Strategy Cuts Carrying Costs

Land acquisition and development play prominently in the strategy of Ryland Homes' Orlando, Fla., division, whose sales have doubled or nearly doubled for three years running. The division closed 1,053 homes during the first nine months of 2003 and expects sales to top 1,200 by year-end.

"Land costs present the most difficult dilemma," division president Larry Nicholson says.

Like other production builders in the area, Ryland sells homes at two or three price points to speed absorption. This cuts interest and maintenance costs for the land and helps mitigate the cost of slow government approval. Nicholson says approval time has gone from as little as one year to as much as three years even while demand in Orlando's housing boom has cut lot inventory from two years to 11 months.

To reduce approval time further, Ryland buys entitled parcels from smaller builders that can't compete midmarket and move upscale for higher margins.

Using one marketing and advertising campaign to market product at multiple price points adds cost efficiency, Nicholson says.

About two years ago, Ryland bought land for approximately 2,000 homes. Today, it is developing in 11 communities on much of that land and moving beyond Orange and Seminole counties with sites in Lake County and elsewhere.