Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Dan Oppenheim – Credit Suisse
Dan Oppenheim – Credit Suisse
You mentioned that 50% of the targeted communities with the new product offering are schedule to open in the first half, could you clarify how much of your total communities that will be and then also last quarter you talked about how the sales trends in those communities where you had already opened them were seeing two sales per week, could you comment about the trends you saw in the fourth quarter in those communities relative to your other communities.
Jeffrey Mezger
The reason that I clarified it as 50% of the targeted communities is that there are several locations in states like California where we don’t have the ability to change to a new product series because the product is approved with the map. Those are the communities where I’ve been referring to the value engineering, lowering spec levels, doing whatever we can to cut our cost.
But it can’t go to this new product which is significantly more affordable to build and to offer to the consumer. We’re continuing to open these products around the system now however most of them are opened in December with a full grand opening here in January. So I can’t share with you the December results because we don’t share numbers within the quarter however we are seeing favorable positive sales where we’re opening these communities where they are outperforming their previous product or other communities we have open in the area.
Dan Oppenheim – Credit Suisse
Could you talk at all about how should we think about the margins on these products. Have you taken enough cost out where we can see kind of maintaining margins or should we think about lower margins on these going forward.
Jeffrey Mezger
Well certainly the intent is to elevate margins. We’ve been able to lower our cost, we are lowering the price of the product as well so its more affordable and more competitive with the resale and foreclosures. However we’re not lowering the price to the extent that we’re lowering our costs so at this time we’re actually seeing margin improvement as we introduce this new product.
It was one of the components in why our margins were up incrementally in the fourth quarter because we’ve been able to lower our cost to build. We’ll give you more guidance on that as we go forward after we open up in the first quarter but our expectation is that margins will be enhanced with this product not reduced.
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