Quarterly profit rises for home builder

Jennifer Shubinski

Tuesday, July 13, 2004 | 10:52 a.m.

A national home builder with a large Las Vegas presence is attempting to slow its home sales in Nevada and other states by increasing prices because of a growing backlog of homes sold -- but not built.

MDC Holdings Inc., doing business as Richmond American Homes, announced last week, before releasing its second-quarter earnings, that it ended its second quarter with its highest ever nationwide backlog, 8,259 homes.

MDC Holdings on Monday reported a profit of $82.6 million or $2.43 per share for the second quarter, up from $42.7 million or $1.30 per share in the year-ago quarter.

Revenue grew 27 percent to $875 million.

The company attributed the growth to substantial increases in home sales revenue and home gross margins.

"The outstanding results for the quarter were driven by extraordinary demand for housing in Nevada and organic growth in our other long-standing markets, particularly California and Arizona," Larry A. Mizel, MDC's chairman and chief executive said in a statement.

In Nevada, Richmond American ended the quarter with 1,646 ordered homes that have yet to be built. The company does not release city-specific data, but in Nevada, Richmond American Homes only builds in the Southern part of the state.

In Nevada, Richmond American received 927 orders for homes, net cancellations, during the second quarter and 1,957 orders for homes, net cancellations, during the first six months of the year, the company reported.

"Given the strong home orders in the first quarter and early second quarter, we intentionally slowed the pace of new orders in certain communities over the last several weeks in some of our fastest growing markets, including Southern California and Nevada," Mizel said. "Similar to our actions in Virginia and Maryland in the first quarter, which continued throughout the second quarter, we increased sales prices and limited the release of new homes for sale to allow construction to catch up with the growing backlog of homes sold but not started in these markets."

In Las Vegas, the company is among the top three home builders, closing escrow on 2,059 homes in 2003, according to research firm Home Builders Research Inc. Richmond American follows KB Home and Pulte Homes (including Del Webb), respectively, as the three largest builders in the valley.

The estimated average selling price of Richmond American homes in backlog during the second quarter, nationwide, is $302,700. In the Las Vegas Valley, homes range in price from the $110,990, 555-square-foot model in the northeast to the $594,990, 2,337-square-foot model in the southwest valley.