Ashton Woods, an Atlanta-based multi-regional privately held company that vaulted meteorically into a top 20 ranking in the Builder 100 last year on 2015 revenues of $1.04 billion, will press the growth and unit volume pedal to the metal in the coming months as it unveils a new, entirely discrete brand and business model aimed directly at millennial buyers, many of them currently renting.
Next weekend, coinciding with the traditional opening of housing's annual Spring Selling season, Ashton Woods, America's No. 4-ranked private home builder, will grand-open the first three of its Starlight Homes new-home communities, two in Atlanta and one in central Florida, each featuring six to eight floor plans that spotlight monthly payments that range from the mid-$800s to the low $1000s per month. By the end of March, Starlight homes will be selling in Atlanta, Florida, Austin and Phoenix, and, most likely before 2017 ends, Ashton Woods expects to be selling its Starlight Homes communities in all 12 markets it currently operates in, building out an entry-level brand it hopes can compete with juggernauts LGI Homes and D.R. Horton's Express brands.
Ashton Woods in the past six years since the dregs of the downturn transformed itself from an over-leveraged, private company on the brink of extinction into a 6-state powerhouse. Leveraging nimble land strategy, highly-personalized floor plans, white-glove customer care, operational precision, and compelling architecture into a volume-custom hybrid, its model perfectly suited the profitable move-up, and second-time move-up home buyers who kickstarted housing's recovery four-plus years ago.
"The crux of how we launched the Starlight Homes business model and brand was to serve a buyer who may never have considered that homeownership was attainable," Carrie Schonberg, Ashton Woods VP of marketing, tells me. "The imagery of the branding, the starlight notion, syncs up with our business model which we sum up with the tagline, 'guiding you home,'" says Schonberg. "Our whole approach to this unmet market is to work with people most of whom are currently renting, and start with them well before the purchase process to get them ready for homeownership."
The six or eight floorplan versions will be built as spec or inventory homes, and part of the sales experience will be that sales associates will take their prospects to the home that will potentially be the one that prospective customer will buy. Marketing will focus heavily on identifying current renters, targeting them with emails, direct mails, and "guidance" to let them know that both the baseline price is doable and the financing is attainable, despite continued mortgage lending constraint.
Competing not only with other new home builders, Ashton Woods, LGI, Horton, Meritage with its entry-level plus, and Toll Brothers with its T|Select line, know that opportunity during the next couple of years is going to be increasingly strong in the FHA price bands in many markets, given that existing homes in that range are so scarce and rents keep going up. The move is timely, as reports and research are beginning to suggest that many young adults--as much as they believe in homeownership and want it--are starting to believe that the American Dream is beyond their grasp.
The Wall Street Journal's Laura Kisisto wrote a piece for yesterday's paper titled, "Young People Lose Confidence in Their Prospects as Homeowners," noting:
The share of renters and people living with family members who believe now is a good time to buy declined to 55% in the fourth quarter of 2016 from 58% in the third quarter and 63% at the beginning of last year, the National Association of Realtors said Wednesday.
Lawrence Yun, chief economist at the National Association of Realtors, blamed lack of affordability, a shortage of inventory, student debt and a perception that credit remains tight for potential buyers’ lack of confidence.
Home builders were relatively slow--except for LGI, Horton, and a few smaller privates--to invest big-time in entry-level communities for four key reasons.
- One, they were able to meet a need for well-heeled, cash-rich discretionary buyers who were the vanguard of the first phase of recovery, netting higher profit margins and cadencing their operations so that they could deliver quality homes to discriminating buyers;
- two, labor capacity constraints meant that a surge in high-volume, low price product, often in farther-flung geographical peripheries of job centers was a suppressor of first-time buyer initiatives;
- three, housing finance, the credit box, and post-recessionary job and household income levels limited the pool of young adults able to get on the homeownership dance-floor; and
- lastly, but importantly, home builders' operations and skill-sets in the lower-price tier, higher velocity, lower margin business was an area that had been mothballed for a longer time period, and was harder to whip into shape for a new go.
Together, these conditions held back a major surge in entry-level production before now.
Ashton Woods--which happens to have a strong representation of former Centex execs and other builders with entry-level experience--believes its ability to excel at the starter home game is in good shape.
Not coincidentally, Ashton Woods yesterday announced it has created a new executive-level position, Chief Operating Officer, and it has promoted Ryan Lewis to that position.
Here's a note Ashton Woods CEO Ken Balogh put out to the company yesterday:
We are pleased to announce the promotion of Ryan Lewis to Chief Operating Officer of Ashton Woods Homes and Starlight Homes. Ryan joined the company in 2013 and launched the Charleston Division of Ashton Woods. In 2014, Ryan was also named the Division President of the Raleigh Division. During this time, he has been able to successfully grow both divisions and achieve tremendous success in these markets.
He joined the company after serving in several regional operational roles at Pulte and Centex Homes. Ryan’s background and breadth of knowledge in Purchasing and Estimating, Construction Services and Operational capacities has enabled him to achieve remarkable success in his career. In his new role, Ryan is responsible for the homebuilding operations of Ashton Woods and Starlight Homes and he will oversee the Sales, Architecture, Marketing and Purchasing organizations.
I am very excited to have Ryan in this new role where he will be able to serve the broader organization and provide strategic guidance to our homebuilding operations. Ryan embodies strong leadership qualities and a unique passion for our people and our business that has allowed him to excel in his career.
Ryan, his wife, Elizabeth, and their boys, John and Andrew will be relocating to Atlanta for this new role.
Please join me in congratulating Ryan on this well-deserved promotion.