MAYBE BUILDER 100 EXECUTIVES WILL BE THE next ones hauled before a congressional committee to answer allegations about steroid use. How else can you explain a single company, D.R. Horton, building 44,005 homes a year? Let's do the math—that means it started and closed 121 homes every day. I can just hear the congressman intone, “No home building company ever managed to do 20,000 until 1998. And now you did double that amount in one year! I want to ask you how that could humanly be done?”
Rest assured that no performance-enhancing drugs were involved, unless you want to call entrepreneurialism one. Horton doubled its bonuses for division presidents last year when it hit its markets for inventory turnover. It worked. The company wants to double again by the end of the decade. (Read more about Horton's incentive plan in “High Jump,” see page 156.)
And how are we to believe, another lawmaker might ask, that M.D.C. Holdings, already nearly a $3 billion company, could increase its revenues by 37 percent in one year? Profits at M.D.C. Holdings last year nearly doubled.
No secret injections were involved, unless a business plan counts. M.D.C. threw out the first ball back in 2001, when executives there reorganized by creating regional presidents and charged them with entering new markets and making key acquisitions. Early moves really bore fruit last year.
The 2004 season will be remembered as a great one for most BUILDER 100 teams. Closings, on average, rose 20 percent, and revenues increased by 28 percent. Nearly everyone on the list turned in a Babe Ruth–like performance. A select few accomplished a miraculous feat: They doubled in size, without the help of “supercharged” milkshakes.
Taylor Woodrow Homes, which raised eyebrows by changing course in California a few years ago, confounded skeptics by increasing its closings by 123 percent. First Home Builders of Florida, Levitt and Sons, and Warmington Homes California all more than doubled their revenue last year.
If BUILDER 100 companies had a “problem” last year, it was growing too fast. Holiday Builders in Florida has nearly doubled in size in two years. As CEO Richard Hawkes says, “You can sell homes all day long down here, but controlling our growth has been the key for us.” Holiday slowed down production to emphasize quality control.
With the big builders, their biggest problem will be sustaining growth. So it's no wonder that they list managing land supply as their No. 1 issue. Centex, for one, estimates that 50 percent of its markets are “entitlement constrained,” though it has all the land it needs for 2006 production levels and 73 percent for 2007.
The top 100 companies in this industry command a steadily increasing share of the market. Last year, they took down 36 percent of housing sales, compared with 27 percent 10 years before. That number will continue to grow in years to come, though it will no doubt occur through natural economic means.
Boyce Thompson, Editorial Director