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Starts and Permits Show Signs of Life for Single-Family

Great News From Builder Online!
By:Claire Easley

In October, permits came in at the highest level seen in 19 months.

At long last, the housing industry is showing signs of life. Permits were up 10.9% in October to an annual rate of 653,000, the best reading the industry has seen in 19 months, according to data released today by the U.S. Census Bureau. On an annual basis, permits were up 17.7%. Both single-family and multifamily permits were up on a monthly basis, 5.1% and 24.4%, respectively.

While housing starts slipped by 0.3%, they were up 16.5% year-over-year. The monthly decrease was fueled by an 8.3% dip in multifamily starts, after the sector saw a 35.0% increase in September. The change brought the annual rate for units in buildings of five units or more to 183,000. Single-family starts were up 3.9% for the month, for an annual rate of 430,000.

The news helps to substantiate yesterday’s report that builders are feeling more optimistic about the industry than they have been for more than a year, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), which tracks builder confidence.

The numbers are still low, of course. Both starts and permits will likely set record lows this year, and while an HMI reading of 20 is higher than it’s been since May 2010, it would take a reading of more than 50 to indicate that a majority of builders describe conditions as “good.”

Still, the report was a good one, wrote Patrick Newport, U.S. economist at IHS Global Insight, in a statement today. “It has supporting evidence that the single-family market is finally getting off the mat and that the multifamily segment is continuing to make small strides, and that we should expect good housing starts numbers the rest of this year.”

Claire Easley is a senior editor at Builder.

San Antonio Solar Boosters, Lennar and KB Home

From Builderonline.com

Posted on: August 22, 2011
Source: San Antonio Express-News

Of course the buyer of a new luxury home can consider installing solar panels. Why not?

But for the first time in San Antonio, solar panels are becoming an option for homebuyers at an affordable price point, and in the kind of new homes that many people purchase: production homes by large, national builders.

Supporters of solar energy say it’s a sign that green building has become more widespread in the market and that local homebuyers are growing increasingly sophisticated about energy efficiency.

Lennar Homes recently opened a model home with solar panels in the Kallison Ranch neighborhood off of Culebra outside Loop 1604 and will start offering solar panels as an option in all of its communities.

KB Home also will roll out solar panels as an option in all of its San Antonio communities this fall, and last week installed solar panels on a model home in its new La Fontana neighborhood off of U.S. 281 North and Evans Road.

“It really demonstrates a maturing of the market,” said Cathy Teague, a spokeswoman with KB Home. “Not every buyer will want to do solar panels, but there are a certain number of new homeowners who are interested in seeing how far off the grid they can get.”

Anita Ledbetter Devora, executive director of Build San Antonio Green said people also have realized they don’t have to install a huge and expensive system to run an entire home — they can use solar as a way to permanently shave utility bills instead.

“The tipping point is that we have more educated installers and builders,” Devora said. “Years ago it was an all-or-nothing mentality. Builders are putting in more affordable systems. It will make a difference in your utility bill without breaking the bank.”

Lanny Sinkin, executive director of Solar San Antonio, said some homeowners and builders take a phased approach. “You can do some one year and some another year and just keep building your system,” he said.

According to Solar San Antonio, the cost of a 5-kilowatt system — a typical choice that can handle about 40 percent of a home’s energy load — costs about $27,500 installed. But a CPS rebate whittles about $11,250 off of the cost, and a 30 percent federal tax credit shaves off another $4,875. That leaves a typical buyer of solar panels paying around $11,375.

“It really changes the whole proposition,” Sinkin said.

Both KB and Lennar declined to provide specific costs for the solar panel option, but Brian Barron, director of construction for Lennar, said the build will be able to lower the costs thanks to volume discounts.

In 2010, San Antonio-based Imagine Homes, a smaller volume builder, was the first to offer solar panels to buyers of homes at a moderate price point, in neighborhoods where home prices start around $140,000.

About 10 percent of its buyers have opted to put solar panels on their homes so far, and John Friesenhahn, a partner with the company, said he is seeing increased buyer interest in solar energy.

“My hunch is that it’s gas prices as well as the heat,” Friesenhahn said. “When gas prices go up, and people get these huge electric bills from CPS, they stop and think about their budget.”

Friesenhahn said in Imagine neighborhoods, a basic 2-kilowatt solar unit generally costs anywhere between $12,000 and $16,000 before the CPS rebates and tax incentives.

So far San Antonio has 382 photovoltaic units, mostly on homes, Sinkin said. Another 70 are awaiting approval from CPS.

A few years ago, though, the city had hardly any solar units — just five systems in 2008, according to information from CPS and Solar San Antonio.

Devora said she hopes that number will start to grow quickly, and was happy to see solar offered on homes where the utility bill savings can make a real difference in a household’s budget. “We’re seeing a huge change in the residential market,” she said.

KB Home, based in Los Angeles, has 28 neighborhoods in the San Antonio area and the Miami-based Lennar has nine communities. They are both among the top 10 most active builders in the market, and together have more than 13 percent of the market share of new home building, according to the housing research firm Metrostudy.

Barron said Lennar isn’t sure how many buyers will choose solar. But already the new model home has been drawing people curious about the panels. “Buyers these days expect some type of green efficiency program,” he said. “Installing solar panels is something we consider as the next step in green building.”

Read more: http://www.mysanantonio.com/business/article/KB-Lennar-tract-homes-in-S-A-going-solar-2072961.php#ixzz1VlslxCvN

Congratulations Challenger Homes & New Home Star!

Challenger Homes, New Home Star Take Top Market Share in Colorado Springs
PRWeb – 10 hrs ago

Rapidly expanding Colorado builder and sales management partner hit milestone.

Colorado Springs, CO (PRWEB) July 28, 2011
Through the midway point of 2011, Colorado Springs-based, Challenger Homes has a good reason to be confident. For the first time in the homebuilder’s 11-year history, the company has moved into first place in Colorado Springs market share. The year-to-date permit report, published this month, marks a milestone for Challenger and sales management partner, New Home Star.

Although many builders continue to struggle, Challenger has thrived in recent years. The company has also remained steadfast in its practice of remaining closed on Sundays, despite most builders opening for business. In a market where every new customer counts, this practice has forced Challenger Homes and New Home Star to be very customer-focused the other six days of the week. Given the builder’s recent success, the approach appears to be working.

“We feel very blessed to be in this position during a very difficult market. It is a testimony to all of the great people working for and with Challenger Homes that share our vision and values,” said Challenger Homes president, Todd Anderson. “By focusing on some timeless basic principles, we have been able to not only survive this housing recession, but thrive to become one of the top builders in our market.”

Challenger has experienced year-over year sales growth in the high double-digits, since partnering with New Home Star in 2009. The national sales management and outsourcing company partners with builders across North America to drive bottom line results. In Colorado Springs, that partnership has assisted Challenger Homes for consecutive record years in one of the most difficult housing markets in history.

“Watching what has happened with Challenger Homes over the past two years has been amazing. It’s a special experience to go from 15th to 1st in market share; one that you don’t get to experience often. I’m proud of the extraordinary team effort and thankful for the results. There is no doubt we are blessed,” explained New Home Star president, David Rice.

About Challenger Homes:

Over the years, Challenger has sold a lot of homes, in a lot of different designs, to a lot of different people. However, the core principle hasn’t changed. More House to Call Home, designed around the customer, at an affordable price. For more information on Challenger Homes, visit http://www.mychallengerhomes.com.

About New Home Star:

New Home Star is a national sales and marketing company, providing builders and developers with comprehensive management and outsourcing services for today’s housing market. New Home Star currently partners with over 30 builders spanning 3,000 miles across the United States. For more information on New Home Star, visit http://www.newhomestar.com.

Home building jumps in June after dismal spring

By DEREK KRAVITZ / www.Builderonline.com

WASHINGTON – Builders broke ground on more single-family homes and apartments in June, helping the battered construction industry gain a little life after a dismal spring.

The Commerce Department said Tuesday that builders began work on a seasonally adjusted 629,000 homes last month, a 14.6 percent increase from May.

Still, that’s roughly half the 1.2 million homes per year that economists say must be built to sustain a healthy housing market. Jennifer Lee, a senior economist at BMO Capital Markets, called the gains “just a blip in the overall flat-lining trend of homebuilding activity.”

“We have to see a rebound in job creation to sustain a recovery in housing,” she said.

Much of the increase in June came from a surge in apartment construction, a volatile part of the industry. That sector jumped more than 30 percent last month.

Renting has become a preferred option for many Americans who lost their jobs during the recession and were forced to leave their rapidly depreciating homes. Since 1992, apartments have typically made up just 20 percent of home construction. Now, they make up closer to 30 percent of the market.

Single-family home construction rose 9.4 percent. It was the biggest increase since June 2009, when the recession officially ended. But analysts said the pace of 453,000 homes per year was still too depressed to signal a turnaround.

“The underlying trend of single-family housing starts shows no signs of improving in a significant manner anytime soon,” said Joshua Shapiro, chief U.S. economist at MFR Inc.

Building permits, a gauge of future construction, increased 2.5 percent.

Home construction rose in every part of the country. The biggest gains in single-family home construction were in the Midwest and South, which saw extensive damage from tornadoes and flooding this spring. In the Northeast, the overall building pace spiked 35.1 percent and in the Midwest, it rose 25.3 percent. In the South, it rose 10.6 percent and in the West, it increased 5.4 percent.

Though new homes represent just 20 percent of the overall home market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.

The weak housing industry is also holding back the U.S. economy. In past modern-day recessions, housing accounted for 15 to 20 percent of overall economic growth. This time around, between 2009 and 2010, housing contributed just 4 percent to the gross domestic product.

Cash-strapped builders are struggling to compete with deeply discounted foreclosures and short sales. A short sale is when lenders allow borrowers to sell their homes for less than what is owed on the mortgage.

New-home sales fell in May to a seasonally adjusted pace of 319,000 homes per year. That’s far below the 700,000 homes per year that economists consider healthy.

One reason is that previously occupied homes are a better deal than new homes. The median price of a new home is more than 30 percent higher than the median prices for a re-sale. That’s more than twice the markup in healthy housing markets.

Loans are also harder to get. Most private lenders are requiring 20 percent down payments and higher credit scores for the lowest mortgage rates.

In the past month, President Barack Obama said the housing market has “been most stubborn to us trying to solve the problem.” And last week Federal Reserve Chairman Ben Bernanke said the troubles facing home construction and sales were more persistent than previously thought.

The builders’ trade group said Monday that its survey of industry sentiment rose to 15 in June. Any reading below 50 indicates negative sentiment about the housing market. The index hasn’t reached 50 since April 2006, the peak of the housing boom.

Four Great Builders to Watch!

Four Builders. Same Story.
Similar choices beget singular successes.
By:John Caulfield
www.builderonline.com

Great minds think alike, the saying goes. So it’s not surprising to discover common threads that connect the recent successes of the four regional builders we profile on the following pages.

All of them have refreshed and edited their house plans within the past 24 months, often by introducing new series with flexible designs. The builders have concluded as well that offering more choices through options empowers their customers and generates more profit per sale.

Another common thread is construction efficiency. Each company used the recession to work out how to build houses quicker with significantly fewer employees but without sacrificing quality. Simplifying their house plans certainly helped, as did the availability of labor willing to meet the builders’ higher production demands. Keeping their associates and subs happy is now a critical component of each company’s business model.

It’s worth noting that each of these builders projects healthy growth over the next few years within its local markets. That doesn’t mean, though, that they aren’t also looking to attract out-of-state buyers who are relocating for reasons of business, lifestyle, or retirement.

To continue reading this article follow this link: http://www.builderonline.com/operations/four-builders-same-story.aspx?cid=NWBD110512002

Lennar Atlanta Celebrates With “Derby Days”

www.atlantarealestateforum.com

Lennar Atlanta Celebrates With “Derby Days”

Never ones to shy away from using an event or holiday as a reason to celebrate and decorate their Model Homes, Lennar Atlanta has announced that this coming weekend from Friday 5/6 though Sunday 5/8 will be “Derby Days” at all their Atlanta new home communities in celebration of this weekend’s Kentucky Derby.

All Lennar Atlanta Welcome Home Centers will be decorated and events planned by the individual New Home Consultants active in that neighborhood. This means that if you tour multiple communities this weekend you may be offered a piece of authentic Kentucky Derby Pie, have the chance to win Kentucky Derby memorabilia or just shop for your new home in a festive environment. Sorry, but Mint Juleps are not on the menu.

“Derby Days” will be taking place throughout the northern metro Atlanta area including Caswell Overlook townhomes, Creekview at Shiloh Valley, Mirraview and Tanglewood in Cobb county. The new Lennar Atlanta Forsyth county communities of Laurel Heights and Hanover Pointe. Trey Vista in Buford will be the location to join the festivities in Gwinnett county. These communities range in price from the $150,000’s to low $400,000’s.

Don’t forget forget to follow Lennar Atlanta on Facebook to stay up to date on activities including events like “Derby Days” for all their Atlanta communities.

For More Information –
www.LennarAtlanta.com
Ph. 404-931-7462

I Am Woman, Hear Me Saw

From: BUILDER 2011Posted on: May 5, 2011 11:02:00 AM
I Am Woman, Hear Me Saw
Habitat For Humanity’s Fourth Annual National Women Build Week will start 257 homes by this Sunday.
By:John Caulfield

Mel Ressler has worked for Habitat for Humanity, on and off, for the past decade, including time spent with AmeriCorps. This week, she’s supervising the construction of two homes in Charlotte, N.C., that are among the 257 houses Habitat will start in different markets across the U.S. between April 30 and May 8 as part of its fourth annual National Women Build Week.

Women on construction sites may still be more the exception than the rule, but they’re more evident on Habitat’s sites, where on any given week 10,000 female volunteers are helping to build Habitat homes around the world. Over the past 20 years, all-women crews have built 1,800 homes under Habitat’s auspices, the first of which was started in Charlotte 20 years ago.

To finish reading the article click here: http://www.builderonline.com/construction/i-am-woman-hear-me-saw.aspx?cid=NWBD110506002

Taylor Morrison Takes Top For-Profit Private Builder Spot on BUILDER 100 List

Closings decline 21% among 10 largest private home building firms.
By:Teresa Burney www.builderonline.com

Surviving the worst housing market since the Great Depression represents a major achievement for a privately funded builder, but the top 10 for-profit private builders of 2009 were able to do more than just stay alive–they also managed to hold their own against the cash-rich publicly funded builders.

No private for-profit builder took a top 10 on the BUILDER 100 list, but one, Taylor Morrison, at No. 13 with 3,347 closings, came close. (Nonprofit Habitat for Humanity International achieved the rank of No. 8 on the list, with 5,294 closings.)

David Weekley Homes, The Villages, and Shea Homes weren’t too far behind with more than 2,000 closings for each of them. (See sidebar below for individual companies’ closings and revenue numbers.) However, Shea Homes, with a 35.2% drop in closings and a 40.1% fall in revenue, dropped several spots, falling behind David Weekley and The Villages.

Yet, as a group, the top 10 private builders were, for the most part, able to stay close to the same spots on the lists they held last year. Woodside Homes, even under Chapter 11 bankruptcy protection, only dropped one notch, from No. 20 to No. 22, with 1,788 closings in 2009.

Of course, 2009’s difficult business conditions made an undeniable impact on these firms. Business remains a fraction of what it was during home building’s peak, and most large private builders on the BUILDER 100 took a sizeable hit again last year. As a group, closings were down an average of 21%. Revenues were off as well, by 23.9%, as the companies discounted homes to get them sold.

Only one private builder, Ashton Woods Homes, grew closings last year, boosting its business by 9.7% to 1,319 deliveries. However, its revenue still declined 9.5% in 2009.

(Editor’s note: Housing nonprofit Habitat for Humanity, the No. 1 builder on this list of top 10 private builders last year, would have also been the biggest private builder this year based on last year’s criteria. However, this year we decided to restrict this list of the top 10 private builders to for-profit firms only.)

Top 10 For-Profit Private Builders in 2009

1. Taylor Morrison (B100 rank: #13*)
3,347 closings, $1.3 billion revenue

2. David Weekley Homes (B100 rank: #17)
2,229 closings; $690.million in revenue

3. The Villages (B100 rank: #19)
2,115 closings; $658.5 million in revenue

4. Shea Homes (B100 rank: #20)
2,091 closings; $838.9 million in revenue

5. Woodside Homes (B100 rank: #21)
1,788 closings; $469 million in revenue

6. The Drees Co. (B100 rank: #22)
1,500 closings; 519.6 million in revenue

7. Highland Homes (B100 rank: #23)
1,455 closings; $511.2 million in revenue

8. Ashton Woods Homes (B100 rank: #24)
1,319 closings; $319.5 million in revenue

9. McGuyer Homebuilders (B100 rank: #25)
1,280 closings; $325.7 million in revenue

10. Perry Homes (B100 rank: #26)
1,267 closings; $368.7 million in revenue

Source: BUILDER 100
* Numbers in parentheses refer to the company’s overall rank on this year’s BUILDER 100 list.

BUILDER 100’s Top Private Companies Spent Last Year Stuck in Neutral

But moves by several of the largest for-profit, private builders put them in better shape to reap rewards in 2011.
By:John Caulfield www.builderonline.com

Ask anyone at Shea Homes how tough it was to make a buck in 2010.

The Walnut, Calif.–based company was once again one of the 10 largest for-profit, privately owned builders in closings that year, according to our annual BUILDER 100 ranking. (See chart below.) But those closings were down slightly from 2009 and Shea’s revenue was flat, despite J.D. Power & Associates recently rating Shea the industry’s No. 1 builder for customer satisfaction.

No one could argue that Shea was simply waiting for the recession to recede, either. In June, it acquired a bankrupt Levitt & Son community in Florida for $5.3 million from Bank of America, which includes 345 developed homesites and undeveloped lots with the potential for another 390 homesites. In the first phase of the $2 billion Civita project in San Diego, Shea is building two subdivisions of 200 condos, townhouses, and attached homes. And the builder continued to expand its popular Spaces house design concept, which features room flexibility, to other markets.

Moves made in late 2009 benefited two private builders, Ashton Woods USA and Woodside Homes. Georgia-based Ashton Woods USA converted $125 million of its public debt to private debt, which appears to have given this company breathing room to grow. The company has since expanded its operations into Raleigh, N.C., and Austin, Texas. Ken Balogh, a former Centex executive who was Ashton Woods’ COO, was promoted to CEO after Tom Krobot, who had held that post since 1995, retired on Dec. 31, 2010.

North Salt Lake City, Utah–based Woodside came out of bankruptcy in November 2009 and soon afterward began jumping on distressed land opportunities. Its strategy, says CEO Joel Shine, has been to “go where there’s a little less competition” from builders or existing homes, with an emphasis on being near job centers. As of November 2010, Woodside’s biggest deal since coming out of Chapter 11 was in Temecula, Calif., where this builder/developer placed in escrow $7.2 million to buy 210 finished and unfinished condominium lots. The company also acquired lots in Las Vegas; Mesa, Ariz.; and Roy, Utah.

Many private builders are hoping that 2011 presents their companies with a more robust business climate. Arizona-based Taylor Morrison, at the top of the list, is looking to return to profitability after its British parent, Taylor Wimpey plc, sold Taylor Morrison and Canada’s Monarch Homes in April of this year to an investment consortium for nearly $1 billion.

Texas-based David Weekley Homes, which incurred double-digit dips in revenue and closings last year, looked East for growth—to Indianapolis, to be precise, where last month it entered that market by acquiring The Estridge Cos., which only weeks earlier had discontinued its home building operations because it couldn’t get financing to continue. Paul Estridge will become president of Weekley’s Indianapolis division, which is already selling homes and is expected to restart construction next month.

Rank Company 2010 Closings Change 2010 Gross Revenue Change
14 Taylor Morrison 2,570 -23% $1,500 million 14%
16 The Villages of Lake Sumter 2,208 4% $512 million n/a
18 Shea Homes 2,002 -4% $835 million 0%
19 David Weekley Homes 1,857 -17% $612 million -11%
20 Highland Homes 1,704 17% $599 million 17%
21 The Related Group 1,634 n/a $961 million n/a
22 The Drees Co. 1,511 1% $513 million -1%
23 Woodside Homes 1,444 -19% $361 million -23%
24 Perry Homes 1,298 2% $364 million -1%
25 Ashton Woods 1,197 -9% $310 million -3%

John Caulfield is senior editor for Builder magazine.

Learn more about markets featured in this article: San Diego, CA, Raleigh, NC, Austin, TX, Indianapolis, IN.

Texas Housing Market Shoulders the Burden of Performing Well Under Pressure

From www.bigbuilderonline.com

While the nation mostly zigged, Texas zagged. While most corporations stockpiled cash and plunked all their lean-production savings on the bottom line of profits, Texas’ oil-driven economy kicked and buckled and kept people in jobs, and even expanded some capacity beyond the immediate, foreseeable demand for its inventories.

What’s more, Texas dodged the bullet of a bubble housing economy, which didn’t feel so very good during the last-decade boom, but feels pretty derned blessed right now. Consequently, hordes of folks weren’t buying homes as part of the national Ponzi Scheme of getting something for nothing, then flipping it to go onto the next square in the game. On the contrary, folks in Texas mostly bought their homes to live in them. What a concept!

This is why Texas tends to break the model when it comes to matching up failed loans with loan types. So many of those folks in Texas who bought homes during the past decade were among the riskier quality borrowers, with semi-ok credit scores and low- to no-down payments. Yet, percentage-wise, more of their loans are intact today than in most other regions of the country. Which is why there’s a relatively normalized–although low-pulse–marketplace for housing in the Lone Star State.

The big issue there is access to home loans and down payments. Since all regions are tarred with the same brush as the worst of them when it comes to rolling up the statistics on loan risk, banks don’t tend to look at Texas and say, “well, okay, we’ll accept a 580 FICO on a Federal Housing Administration-backed loan.” Just isn’t happening. So qualifying your average paycheck-to-paycheck style household, the backbone of home buyer populations for lo, these many yeaers, is well nigh a pipedream.

So, Texas, being Texas, is going to have to set a good example at helping the rest of the nation figure this dilemma out. And it probably will do just that.

Here is the Texas Housing Update from equity research analyst Buck Horne and his team at Raymond James & Associates.

Texas Housing Update: March Sales Fall 11% Y/Y; Median Price Flat Y/Y

* Sales fall 11% y/y. Existing home sales in Texas dropped 11% y/y in March, which was comparable to February’s 10% y/y decline. From our view, the negative y/y sales totals are not terribly surprising and should be kept in the context of 1) increasingly difficult y/y tax-credit sales comparisons, 2) relatively fewer foreclosure liquidations in the region, and 3) the state’s price stability. Overall, Texas remains a very competitive market, but over the past two years, it has been one of the few bright spots for many homebuilders. More recently, though, increasingly difficult mortgage underwriting and higher fee structures for GSE/FHA loans are creating new challenges in Texas, in our view, given its higher mix of credit-constrained buyers. Thus, with difficult tax-credit comparisons still ahead, we suspect y/y existing home sales results will likely remain negative at least through May until the tax credit comparisons are lapped. Locally, North Texas pending sales (Dallas area) were down 13% y/y in March. Similarly, Austin area pending home sales dropped 17% y/y. Houston area pending sales only fell 1% y/y in March, but both KB Home and Lennar recently noted renewed signs of pricing pressure among new homes for sale in Houston.

* Major market sales drop 10% y/y. Transaction activity in the four largest markets for public homebuilders (Austin, Dallas, Houston, and San Antonio) outperformed the state as a whole but were still down 10% y/y in March (versus a -7% y/y comparison in February). Drilling down, sales in Dallas fell 14% y/y, and Austin sales declined 12% y/y. Meanwhile, Houston reported the least severe decline among the major markets in March, falling 6% y/y. Overall, we believe San Antonio area home sales have been buoyed by the Defense Base Closure and Realignment Commission (BRAC) initiative. That said, sales dropped 10% y/y in March as this submarket lapped a difficult year-ago comparison (+28% y/y).

* Inventory slides 2% y/y. March listings in Texas were down 2% y/y but up 3% from February to 126,051 units. Since 2004, the average seasonal sequential increase between February and March has been roughly 4%. Texas’ total listings represent 7.5 months of supply, which is up from 7.1 months of supply reported in March 2010 but still below the 8.4 months of existing home supply reported nationally as of March. Existing home inventory declined in three of the four major markets. The only y/y increase among the major markets continues to be reported in Houston, where inventory grew by 5% y/y (a deceleration from the 9% y/y increase reported last month). Elsewhere, San Antonio listings dropped 4% y/y and Dallas listings fell 2% y/y. The most substantial y/y decline was registered in Austin, where listings dropped 12% y/y.

* Median home price flat y/y. After climbing 4% y/y in February, the median home price remained flat y/y in March. Over the last 24 months, y/y median price comparisons have oscillated in a narrow range between -3% and +4%. In our view, this suggests that Texas home prices have remained relatively stable. At a median price of $143,700, Texas’ existing median home price is 10% below the March national median price of $159,600 (-5.9% y/y). Thus, in our view, Texas will likely avoid the level of price declines seen in markets still flooded with distressed properties. On a local level, two of the four major markets reported a y/y increase in the median sales price in March, with the breakdown as follows: Dallas (-2% y/y), Houston (-2% y/y), Austin (+3% y/y), and San Antonio (+3% y/y).

* Fewer foreclosures in Texas. Recently released fourth quarter mortgage delinquency data from the Mortgage Bankers Association revealed only 1.9% of loans (69,000 mortgages by our estimate) in the state were in foreclosure versus 4.6% nationally. While slightly above the rest of the nation, the level of implied future foreclosure activity is still far less threatening than many other key states for the homebuilders. Specifically, 9.2% of Texas mortgages were delinquent versus 8.9% nationally and 10-12% in the states hardest hit by the foreclosure crisis. Supporting the Mortgage Bankers Association data, according to Lender Processing Services, the “non-current” rate (delinquency rate + foreclosure rate) in Texas for February remained comfortably below the national average (10.5% versus 13.0%).

* Texas faces fewer headwinds than most markets. In our view, once a sustained recovery is underway, homebuilders with a strong presence in Texas will ultimately benefit from the state’s 1) limited foreclosure overhang, 2) highly affordable housing markets, 3) business-friendly growth policies, and 4) relatively small percentage of borrowers in a negative equity situation. Specifically, based on data from First American Core Logic, only 10.4% of properties with a mortgage were “underwater” in Texas as of December (versus 23.1% nationally). After ending its streak of 16 straight months of y/y declines in employment last May, job growth has steadily accelerated in Texas. Specifically, based on seasonally-adjusted data provided by the Bureau of Labor Statistics, Texas payrolls rose by 251,100 jobs, or 2.4% y/y, in March. Evidencing the favorable market dynamics, M/I Homes announced in early April it acquired the assets of privately held TriStone Homes, based in San Antonio.

* Builder exposure. For reference, as a percentage of their total 2009 unit closing volumes, Meritage Homes, The Ryland Group, and Lennar Corp. have the largest respective exposures to Texas.