Home builder adds value by running business well

Moneymakers: Mike Belmont

By NANCY SARNOFF

To call the Houston housing market a paradox would be an understatement.

Interest rates are expected to rise, but housing starts are at an all-time high. Lots are getting more expensive, but developers are still buying at a rapid pace. Job growth is slow, but houses are selling at lightning speed.

And Centex Homes is right in the middle of the action. The company just rolled out its new Fox & Jacobs line of homes catering to first-time buyers.

Mike Belmont, the new division president for Centex Homes in Houston, discussed the city's housing market with Chronicle reporter Nancy Sarnoff.

Q: Is Centex being affected by rapidly increasing costs for building materials like steel and concrete? Are the rebuilding efforts from Hurricane Charley in Florida further affecting prices and supplies?

A: This discussion about limited supplies has affected the pricing. It's not just concrete and steel, but petroleum-based products as well, such as roof shingles. The prices of those are all escalating. Housing is getting more expensive because of the costs.

I don't know if that has affected our operations here, but I suspect it will probably have some impact on materials with regard to the rebuilding. Products like plywood could be impacted.

Q: How is Centex dealing with these challenges while at the same time meeting demand for affordably priced homes?

A: We try to be very efficient in our purchasing and our negotiations with our vendors and subcontractors. Obviously, we try to hold off price increases as much as we can. This isn't unique to Centex. It's something all builders are faced with.

In Houston, we're rolling out our Fox & Jacobs homes, a Centex-branded company. It's a more value-oriented home that provides the most house for the money. It's a streamlined building process. The prices range from the low $100,000s to $160,000. The price per square foot on some of our larger plans is under $50 a foot. We think that provides a real value for the consumer.

Q: Interest rates are expected to start rising this year after staying at historic lows for some time. What effect will rising rates have on new-home sales?

A: If rates are starting to climb up, it's an indication the economy is continuing to recover, which means job growth and more people in the home buying market. We have the ability to offer some creative financing packages, adjustable rates and other programs to help offset interest and allow the customer to still get into a home.

Q: Forty-thousand homes have been built over the past year. Where are the buyers coming from?

A: I think the job market, and job growth, is very strong right now, and I'm not sure if that's showing up yet in all the different reports.

But we are getting a lot of people from out of state that come into our models as they are being relocated here. And it's a multitude of different industries.

We're also getting a lot of people coming
out of the rental market.

There's a real large population of renters in Houston that see the advantage of homeownership. Consolidations and relocations in Houston could also contribute to the amount of people migrating to the city.

Houston is a dynamic market that has a cross section of employment opportunities and is very diversified. It also still has an element of affordability.

Q: How is Centex dealing with heavy competition for the rising cost of land?

A: There's a great deal of demand right now throughout the market as we look for land.

We look for parcels we can purchase, develop and create our own communities.

We can be a little more self-sufficient in terms of our process and rely not so much on the developers.

At the end of the day, that allows us to have a more affordable lot, which is passed on to the consumer. It also allows us to control our schedule and open on time