Lessons Learned
Builders continue to learn valuable lessons during the housing downturn. But in reflecting back on the boom period, Kim Shelpman, CEO of Holiday Builders, based in Melbourne, Fla., thinks maybe the best lesson is the simplest. “If it seems too good to be true, it generally is,” Shelpman says.
“To have dirt appreciating so rapidly, it should’ve put a red flag up,” she says. “Never in history has that ever occurred, that dirt escalated that fast.”
Hovnanian also sees appreciation as a guide for land purchases; if appreciation spikes the way it did between 2003–2005, “it’s in general a time to be much more cautious on land purchases, in every way, shape, or form,” he says.
While Pulte wasn’t as focused on being the largest builder in the country the way Fort Worth, Texas–based D.R. Horton was, says Dugas, the company did fight hard for growth and will again when the market picks up. Still, Pulte may have been too focused on growth during the boom.
“We did, candidly, push the growth button very hard. Potentially too hard, given the fact that this is a cyclical business,” Dugas says. “[But] don’t lump us all in Horton’s bucket. With all due respect to Horton, we’ve never been super public about wanting to be the biggest. It’s about being the best. I do think the market share growth game is not over, so look for us to grow again, but not to be blinded by just growth desires.”
While all the promises to be more cautious once the good times return sound good, the bottom line is that people have short memories, says Hovnanian. It was a long time between the last bust in the early 1990s and now.
“What happens, realistically, is the lessons are remembered in the short-term memory banks,” he says laughing. “So, we’ll remember for a while. But if it’s another 15-year run with a strong market, chances are we’ll forget 15 years from now. I bet in 2023, many of us will have forgotten these lessons.”