Discounts Offered To Combat Cancellations: CTX

Market Watch has this report on Centex. "There's no question demand is slowing in certain markets, such as Phoenix and Washington, D.C., Centex executives said. Cancellations ticked up 175 basis points to 27.2% in the fiscal third quarter ended Dec. 31. But Eller said this still falls within the company's historic cancellation rate average of 20% to 30%. The biggest cancellation increases came in Phoenix, Indianapolis, Minnesota, San Diego, Sacramento, Calif., and Reno, Nev." "To combat this, the company has started offering incentives and discounts, such as special 12-hour 'blowout' sales, to drive traffic and sales at some communities. Chief Financial Officer Lel Echols emphasized the discounting sales were held in markets that had seen 'heavy runups in prices in the last year,' where the discounts simply brought prices back to levels they were at six months ago. " "Chairman and CEO Tim Eller said the company's wide geographical footprint should allow Centex to offset weaknesses in some markets with strength in others. 'For example, frothy markets such as Phoenix and Washington, D.C. are moderating, but our operations in the Carolinas and Texas are accelerating,' Eller said. 'Right now, our Sacramento and San Diego operations are also moderating while our five other California markets continue to be strong.'" "Orders, which reflect revenue two or three quarters down the line when a home sale closes, rose only 4% in the quarter. Several regions experienced year-over-year declines: The Mid-Atlantic, Southeast and Midwest saw orders fall 8%, 15% and 3%, respectively. This was partly offset by order increases in the Southwest and West Coast, where orders climbed 28% and 10%, respectively." "Echols sees the slowdown in Washington as a temporary phenemona that will likely rebound within a few quarters. 'The speculators, let's call it the flipper-speculators, are exiting the (Washington) market and putting inventory on the market, and that inventory is being worked through through the normal sales process,' said Echols." "Centex has been aggressively buying back stock, having repurchased 5% of the company's shares outstanding in the past four months. Eller said the company expects to continue repurchasing shares." Update: From Marketwatch. "'Speculators are pulling out,' said David Lereah. 'I expect further softening in prices,' Lereah said."