Market Timing

Next, Caruso pops into a sales meeting where Samoy has reminded her sales team to have fall mums planted, Halloween candy available, and nice candles burning in the sales centers.

Caruso has some words of encouragement for the sales staff. “Interest rates are going up, and we're still raising prices,” he says. “Work the traffic so we don't have any kind of a slowdown in sales.” He speaks often of building relationships with customers, and he returns to the theme again here, emphasizing the importance of knowing each buyer. “Know how many kids they have and where they work. We're not just taking orders,” he instructs.

In early October, Caruso is selling homes that will start in late winter and early spring 2006. The company generally doesn't operate off a large backlog of sold homes, in order to better manage customer experience. It has sold through the winter, though, to hedge against the effect rising interest rates may have on traffic. Nevertheless, Caruso and Herzog remain bullish about the D.C. market, thanks to high traffic numbers and strong area employment. The Washington metro area boasts one of the nation's lowest unemployment rates, at close to 3 percent.

As employment has grown, so has the definition of the D.C. housing market. The map in the corner of Caruso Homes' main conference room stretches north to Delaware and west to West Virginia.

LESSONS LEARNED: When Caruso Homes finished communities ahead of schedule in 2003, others were held up in the permitting process, leading to a dip in closings and revenue that year. The company has concentrated on having more than enough land and projects in the queue since. That philosophy clearly paid off in 2004 and 2005.

At this meeting, the team wants to identify land near projects that will be closing at the end of 2006 and in 2007. “The effort is on replacing jobs in our core markets,” says John Maestri, vice president of land acquisition. The staffers cover the table with plans of current projects and maps of nearby counties, outlining possible deals.

The company took a break from buying raw dirt in the early 1990s, when Caruso picked up lots left behind by builders in the wake of the housing market plunge. Caruso partnered with area landowners and developers who finished the lots for a cut of the profits.

The company returned to developing its own lots about four years ago, when finished lots became increasingly expensive and tough to find. “All the jobs we thought were on the horizon started disappearing,” Caruso recalls. Herzog nods in agreement. “It's about controlling our own destiny.”

After a break for lunch at Grace's Fortune, a Chinese restaurant that Herzog and Caruso—and other local builders and developers—frequent, Caruso takes 10 minutes to answer e-mails. A small group gathers in his office to delve further into the company's finances than Staiger went into in the earlier management meeting. Staiger reviews deals with current investors, including those who will soon receive checks from the company.

Though Caruso Homes has a reliable group of investors—every investor has always participated in a subsequent project—he also discusses possibilities for future deals. The company has a goal of meeting with at least one new possible investor each month.

Herzog steps out of the finance meeting to sit in on the end of the starts meeting. Each week, Samoy and other staffers from the production, purchasing, budgeting, and mortgage departments go through each project, updating start, sale, and settlement dates.

Though tension sometimes creeps into these meetings, as the departments naturally push and pull against each other, the group is satisfied with the outcome of this week's update. “We should be good through February,” Samoy says. On that note, Herzog returns to the finance meeting.

His meetings over, Caruso spends the rest of this Monday answering e-mails and setting his schedule for the week.

While he writes, he discusses an eternal question for his company: Is it better to go somewhere new and get a big plot of land or to stay close in smaller projects but better-known areas? The company has started a satellite office in Virginia to use as a template for farther-away offices and has installed video conferencing, but Caruso says true geographic expansion is at least a year off.

The company is well prepared for nearby growth through 2007. It controls some 5,000 lots. Future plans include spinning the land development department into a separate business to manage that inventory. At the end of this autumn day, though, Caruso keeps working that part of the business. He shoots off one last e-mail: It's to make a lunch appointment to discuss selling surplus lots.

Owner and CEO: Jeffrey Caruso

President and COO: David Herzog

Company focus: Move-up and active adult housing in the Washington market priced between $250,000 and $750,000

Employees: 131

Year founded: 1986

Web site:www.carusohomes.com

Notable: Building second House for Hope charity home; launched satellite office in Virginia.