9. REFLECT ON WHAT HAPPENED
“Give us an inch, and we’ll take a mile.” That’s Ohly’s take on how builders’ actions contributed to an epic housing recession that will linger into next year.
With industry losses in the tens of billions of dollars and hundreds of thousands of workers, some home building executives are finally conceding that they can’t pin their woes solely on the usual suspects—venal mortgage lenders, aggressive Realtors, avaricious investors, out-of-control public builders, clueless home buyers, government regulations. They also blame themselves and their brethren for believing that demand was endless, without thinking about the hangover after the party. “You can’t have a 2005 without a 2009,” observes Neal.
“The 100-year storm is possible,” adds Simon. “The market became so overheated that everyone and his brother became a developer.” And in their quest for market share and profits, established builders ignored fundamental management tenets. “The more homes you deliver, the more problems you have,” says Chung.
Barton says “humility” now informs his decisions about expansion. “I’ve also learned not to spend all our money, no matter how good a deal looks.”
10. BELIEVE IN THE INDSUTRY AGAIN
An economic storm that rocked their world may have lowered builders’ short-term expectations. But it hasn’t shaken their unflappable optimism.
Some builders have more to be hopeful about than others. Harkins Builders made money in 2009 and should do so again next year. “We’re ready for an upturn in 2010,” says Lombardo. “We have the right personnel and certainly have the capacity. Our relationships with our trade partners are as strong as ever.”
Future success, though, may be a matter of perspective. Pacific Communities, which closed about 160 homes in 2009, owns 10,000 lots outright. Its president measures profit based on gross margin and not by internal rate of return that other builders are obsessed with. “So I can look at these lots as long-term assets,” says Chung.
In September, Neal Communities had 27 net sales and was on track to close 22 homes in October. The builder also has more than 400 houses under construction “This is a time of great opportunity,” says Neal. “It’s fun when you’re at the top and it can be fun when you have challenges. We’re building specs again, and I like the challenge.”