Through October, CBH Homes was on track to sell between 800 and 1,000 homes in 2008 and generate more than $150 million in revenue. Sales in the summer alone were up 133 percent over the previous summer. What is CBH doing to produce such numbers? The Meridian, Idaho–based builder’s astonishing success stems from just a few timely decisions its executives made a year earlier, when the state’s real estate market began tanking.
Oddly enough, CBH’s exposure to the housing downturn is greater than most builders’ because it builds a lot of spec homes: As of last fall, it had between 350 and 375 in stock. But when business tailed off noticeably in the fall of 2007, Corey Barton, CBH’s owner, decided his company needed to offer customers (mostly first-time and move-up buyers) something different. CBH would build simpler homes it could price between $95,000 and $200,000, from a previous range of $225,000 and $300,000. That included reducing the size of its homes to between 899 and 2,500 square feet, from 1,544 to 3,500.
Around then, the company conducted its first “Deal of a Lifetime” sales promotion, which lowered prices on inventoried homes by $30,000 to $70,000. That event drew more than 900 prospects and resulted in 100 sales with virtually no cancellations. CBH resurrected this promotion last October, drawing more than 1,000 people and selling 96 houses.
During the most recent sales event, CBH turned away 30 percent of its prospects because they didn’t qualify for a mortgage loan. But the builder stays in touch with customers who don’t quite have their financing ducks in a row through its Homebuyers Club, which is tied to its mortgage subsidiary. The club offers educational seminars on topics that might help buyers get to where they could make a purchase.
“People need to be educated about what it takes to buy a house,” says CBH’s vice president Ronda Conger, who points to one younger buyer who, after signing a contract, blew up her credit rating by purchasing a $17,000 car. The Homebuyers Club seems to be helping, as three of the 15 people who attended a seminar last August purchased a home from CBH in October.
Barton says that, despite its lower pricing strategy, his company made money in 2008. To rein in expenses, CBH Homes centralized its selling offices. Where it used to have a sales rep at each of its 42 communities, it now has Square One sales offices in six Idaho markets, each providing buyers with information on at least 10 communities and 40 to 50 floor plans. “It’s a huge reduction in overhead,” says Conger. “But we really did it for the customers, to allow them a one-stop shopping selection. It’s a buffet.”