Examples of Success in Home Building

There's a lot of bad news about our industry and the economy, and the casual observer might assume the majority of home builders are headed for bankruptcy protection. While that is indeed happening, most builders aren't hitting the bottom. Despite high inventories and falling home values, some builders have been quick to respond to market forces and remain quite profitable. They are not only surviving, they are thriving.

Of course, there has been some modification to what it means to succeed in today's housing market. Most builders agree that success isn't as much about increasing sales as it is about gaining market share. To do this, savvy builders are honing their organizations and maximizing their marketing and sales dollars by focusing on highly qualified prospects. In addition, they are reevaluating their value proposition to be in the best position to take advantage of sales opportunities that do exist.

Meanwhile, home builders that are struggling through the housing slump have a few things in common, too. Typically, they have low customer satisfaction ratings, they have stretched their resources across too many communities, they are trying to be all things to all home buyers and they are suffering whiplash from having grown too rapidly over a short period of time.

We checked in with three builders that have risen to the challenge in Arizona, one of the most competitive housing markets in the Southwest. They include Blandford Homes, Mattamy Homes and Pulte Homes. Here are their stories.

Slow and Steady During the Race

Yet, Blandford's ability to rack up sales during an industry-wide slump has more to do with the way the company has been run for the past 30 years than the past 30 months. Since founding the company three decades ago, Jeff Blandford has fostered a corporate culture that puts fairness front and center. “I was raised to treat people the way you want to be treated,” Blandford says. “It offends me greatly when I feel we haven't done something right by the customer.”

Today, customer surveys show that 100 percent of Blandford's home buyers are willing to make referrals. In fact, nearly all of its sales come from repeat and referred buyers, which is an incredible boon at a time when every builder is looking to get the most out of its limited marketing dollars.

Another factor contributing to Blandford Home's current success is its steady, planned growth. As Blandford's business grew during the 1980s and 1990s, the company was building about 600 homes a year. Though the big numbers were appealing, Blandford didn't like where the company was going in terms of quality construction and service. Customer-oriented superintendents and salespeople were hard to find, which was leading to greater customer dissatisfaction. So he made a conscious decision in 1994 to downsize the operation, limiting annual production to 450 homes. “If we can't sell it right and maintain it right, we'll have little success making home buyers happy,” he explains.

This strategy has paid off for Blandford Homes — which markets itself as Mountain Bridge — as many of the builders that grew rapidly during the boom years are the ones hit hardest now.

More recently, Blandford has focused on just one or two developments to better manage its resources. Blandford's developments typically have several neighborhoods, each with its own price range of homes. This enables the company to appeal to first-time home buyers, buyers looking to move up to a larger home and even those looking for luxury estates. This helps fuel repeat and generational buyers, who either want to stay in the community or live close to other family.

For some builders, putting all of your business in just one or two development projects might seem too risky. Blandford, however, doesn't conceive of a new master plan without a lot of forethought and planning. “If I couldn't find the right piece of ground, I wouldn't do it,” he says. “I don't just go out and say I'll put $100 million in this one property. I think about it for years.”

For example, Blandford kept his eye on some state-owned property for almost 10 years and had to pursue it aggressively when he finally deemed the time right to buy. Similarly, he works with landowners for years so that he stays top-of-mind when they are ready to sell. “Creating a relationship years in advance is truly an advantage,” he says.

Meanwhile, Blandford knows how important superintendents and subcontractors are to customer delight and has hired some of the best in the business, paying them “way above industry standards and treating them well.” As a result, the company has low turnover, with the average employee being with the company for 15 years. “Titles don't mean much in our company,” Blandford says. “It doesn't matter if it's a laborer or one of the top guys, we treat everyone the same. It creates professionalism and respect throughout the organization.”

“In the end,” Blandford says, “our guys don't build a quality home because they have to, they build it because they want to.” With an attitude like that it's no wonder that buyers camped out for a week in May 2008 to buy 106 homes over a weekend at their new Mountain Bridge community.

Mattamy Homes intentionally uses local trade contractors who have worked through all types of housing cycles. This model is the Juniper, Design 350-C Elevation, at Circle Cross Ranch in Queen Creek, Ariz. Click to view larger image.

Mattamy Homes is Canada's largest home builder, with more than 5,000 homes closed in 2007. Four U.S. divisions entered the Arizona market in 2007, the beginning of the U.S. downturn. Despite that disadvantage, the builder has experienced tremendous success in the competitive Queen Creek, Ariz., market that has forced many other builders to close their doors. The team attributes that to employing local industry professionals with a commitment to customer delight and loyalty.

Since May 2007, Mattamy Homes Arizona has gained traction from 1.7 closed homes per month to 4.8 closed homes per month as of September 2008. About 60 home buyers have moved into the Mattamy community, ahead of the desired 50 homes per year in the 242-home site development. About 46 of those have moved in since January, and Mattamy has been averaging about five new homeowners a month. Around mid October, another 17 homes were in the process of being built. “We are above our closing budget for our fiscal year and are already in the process for picking up two to three more parcels and planning for future growth,” says Carolyn Morrison, vice president of operations.

Here are key strategies Mattamy's Arizona division follows:

1. Look to the Locals

While some industry veterans might question the company's decision to expand into a new market while the market soured, others readily see the up side to such a move. For example, with many trades out of work, Mattamy has used “local industry professionals, people who have been through the market and its changes,” says Morrison.

2. Target Your Market

Mattamy has chosen its target market carefully, too. Because many existing homeowners are having trouble selling their homes these days, Mattamy has focused more heavily on first-time home buyers and renters. About 95 percent of the customers have been first-time home buyers, Morrison says.

3. Keep Inventory

Mattamy tries to keep homes in inventory for buyers who need to close fast, such as renters who suddenly find out that their landlord's property has been foreclosed.

4. Help With Financing

Helping home buyers secure financing is key during the current credit crunch. Because Mattamy is developing in the rural southeast valley, buyers qualify for financing under U.S. Department of Agriculture regulations, which permit 100 percent financing and no mortgage insurance. This has helped the builder attract buyers who may not qualify for financing in more urban areas.

5. Adjust the Price and Product

Mattamy's goal has always been to offer an affordable home that exceeds buyers' expectations, but changes in the economy prompted them to tweak their approach. To help people meet a target price point, the company pulled some standard features from its homes that research showed weren't important to buyers and making those items optional. The company also worked closely with its trade partners to reengineer its homes to save money on materials and time without affecting the quality of construction.

6. Cautiously Respond

Like many builders, Mattamy has had to lower prices to reduce inventory. But Morrison adds, “We will never be at that bottom level. We won't discount just for the sake of the sale. It's not all about price. The home still has to fit their needs, and it takes more than price to deliver that. Plus, we're here for the long term. We have a neighborhood we're committed to.”

Knowing that happy residents are its best form of advertising, Mattamy continues to host homeowner events every quarter and deliver customer care long after the sale.

Moving forward, Mattamy is maintaining a realistic outlook. “We anticipate increasing sales slightly after spring of 2009,” Morrison says. “We're here to stay and looking to grow significantly in this market.”

Buyers choosing the Regence model at Sun City Anthem at Merrill Ranch by Del Webb in Florence, Ariz., also get the perks of organized activities, plenty of gathering places and outdoor events. Such amenities have helped Pulte's sales during the downturn. Click to view larger image.

Although a lot of builders tout lifestyle amenities to attract home buyers, Pulte Homes takes it to a whole new level at its behemoth community in Florence, Ariz., which opened on cusp of the downturn in mid 2006. The 3,200-acre development is zoned for 9,400 units and is divided into two neighborhoods: Sun City Anthem, a 4,000-unit Del Webb community for active adults, and Anthem Parkside at Merrill Ranch, an all-ages Pulte community.

Pulte's amenities-laden development and its marketing approach are paying off. Deborah Blake, Pulte and Del Webb's vice president of marketing for the Southwest, says the company has seen month-over-month and year-over-year sales increases for the past two years. No small feat considering that housing starts in Phoenix have plummeted by 65 percent. Currently, the company estimates that it has reached 18 percent total market share in for all homes built in Phoenix and a whopping 60 percent of Phoenix market share for active adults.

Pulte is prohibited from releasing sales numbers due to U.S. Security and Exchange Commission guidelines for public companies, but independently our team discovered that the Pulte Florence community is selling 30-40 homes per month and have not seen much decline in sales despite market conditions. A lot can be said about this level of success and how that translates across the entire company.

“We did a lot of research into what home buyers wanted and what amenities active adults were willing to share,” says Blake. Therefore, certain amenities are available to residents of both neighborhoods while others, such as pickleball (a paddle game that combines ping pong, tennis and badminton), are available to just those living in the active-adult neighborhood.

Both Sun City Anthem and Anthem Parkside at Merrill Ranch offer amenities such as 40,000-plus-foot community centers; fitness perks such as walking tracks and rock climbing walls; cafes and even a spa.

In addition to all of the fun, Anthem Parkside includes a retail center so residents can easily spend the entire weekend in their neighborhood. The project follows the success of Anthem by Del Webb just north of Phoenix, which was the company's first all-ages master-planned community in Arizona. Known for its wide assortment of recreational amenities, Anthem by Del Webb has seen more than half of its 11,000 units sold since opening in 1999.

Anthem at Merrill Ranch, however, is Phoenix's first multi-generational community, which creates unique opportunities for extended families and multiple generations to live close to each other.

“People love the concept of coming home and having everything in their own backyard — the amenities and the programming to activate those amenities.” says Blake. “We spend a lot of time on teen and tween programs — programming that helps families.”

Also, to ensure that the quality of the programming is top-notch for all new home buyers, Pulte runs all of the facilities until control is turned over to the homeowners' association. “If you can't assure that the residents have a well-run amenity when it's turned over, it's a marketing problem,” Blake says.

“Quality of life is important to the value of your home,” Blake says. “What makes you successful in a highly competitive market is when your salespeople can demonstrate that you get 'all of this' for the cost of your home.”

With the intense credit crunch, it's also important for builders to show prospects different ways they can afford a home, whether through options, discounts, incentives, mortgage terms, etc. “Good salespeople understand what is needed to put together the best deal for each buyer,” Blake says.

To promote the value of its neighborhoods, Pulte has put a greater emphasis on marketing, including newer forms of media, such as Internet and text messaging. With competition for home buyers increasingly fierce, builders must get more creative and targeted with their marketing messages, Blake says. “Getting to consumers has never been more confusing,” she says. “You need expert help getting your message to different consumer groups. Who would have thought we'd be sending instant messages to consumers and engaging in social networking?”

Pulte's amenities-laden development and its marketing approach are paying off. Says Blake: “In the last year and a half, we have found how important it is to focus on good marketing and targeted advertising. … If you're going to gain market share, you have to market well.”