CEO on Homebuilders Scaling Down House Sizes

This is a rush transcript from "Your World With Neil Cavuto," April 27, 2009. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: All right, going small is getting big — homebuilders scaling down the size of their houses, trying to boost up sales with first-time buyers armed with that tax credit from Uncle Sam.

Pulte Homes CEO Richard Dugas is fresh off a merger with Centex Organization. He's jumping on this trend. He joins us now in this exclusive chat.

Very good to have you, sir. Thanks for coming.

RICHARD DUGAS, CEO, PULTE HOMES: Thanks, Neil. Good to be back.

CAVUTO: By the way, what are you seeing in the housing arena right now? Any pockets of activity? Any sniffing around? What?

DUGAS: I would say we are dancing around the bottom.

Frankly, we have seen some reasonable indicators of better traffic levels and shopping levels of late. We are not ready to call the bottom, but I have to tell you at least the rate of decline has — has begun to slow.

CAVUTO: All right. Now, there used to be a trend years ago, Richard, where buyers were — bigger was better, and better had to be bigger, and these so-called McMansions were being built.

And, all of a sudden, that is no longer the rage, right? They are going the opposite way. What are they doing?

DUGAS: Neil, that is exactly right. People are looking for value today. They're looking for more house for their money. And some of the content within the homes, we're seeing being taken out, in favor of more square footage for the money.

As an example, more — more granite is out, and more standard countertops are in, that type of thing, that, as well as a small move toward, I would say, smaller homes, more affordable product. And that is one of the things that makes the Centex merger so attractive for Pulte, is, they're specialists in entry-level and first-move-up buyers, which are doing relatively well today.

CAVUTO: All right.

So, on the high end, where you have the folks like Toll Brothers, and, I guess, on the — Hovnanian shares that, to a degree, but not as much — that is still not percolating?

DUGAS: Well, again, that is a fairly small piece of our business. I can't really speak for what Toll or Hovnanian are seeing.

What I will tell you is that mortgage availability for the entry-level buyer is the best in the country today. As an example, the FHA loan program, which allows for a 3.5 percent down payment, is among the best vehicles to get financing.

Now, you still have to have good credit, but, as an example, for a jumbo mortgage on a more expensive home, you typically have to have 20 percent down. So, there's a lot of reasons why we like the entry-level sector today.

CAVUTO: But, then, Richard, real quickly, you have got a wild card event thrown in, right, a senior U.N. official just on the wires right now saying that this swine flu thing cannot be contained.

Generally, that puts the fear of God into folks. And — and the last thing they want to do is make a major purchase, to make any purchase. Are you worried that this swine flu stuff actually stalls whatever turnaround you are hoping for?

DUGAS: You know, Neil, there is no way to comment on that, frankly. It's so early in the process.

Clearly, it's a serious situation. It looks like the government is doing a fine job so far of keeping us all informed. And we will have to see how it plays out.

CAVUTO: All right, Richard, thank you very much, in light of all this breaking news.

Always good seeing you. Thank you.

DUGAS: Thank — thank you.

CAVUTO: All right.

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