Meritage expands to North Carolina

Scottsdale-based homebuilder Meritage Homes Corp. has expanded into the Raleigh, N.C.-area, which, compared with the Phoenix and Las Vegas markets, is ranked the healthiest region in the country for that industry.

Meritage, which is Arizona's only publicly traded homebuilder, bought a partly developed community with 46 one-acre lots on the edge of Raleigh and plans to build one of its newer energy-efficient communities there, offering Research Triangle professionals homes that are believed to be twice as energy-efficient as standard homes.

This is Meritage's first expansion since 2005 and its first outside its current footprint of 12 markets in six Western and Southern states.


Brent Anderson, Meritage's vice president of investor relations, said the company has been looking at the Raleigh area for some time because it's poised to be a strong market.

"There is population growth and job growth in the (Raleigh) area, which are the two biggest things we look for as homebuilders in a market," Anderson said. "Prices have been stable and actually had increased until just recently. And there are low foreclosure rates."

Hanley Wood Market Intelligence, a Costa Mesa, Calif.-based residential real-estate research company, last month rated the Raleigh-Cary, N.C., area the healthiest homebuilding market in the country.

Hanley Wood also noted that although existing Raleigh home prices grew 4 percent last year, they are expected to fall 10 percent this year because of a spreading foreclosure problem. Job growth, though, is expected to continue to lure residents to absorb new homes.

Meritage, meanwhile, is not looking for other expansions but plans to focus on its current markets in the Southwest and Southeast, Anderson said.

"We think there is growth potential in every one," he said. "We have been increasing market share in all except maybe Las Vegas."

He expects Meritage to begin selling homes at its Raleigh community in the third quarter.

Jim Belfiore, a Phoenix-based housing analyst, said that the expansion into North Carolina is a good move and that he is surprised Meritage hasn't gone there before. He said that he was involved in some North Carolina deals in 2004 and that every major homebuilder was setting up shop there.

But the company's earnings statements show the recession hasn't been kind. Last year, it was able to report a profit of $7.2 million after three years of losses. It sold 3,700 homes in 2010, a decrease of 8 percent from 2009.

The expansion into North Carolina shows optimism on Meritage's part, Belfiore said.

"I think the majority of homebuilders believe the market is going to improve in the next 18 to 24 months," he said.

After the expansion was announced late Tuesday, Meritage's share price remained virtually unchanged at $24.61. On Thursday, it rose 1.38 percent, to $24.95.

Belfiore said Meritage's focus on green building in Raleigh should distinguish the homebuilder from others. Green offerings include energy-efficient appliances, double-pane windows, programmable thermostats and blown-in insulation.

"I would say they are on the cutting edge in that respect in this market," Belfiore said. "They are a leader, and other builders are taking notice because Meritage's sales rates are generally higher compared to their competition. As homebuilding comes out of its doldrums, you will start to see more production homebuilders incorporating some of these features."

by Betty Beard The Arizona Republic Apr. 8, 2011 12:00 AM




Meritage expands to North Carolina