LOS ANGELES ? Coming off a quarter where its revenue sank 49 percent amid a sharp drop in home closings, homebuilder Beazer Homes USA Inc. says it's going to step up efforts to buy and rent out foreclosed homes.
The Atlanta builder, which reported a wider fiscal third-quarter loss on Tuesday, began buying foreclosures, fixing them up and renting them out in the spring. The idea: Bring in more revenue by catering to people who aren't ready to buy a house or who can't qualify for a mortgage.
President and CEO Allan Merrill said the strategy has paid off and now Beazer owns or has under contract more than 100 rental homes, most located in Phoenix and some in Las Vegas.
"While today's difficult new home sales environment creates challenges for our homebuilding business, it creates sizable opportunities for the pre-owned homes division we launched this spring," Merrill said.
The builder now plans to expand the business by enlisting an outside partner to help shoulder most of the costs of buying more homes, while it limits itself to an investment of $20 million.
The strategy is part of a broader revenue-boosting plan by Merrill, who took over the CEO post after former CEO Ian McCarthy was ousted in mid-June.
McCarthy was fired about three months after he agreed to give back $6.5 million in bonuses and profits from the sale of company stock in a deal with federal regulators. The executive had accrued those gains at a time when investigators said Beazer was committing accounting fraud.
Merrill outlined several ways the builder intends to raise more revenue, including keeping operating costs low, improving its sales per community and taking in more fee income from home rentals. Earlier this year, the builder cut roughly 130 full-time jobs as part of a cost-saving effort.
Beazer's move to beef up its home rental business reflects improving demand for rental housing, which has helped drive up rental rates in many U.S. markets. In contrast, new home sales have been lackluster this year, following a disappointing spring home-selling season, the traditional peak sale period for home sales.
Last year was the worst for new-home sales on records dating back a half century, and through the first six months of this year, sales are lagging behind last year's totals.
High unemployment, larger down-payment requirements and tougher lending standards are preventing many people from buying homes. And some potential buyers who can clear those hurdles are holding off, worried that home prices have yet to bottom out.
"Job growth and consumer confidence have to be pillars of any housing recovery, so until they both show signs of strengthening, we expect a level of new home sales to remain suppressed," Merrill said.
While its rental initiative may have been a bright spot, Beazer's home sales trends in the quarter were mixed.
The sharp drop in the builder's home closings for the April-June quarter was primarily due to a smaller backlog of homes under contract at the beginning of the period than in the same quarter last year, when homebuyer tax credits helped spur home sales industrywide.
The housing incentives expired at the end of April last year, and sales sank through the summer.
That sales decline made for an easier year-over-year benchmark, however, and Beazer posted a better-than-expected 23.7 percent annual jump in new home orders in its latest quarter.
Merrill said he expects the company will generate more sales in its fiscal fourth quarter than it did in the same period of 2010 and 2009.
Beazer posted a net loss of $59.1 million, or 80 cents a share, in the three months ended June 30. That compares with a loss of $27.8 million, or 41 cents a share, a year ago.
Beazer's loss from continuing operations was $55.8 million, or 75 cents per share, which included $16 million in pre-tax charges.
Analysts polled by FactSet expected a smaller loss of 46 cents a share.
Revenue fell to $172.8 million from $321.8 million, falling well short of Wall Street's estimate of $230.2 million.
Home closings slid to 791 homes, while new orders rose to 1,215. The cancellation rate fell to 24.3 percent from 29.3 percent.
Beazer shares ended the regular session down 11 cents, or 5.7 percent, to $1.83.
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AP Business Writer Michelle Chapman in New York contributed to this report.
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