When KB Home rolled into Louisiana in 2005, it was like manna from heaven for at least one company. Baton Rouge, La.–based Level Construction and Development signed a deal that year with the national builder to develop 212 single-family lots in a neighborhood called Lakes at Stonegate.
KB’s dream of single-handedly rebuilding New Orleans and becoming a dominant force in Louisiana never materialized, though. The state’s tight permit policies didn’t suit its business model, and KB finished only about 200 homes before exiting the market in 2007, according to the New Orleans Times-Picayune. That decision, however, didn’t set Level back as much as one might have expected.
After completing the neighborhood’s infrastructure, Level began selling finished lots to KB in January 2006 for $52,000 per lot. Todd Waguespack, Level’s president, says KB had agreed to take down 15 homes per quarter, which shrank to eight for a few quarters and then stopped altogether. Level ultimately released KB from its purchase agreement and bought back the lots it sold for $20,000 each.
Level took up where the giant builder left off and closed its first homes in this neighborhood in the spring of 2007. It’s pretty much building the same houses KB would have—ranging from 1,350 to 2,300 square feet and from $179,000 to $200,000—but without extras.
“KB would offer close to 1,000 options; we’ve narrowed that to about 30,” says Waguespack. In the process, Level also shortened its cycle time to around 90 days, from 150 before the recession, to ensure it could deliver homes when customers want them.
The builder is converting about three-fifths of its shoppers into purchasers, but it’s averaging less than two sales per month in this community. The builder may be on track this year to increase total production by 5 percent to 84 homes. What worries Waguespack, however, is the stifling credit crunch that continues to choke home buyer demand and threatens private builders’ growth.
Learn more about markets featured in this article: Baton Rouge, LA.