000 and a 5% increase in new-home deliveries. The increase in average home price was mostly attributable to general price increases within a majority of the company’s markets, a shift to more move-up product and a decrease in the use of sales incentives.
The firm’s gross margin from home sales for Q1 increased to 26.6%, compared to 21% in the prior year period. While net new orders for the quarter decreased 6% from the 2013 first quarter to 1,311 homes, the dollar value of these orders was up 16%, and the company’s monthly sales absorption rate also rose, from 1.7 per community for Q4 ’13 to 2.5 per community for Q1 ’14.
The firm purchased $144.7 million of land during the quarter, of which 34% was located in Florida, 20% in Arizona, 19% in the Carolinas, 14% in California and 12% in Texas. Total land expenditures in acquisition and development are targeted at between $900 million and $1.2 billion for this year, and Stowell said the land pipeline remains strong even though it has been difficult to find land that meets the firm’s criteria for opportunity.
Stowell added that a supply/demand imbalance should lead to increased pricing and absorption, particularly since job growth is reaching an important threshold where each new job will contribute to housing demand. He predicted that the housing recovery will continue to be an uneven one.
As GlobeSt.com reported last week, difficulty in obtaining first-home mortgages is helping the “move-up” market. Mark Buckland, CEO of City Ventures, told GlobeSt.com that with so many first-time buyers having trouble getting loans, those who already had a mortgage and are moving up to higher-end properties have the advantage.
GlobeSt.com had reported previously that the locally based homebuilder has launched a luxury boutique development and homebuilding division that will focus on premier land locations in California. Insignia is dedicated to creating “profoundly personal residences” focusing on superior architecture, amenities and interior design, according to the firm.