Beazer Homes boss hails exit of speculators

By Mark McSherry

NEW YORK (Reuters) - The CEO of the No. 6 U.S. home builder on Tuesday welcomed the departure of speculators, who quickly buy and sell multiple new houses, from the softening residential property market.

Ian McCarthy, chief executive of Beazer Homes USA Inc. (BZH.N: Quote, Profile, Research, Stock Buzz) told the Reuters Real Estate Summit in New York that many speculators had exited the slowing U.S. new home market over the last year after causing price distortions in local markets.

"It's a very good thing -- I think it's much better for them to get out of the market," said McCarthy.

"The underlying demographics are so strong that we just don't need those people coming in, flipping it, and causing local distortions in the market."

McCarthy said Beazer had tried to avoid selling to speculators.

"We had contracts in place where we were trying not to do that, but they were certainly an influence in the market and I think they were distorting the market somewhat," said McCarthy.

"I would call them speculators more than investors. Let's say they were people who were trying to make a fairly quick turn -- not really long-term investors like the baby boomers who are buying second homes."

INVENTORIES

With speculators dumping supply on the market, inventories of new homes, which averaged four months' supply for seven or eight years, are now running at more than five months, McCarthy said.

It could take between six months and a year to work through that inventory, the Beazer CEO said.

McCarthy said the speculation started in California and then spread to areas like Las Vegas, Washington, D.C., Phoenix, Arizona, and Florida.

"Part of it was underlying demand, but part of it was this froth on top of that," said McCarthy.

"All of those markets saw overheating to a degree, prices pushing hard, and they have now softened in terms of number of sales."

Despite the softening in sales of new homes, prices have not fallen dramatically, McCarthy added.

"Pricing tends to be a bit sticky on the way down. Prices can go up very fast but they don't tend to come down that fast."