The end of the housing recession did not materialize in 2009 as builders expected, and the fallout—in terms of failed companies, lost jobs, and red ink—is still spilling into 2010. But there were signs in some markets that both buyer demand and home prices had hit bottom, and that business conditions might finally improve this year.

The industry’s largest 10 builders proved once again that size isn’t everything. Their combined closings in 2009, at 89,578, were off by nearly 37%, and for the third consecutive year, these builders lost market share. Only one of them—NVR—managed to turn a full-year profit.

Like many of their midsize and even custom competitors, several big builders found some solace in first-time home buyers, who seemed to be the only customers able to get mortgage financing. In their pursuit of these buyers, builders added smaller, more affordable house plans to their portfolios. And a few, such as Lennar, added social networking to their marketing efforts.

A number of big builders, which finished 2009 with sales and earnings spurts they hadn’t seen in years, are again looking to expand their market reach, either by optioning land or through acquisition. The relative scarcity of new product available in many markets has large builders convinced they will be best suited to meet demand when it revives. However, facing the dual realities of high unemployment and foreclosures, builders will need to work harder than ever just to stay even.

Every year, BUILDER magazine asks the nation’s builders to provide their sales and closings. Our May issue will feature the full results of our findings, but read on to see which companies finished among the Top 10, and how they fared.


Top 10 Builders for 2009
Rank Company 2009 Closings % Change 2008 Closings 2008 Ranking
10
Beazer Homes USA
4,411
-33%
6,624
9
9
The Ryland Group
5,129
-30%
7,352
8
8
Habitat for Humanity Int’l
5,294
-3%
5,459
11
7
Hovnanian Enterprises
5,659
-50%
11,281
6
6
Centex Corp.
6,900 (est.)
-62%
18,241
3
5
KB Home
8,488
-32%
12,438
5
4
NVR
9,042
-16%
10,741
7
3
Lennar Corp.
11,478
-27%
15,735
4
2
Pulte Homes
15,013
-29%
21,022
2
1
D.R. Horton
18,164
-24%
23,915
1


10: Beazer Homes USA

Atlanta

CEO: Ian McCarthy

2009 closings: 4,411

Percent change from 2008: -33.4%

2009 revenue: $1.01 billion

Percent change from 2008: -44.3%

2008 ranking: 9

Beazer spent much of last year working to fix its balance sheet and its public image, the latter of which having been tarnished by lawsuits revolving around the builder’s accounting and sales practices. In the fourth quarter, the company reported that it had lowered its debt by nearly 9% to $1.39 billion. It also squeezed out a quarterly pretax profit. In November, the developer Hearthstone chose Beazer to manage, market, sell, and finish building out 462 lots in six communities in the Atlanta market that had been under the control of McCar Homes. But that same month, the SEC threatened to sue Beazer’s CEO, Ian McCarthy, to collect past compensation he received when Beazer was out of compliance with accounting rules.

9. The Ryland Group

Calabasas, Calif.

CEO: Larry Nicholson

2009 closings: 5,129

Percent change from 2008: -30.2%

2009 revenue: $1.28 billion

Percent change from 2008: -35.0%

2008 ranking: 8

Despite losing $162.4 million last year, Ryland ended 2009 on a positive note. The builder reported a 75% increase in new orders in the fourth quarter from its 182 active communities, which were actually 34% fewer than the same period a year earlier. Growing buyer demand spurred Ryland to rev up its spec building in the early months of 2010. CEO Larry Nicholson, who in February 2009 succeeded Chad Dreier, who retired, also predicts sturdier gross margins this year.

8. Habitat for Humanity International

Americus, Ga.

CEO: Jonathan Reckford

2009 closings: 5,294

Percent change from 2008: -3.0%

2009 revenue: $1.4 billion

Percent change from 2008: -5.5%

2008 ranking: 11

Habitat’s global mission to provide affordable housing was again noteworthy last year. From July 2008 through June 2009, the organization helped 61,005 low-income families around the world by building 23,657 new houses, completing 15,705 house rehabilitations and repairing 21,643 houses. Five years after the devastation of the 2004 Indian Ocean tsunami, Habitat reported that it had assisted more than 22,500 families in Indonesia, Sri Lanka, India, and Thailand. Domestically, in November Habitat entered into a partnership with The American Legion to help Legion members become an important part of the effort to end substandard housing. And as America’s housing market bottoms out, Habitat has shifted from building new homes to rehabbing foreclosed homes in several markets. In recognition of its efforts, Trammell Crow chairman Ron Terwilliger has incorporated into his will a $100 million gift to Habitat, the single-largest contribution by an individual in the organization’s history.

7. Hovnanian Enterprises

Red Bank, N.J.

CEO: Ara Hovnanian

2009 closings: 5,659

Percent change from 2008: -49.8%

2009 revenue: $1.71 billion

Percent change from 2008: -52.1%

2008 ranking: 6

Hovnanian Enterprises lost $716.7 million in 2009. But the builder churned out positive cash flow of $83.9 million in the fourth quarter. During fiscal 2009, Hovnanian reduced its land position by 30% to 27,820 lots, which were 77% fewer than what the company owned or controlled in April 2006. The company also took some immediate pressure off by negotiating extensions of its senior secured debt. CEO Ara Hovnanian says he can finally see brighter days ahead: “A trend of improvements in sales pace is yet another sign that the housing market is at or approaching a bottom,” he told investors.

6. Centex Corp.

Dallas

CEO: Tim Eller

2009 closings: 6,900

Percent change from 2008: -62.2%

2009 revenue: $1.67 billion (est.)

Percent change from 2008: -68.6% (est.)

2008 ranking: 3

Pulte completed its acquisition of Centex last year and is currently repositioning all of its brands to match the lifestyles and pocketbooks of its customers. Centex, going forward, is Pulte’s entry-level brand with which it is targeting first-time buyers. Pulte is already adopting several of Centex’s operating and construction principles, including a push toward selling homes that are built to order and Centex’s “cadence” system of even-flow production.

5. KB Home

Los Angeles

CEO: Jeffrey Mezger

2009 closings: 8,488

Percent change from 2008: -31.8%

2009 revenue: $1.82 billion

Percent change from 2008: -39.9%

2008 ranking: 5

KB lost $101.7 million last year, but reported a $100 million fourth-quarter gain, thanks in part to its Open Series line of homes, which KB introduced in 2009 to compete against foreclosures and resales. Open Series enables home buyers to add up to 40% more living space to the base model of a home on the same lot. These house designs were so popular that Open Series homes accounted for half of KB’s closings in 2009. KB reinforced its environmental bona fides when it announced in early 2009 that, henceforth, it would build all of its homes to Energy Star guidelines. The builder also promised exclusive use of Sherwin-Williams’ eco-friendly paint and Moen’s water-saving faucets. In September, KB re-entered the mid-Atlantic market, where it had been absent for several years.

4. NVR

McLean, Va.

CEO: Paul Saville

2009 closings: 9,042

Percent change from 2008: -15.8%

2009 revenue: $2.76 billion

Percent change from 2008: -25.4%

2008 ranking: 7

For the second consecutive year, NVR was the only company among the top 10 builders that made money. It earned $192.2 million in 2009 (versus $100.9 million in 2008). Its new orders for the year rose 7%, and were up 47% in the fourth quarter. And for a company that has built its reputation on being land-lite, NVR wasn’t shy about picking up the pieces left by other failed builders. In Indianapolis, it purchased through a bankruptcy auction more than 800 unfinished lots that had been owned by the now-defunct C.P. Morgan. In August, NVR started selling homes in Florida for the first time, after picking up a dozen or so lots. This trend continues in 2010, as NVR made a $170 million bid in March to acquire bankrupt Orleans Homebuilders, including Orleans’ 4,300 lots.

3. Lennar

Miami

CEO: Stuart Miller

2009 closings: 11,478

Percent change from 2008: -27.1%

2009 revenue: $3.12 billion

Percent change from 2008: -31.8%

2008 ranking: 4

Perhaps more than any other big builder, Lennar has been exploiting the commotion created by the housing recession. As part of Landsource’s Chapter 11 reorganization, Lennar invested $140 million in exchange for a 15% equity stake in the reorganized Newhall Ranch. In February 2010, Lennar closed a deal with Starwood Land Ventures to acquire or option more than 2,700 homesites in 38 communities across Florida. The builder also moved forward last year on its 770-acre Hunters Point/Candlestick Point mixed-use redevelopment project in San Francisco, where it has entitlements to build 10,500 houses. And it recently re-entered the Atlanta market. No wonder CEO Stu Miller expects his company, which lost $417 million in 2009, to return to profitability this year.

2. Pulte Homes

Bloomfield Hills, Mich.

CEO: Richard Dugas

2009 closings: 15,013

Percent change from 2008: -28.6%

2009 revenue: $4.08 billion

Percent change from 2008: 35.1%

2008 ranking: 2

The combination of Pulte and Centex, which each company’s shareholders approved last August, forms the industry’s largest homebuilder. Pulte executives estimate that the merger would create synergy savings of $440 million, plus another $150 million to $200 million in purchasing savings. This deal also separates Pulte from other large builders that have been winnowing their land holdings. The combined company—now known as PulteGroup—ended 2009 with 176,727 lots, 153,618 of which it owned. “We feel that over time the value in this dirt will show itself,” said CEO Richard Dugas. Their combined new orders increased 32% in 2009. Pulte alone lost $1.18 billion last year, and any improvement in its profitability is likely to hinge on how deftly it positions its brands—Centex, Pulte and Del Webb—to specific customer groups. (Last year, it hired its first chief marketing officer, Deborah Meyer, who had worked for Chrysler and Toyota.)

1. D.R. Horton

Fort Worth, Texas

CEO: Don Tomnitz

2009 closings: 18,164

Percent change from 2008: -24.0%

2009 revenue: $3.87 billion

Percent change from 2008: -33.5%

2008 ranking: 1

As a result of the Pulte-Centex merger, D.R. Horton, which calls itself “America’s Builder,” in 2010 will relinquish its hold on the top spot among the housing industry’s largest builders. But don’t expect Horton to lose its swagger, based on its actions and attitude last year. When, in the fourth quarter of 2009, the builder reported its first revenue increase in more than three-and-a-half years, CEO Don Tomnitz predicted confidently that Horton would not only make money in 2010 (it lost nearly $3.2 billion in the prior two years), but would maintain its market dominance. In November, Tomnitz told investors that the company might add up to 10 new communities in each of its markets over the following 15 months. Indeed, developer sources in several markets across the country—especially on the West Coast—have observed that Horton has been particularly aggressive in securing options on land since the middle of last year. And Horton—which has always catered to first-time buyers—accentuated that business strategy with the launch, in Colorado, of its Freedom series of homes, which range from 1,215 square feet to 1,553 square feet and are priced from $189,950 to $214,950. Those homes target renters specifically.

John Caulfield is senior editor for BUILDER magazine.

Learn more about markets featured in this article: Los Angeles, CA, Atlanta, GA, Dallas, TX.