Do you know where Don Tomnitz has America's most prolific home building company headed in these tougher market times—and why? To get to the heart of the issue, a biographical footnote from his boyhood hometown of Mexico, Mo., is necessary.

Tomnitz's aunt and uncle's drug store in the small Midwest town—where he had his first job—produced what was then a pretty penny for the family, right through and into the 1970s. Shortly after young Tomnitz packed off to college, though, a fledgling discount outfit, started by a guy out of Bentonville, Ark., took over an old warehouse space in town. Hello, Wal-Mart and everyday low-pricing's revolution. Goodbye Mom and Pop corner drug store. Or aunt and uncle corner drug store, as the case may be.

In Sam Walton's mixed-blessing legacy are cold, hard lessons for countless souls of humble means whose hometown livelihoods went belly up or sold out over the decades. For Tomnitz, now president and CEO of D.R. Horton, the cold, hard lesson transformed into a hard-boiled strategy to thrive and win in markets good, bad, or indifferent. Did somebody say bad?

One of Tomnitz's senior financial officers reminded colleagues of Walton's cardinal rule of engagement in a meeting recently about the challenging market conditions that have emerged in the home building arena. He said, “Don't get confused about one thing. If you look at any industry, the low-cost provider wins.” And while Wal-Mart sells toothpaste, T-shirts, and lawn mowers, and Horton sells houses and dreams, they're both certifiably one thing above all: low-cost providers.

Now, cutting costs isn't a universal answer to the questions that confront the nation's leading home building operations, and Tomnitz would never suggest as much. Today, even the questions are blurry. What's clear is that the past five years, and especially the past two, have been an anomaly. They've been anomalous both for unsustainable growth spurts and for the way the boom years seemed to knit success into the fabric of the sector and—for investors, observers, and almost everybody else looking at home builders from the outside—have bound America's largest public home building organizations into a single, wildly profitable juggernaut.

As the industry enters the arc of an unfamiliar cycle, amid a host of inconclusive, contradictory indicators—referred to by many as “normal” conditions—it's the differences among the leading companies, not similarities, that matter most. The way rougher markets work, the big winners will break ranks and steam on. Others will drift or get swept into peril's way. Sam Walton knew that.

RECORD BREAKERS Looking at operating results posted by the 21 public big builders we've got on our radar for BIG BUILDER'S 2005 Public Builder Report Card, it's like you're looking at numbers Disney concocted. Through the fourth quarter of calendar 2005, most public builders maintained unstaunched momentum. As a group, they reported record deliveries, revenues, margins, and earnings. Our basket of 21 organizations delivered some 353,000 homes, a year-over-year increase of 17 percent, fully 28 percent of all the single-family homes sold, according to figures compiled by JMP Securities. In contrast, industry-wide new home sales increased 7 percent year over year.

Even more stunning, the 28 percent unit volume share of the new homes sold represents revenues in aggregate of $118 billion. This means that one of every three dollars paid for a new home in the U.S. last year went to one of the 21 companies in our list. And while national revenue growth in new home sales was a heady 13 percent from 2004 to 2005, total revenue growth among our crop of builders did double time, at 27.4 percent.

Builder equities also fared well. Weighted for market capitalization, the group rose by 12.7 percent year-over-year in 2005, observes Alex Barron, JMP vice president and home building analyst. With the S&P 500 up just 3 percent for the year, the builders outperformed that index by 4 to 1.

By year-end, it was evident that macho fiscal year operating results were masking signs of weakness in the trenches. For many, sales slowed in the fourth quarter, year-over-year, and cancellations ticked up. This surprised no one. Most knew the joy ride was just that. All nobody knows is when, how suddenly, and how precipitously the joy ride ends.