View from the Top

Not all the results from the Builder 100 are in, but it’s already clear which companies will land in the top 10. D.R. Horton retained its title as the biggest builder in America, closing 37,717 homes, a 29 percent decline from the previous year. While the other members of the top 10 did not change, their places on the Builder 100 did.

The big unanswered question is whether the combined market share of the industry’s 100 biggest companies will drop because of their exposure to some of the hardest hit markets last year. If the record of the top 10 builders is any guide, that may happen. Last year’s list showed that the top 10 builders accounted for 25.71 percent of housing sales, up from 20.97 percent in 2005.

This time around, the industry’s biggest players took it on the chin in formerly hot markets such as California and Florida, which have been off the most in the last year. To work off land inventory, many of them continued to produce spec housing in 2006 and into the spring of 2007, when they put on the brakes for the most part. This deceleration may translate into lost market share in the short term, though industry experts say the largest home builders will gain share coming out of the downturn.

New Leadership

We’re starting to see some changes in the executive suites as the housing downturn continues. CEO Steve Scarborough’s surprise retirement from Standard-Pacific is the most recent example. Scarborough was replaced by Jeffrey V. Peterson, the lead independent director of the company's board of directors. Peterson, who has served on the board for seven years, will be chairman, CEO, and president of the Irvine, Calif.-based public builder.

Sheryl Palmer recently was named CEO of Taylor Morrison Homes, a company formed by the merger in July of Taylor Woodrow and Morrison Homes. Palmer, the highest ranking female CEO in the home building industry, is taking over a merged company that, in aggregate, closed 7,247 homes in 2006 and generated $3.573 billion, which would have made it the 15th-largest builder in the country that year.

McCar Homes, No. 39 on last year’s Builder 100, last year appointed Steve Roberts as the new CEO of the Atlanta-based company. Once only an Atlanta-area builder, McCar expanded organically into the Carolinas and Florida over the last seven years. The move allowed the company to grow closings to 2,265 in 2006, with 60 percent of those coming from outside Atlanta.

Larry Burrows, the former CEO of Winchester Homes, was recently named president and CEO of Weyerhaeuser Real Estate Co., a post that opened when Dan Fulton was elevated to president of Weyerhaeuser Co. in December. Burrows effectively repositioned Winchester, Weyerhaeuser’s Washington, D.C. operation, as an upscale brand during his tenure there, along with implementing strong quality and customer satisfaction programs. Burrows will now oversee Weyerhaeuser’s six home building companies--Camberley Homes, Maracay Homes, Pardee Homes, Quadrant Homes, Trendmaker Homes, and Winchester Homes.

What’s Next for the Fed

Ever since several home builder CEOs visited with Federal Reserve Board Chairman Ben Bernanke last year, the Fed has taken a series of actions designed to ease the housing downturn, dropping the Federal Funds rate from 5.25 percent in September to 2.25 percent as of March 18. 

Michael Moscow, former chairman of the Federal Reserve Board of Chicago, will be speaking at the Builder 100 conference about these moves, their impact on the housing market, and any future actions the Fed might take. To see the complete agenda and sign up for the conference, please visit www.builder100.com/.

Gone, Gone, Gone

Five Builder 100 companies filed for bankruptcy within the last year, most of them victims of expansion at the peak of the market or exposure to particularly weak markets in Florida and Phoenix. TOUSA, the 13th largest builder in 2006, was the biggest to go out. The announcement followed two defaults on interest payments in January on $685 million in notes. Over the years, TOUSA had rolled up companies in Arizona and Texas, among other places.

The next largest company to declare was Levitt & Sons (No. 50 in 2006), which was operating in Florida, Georgia, South Carolina, and Tennessee. The decision came after the company tried unsuccessfully to restructure its bank debt. Lawrence E. Young has stepped into the position of chief restructuring officer.

When Neumann Homes, (59), filed, it had as many as 1,000 creditors, more than $100 million in liabilities, and assets valued at more than $100 million. The bankruptcy also includes its subsidiary companies, Precision Framing Systems, NDC Fabrications, and NeuPro Co. Neumann was done in by ill-timed expansions into Detroit and Denver, among other factors.

America’s First Home, (71), a Florida-based builder that once built more than 1,000 homes a year, called it quits, turning over the keys to a court-appointed receiver. The fast-growth company rode the Florida wave, going from 91 sales in 2001 to 1,129 in 2005.

Trend Homes, (85), announced in February that it was selling assets from Trend and sister company Classic Communities to Najafi Cos., a Phoenix-based private investment firm for $65 million.

Drees Wins ABB Award

The Drees Company won the America’s Best Builder award in the large builder category for the third time in the company’s history. CEO David Drees said in an upcoming interview for BuilderTV that his company earned profits of 5 percent last year and expects to be in the black again this year. Drees attributed the performance to strong cost controls. 

For 2008, Drees has a three-pronged plan: Invest in sales and marketing, sell and build homes for less, and reduce land holdings and speculative inventory. The end goal is to reduce debt and get out from under carrying costs. Drees said in the forthcoming interview that he likes the company’s land positions and won’t be selling much, if any, land.

Slimming Down

As expected, many of the largest home building companies reduced the size of their footprints last year, pulling out of marginal markets. Most recently, KB Home announced it had pulled out of Albuquerque, N.M., Chicago, and Washington, D.C. The Las Angeles-based company had previously pulled up stakes in Indianapolis.

Beazer recently suspended operations in five Midwestern and Southern markets—Charlotte, N.C., Cincinnati-Dayton, Ohio, Columbia, S.C. Columbus, Ohio, and Lexington, Ky. The Atlanta-based company also got out of the mortgage origination business.

Pulte started a staged exit from Kansas City late last year, a market in which it had built as many as 300 homes a year. And, Kimball Hill left Florida.

Centex announced it planned to leave Columbus, Ohio and the North Carolina Triad area.

The full Builder 100 and Next 100 lists will be revealed in the May 2008 issue of BUILDER.  The online versions of those lists will be posted to Builderonline.com in mid-May.  In the meantime, be sure to check out the full Builder 100 online archive.