For one Houston-based operator, Trendmaker Homes, the hell builders are going through now adds up to opportunity.
We caught up with Trendmaker president Will Holder last week in Las Vegas, and the message was clear: it's tough seeing things clearly in Houston right now, as oil-related layoffs play out in sudden blasts, rippling out as waves of loss-aversion and a long-standing high-tide-low-tide psychology.
Holder's position--backed by the patient capital and non-stop flow of ideas, initiatives, and expectations of parent company TRI Pointe Group--may serve as a sneak preview of the attitudes and bearing of home building companies that have the financial wherewithal to stick with their programs through another rough go.
"We're in the fourth largest metro in the country," says Holder. "We hit 27,000 or 28,000 permits in Houston over the past couple of years, and if we lose 10 or 20, or even 30 percent of that, we're still the biggest new home market in the country."
Holder figures that the best thing that can happen for Houston is for oil companies to reset around the bottom of the worldwide demand and price of oil, and find its floor.
Meanwhile, insecurity builds amidst the uncertainty people feel about their jobs, their earnings ability, the stability of the earnings of their family members.
One story has it that an oil company executive learned he was among 3,500 people who were given notice that his job was terminated one day, so he canceled his order for a new home. Within a few days later, the same executive among 2,500 of the same people hired back by the same company, each person with a new job description, so he went out and bought a Porsche that day.
During those days, a home building operator comes face to face with the reality that it can not control the timing of the local economy's shift from one direction to another. Fear is widespread, anxiety is everywhere, and confidence is scarce.
In 35 years of working in the Houston market, Holder's "lessons learned" include this one: it's not what happens to you as a company; it's what you do as a company.
An uncertain, even a doubt-filled local economy, is precisely the moment people who are smart investors work their magic. They buy a dollar for 50 cents. Buying a dollar for 50 cents is what home builders and residential developers do in times when they get rough. They get rough on others, you see, which makes 50-cent dollars possible. Fear does that.
"The opportunity now is to secure as many options on lots in the best communities possible, so that even as your units sold per community per month slow down, you're making it up with more neighborhoods open. More communities get more volume," says Holder. "Then, when the reset happens and the economy's got a floor under it and jobs start to come back, your pace and volume come back across the board."
The Trendmaker focus is on two things: being super capital efficient, so that those revenue dollars, spread across a wider net of operations in more communities, are still profitable. Equally, if not more important, customer care.
"What customers being happy and our employees being happy means is that we get to spend our time on doing things to continue to keep them that way. Thirty-percent of our sales come from direct referrals. If we keep making customers happy we can use our energies on doing even better, instead of with the lawyers."