Real Estate Round-up
Even in a bad economy, homebuilders never die; they just keep hammering away
Remember when Gemcraft Homes, General Homes and U.S. Home were the big names in Houston’s suburban home building business? Ever heard of Fox & Jacobs or Nash Phillips Copus?
Home builders come and go. The biggest home builders in the nation have been through reincarnations, mergers and bankruptcies. Some brand names live on forever with different ownership.
Shake-outs in the home building business come along every decade or two. An economic meltdown or a recession ripples through the market, and home building companies come under financial pressure and fail.
The home building business has been on a big slide in the last two or three years. On a national basis, home sales fell in July to their lowest point ever, according to the U.S. Commerce Department. Houston has fared better than much of the nation, but home sales in Texas have been sluggish for a couple of years.
Even though the recession put a squeeze on the industry, the professionals who lead the home building firms don’t go away. Many builders find that the recession is a fine time to start a new company or hook up with a new organization.
Tough economic times can be a great time to start a new company. Houston’s Plantation Homes and McGuyer Homebuilders were huge success stories that rose from the ashes of the 1980s crash. Materials, labor and lots are cheaper when the housing market is down, making it advantageous for new ventures.
As 2010 has unfolded, a number of builders have been reinventing themselves.
Hanging up A Shingle
Bob Solomon, a 30-year building industry veteran, who had been president Ryland Homes Houston division for a number of years, has just launched his own firm.
Solomon has started M Street Homes, which recently opened its first model home in Sugar Land’s Telfair community.
M Street Homes has an interesting marketing twist with Asian-influenced designs. The M Street model home sports a distinct Indian Fusion décor. The dining room, for example juxtaposes a deep purple area rug and dark wood floors against a backdrop of neutral green tones to highlight the contemporary white chairs and the floral and glass centerpiece. The turquoise walls in the model home’s master bath are strikingly different.
Solomon is not just putting on a home decorating show. He’s trying to reach a vibrant market niche in Sugar Land. Over 60 percent of the homebuyers in the 2,000-acre Telfair community are Asian, according to M Street Homes.
It’s working. Sales of M Street’s patio homes have been strong in the company’s first few months of operation.
And Solomon is having fun. Instead of feeling pressure to satisfy Ryland’s shareholders and Wall Street analysts, he’s fully focused on the home buyers.
“At this stage in my life, I’m really enjoying going from feeding the huge machine of a public builder that needs ‘X’ number of sales each week, to feeding individual buyers what they want. I want to build a lot less homes and have fun. I want to know the people buy from me and make sure they’re happy,” Solomon says.
Lemming’s on the Move
Jim Lemming, who’s been building homes in Houston for years, recently became president of the Partners in Building firm. So far, things have been going well. Partners in Building brought home a truckload of Star Awards from the Texas Association of Home Builders, including three “best design” awards and an award for the best custom home over $1 million.
Being out front on home design trends has been a key weapon for the company during the recession, Lemming says. And Partners in Building has maintained respectable sales totals. The company will end the year with about 200 home sales. That’s not nearly as high as the company record of 260 homes sold in 2006, but it’s strong enough.
“Our company has been consistent through the whole downturn,” Lemming says.
Partners in Building builds custom homes in master-planned communities in Houston suburbs, in addition to a strong tear-down business in Bellaire, West University Place, southwest Houston and the Memorial area. Lemming says the company will sell about 50 houses in the close-in, Inner Loop area, in 2010.
Another reason Partners in Building has fared well in the downturn, is the company’s market niche (its average sales price is about $650,000) has performed fairly well, Lemming says.
Lemming, who has worked for and owned a number of building firms, is a pro’s pro who is respected by his peers. Will Holder, president of Trendmaker Homes, calls Lemming “one of the best people in the city in the home building business.”
Surviving the Downturn
When the crash hit in 2008 with a sudden decline, many builders had to cut prices to make their homes sell. But cutting prices alone did not guarantee survival.
Frankel Building Group cut prices on existing inventory, but the company carefully evaluated the pricing and made sure not to slash prices too deep, says Kevin Frankel, vice president of sales and business development for the Houston firm. Frankel also adapted its product making it more efficient in size and design and putting greener technology in its homes, he says.
Frankel kept building during the downturn, avoiding over extending, but keeping the wheels turning vigorously.
For the most part, Houston’s home builders have responded with intelligence to the downturn. Unlike what happened in years past, builders put the brakes on construction early. So there has been no overwhelming inventory of unsold homes sitting on the ground.
“Houston’s new home inventory is relatively in balance,” says Houston housing consultant Pamela Minich of Minich Strategic Services. “The Houston housing market will recover gradually as job growth returns and the local and national economies show more definitive, sustained signs of recovery.”
Ralph Bivins, former president of the National Association of Real Estate Editors, is editor-in-chief of RealtyNewsReport.com.