It was supposed to be a day to begin looking forward. The first week of October marked not only the beginning of a new month but also a new quarter of business, and Standard Pacific Corp.'s Orange County, Calif., division was ready to start fresh.
The third quarter had left the division bruised and battered. In August alone, the Orange County division's sales were down 90 percent year-over-year and down 75 percent since January 2006.
But, by the close of business on October 4, pink slips were delivered to 24 employees, and a substantial portion of the work-force was relieved of its responsibilities.
The new-home demand in the market was just too feeble to justify the number of names on the payroll. Although the cache of a coastal address remains high, Orange County's anemic sales pace traces back to area's severe land constraints, which subsequently have inflated home prices and kept the affordability ratio low (down to 3.5 percent in August). Moreover, many of those would-be buyers who can afford to a new home in the market are having trouble unloading their existing homes.
Certainly Standard Pacific is not alone. As builders in overheated markets—Phoenix, San Diego, Sacramento, Calif., to name a few—struggle to find bottom, more than a few home building companies have had to trim their workforce numbers. Industry sources report that builders are having to cut anywhere from 6 percent to 20 percent of their staff to stay in line with projected sales drops. But even in some of the less frothy markets, builders are grabbing the shears. In Atlanta, The Ryland Group pared its division staff back by an additional 5 percent in mid-September.
And for those such as Lennar Corp. that claim not to be handing out pink slips, restructuring is the order of the day. At Lennar, entire divisions are being folded into other company operations.
The initial staffing cuts that occurred across the industry in the second quarter have been the deepest thus far. However, many companies expect to continue to make headcount adjustments, if market conditions worsen. Builders in the Florida market appear especially at risk, as news of layoffs trickle in from builder, such as DiVosta Homes, a subsidiary of Pulte Homes, Technical Olympic USA, and WCI Communities.
Current layoffs are hitting land acquisition departments hard, according to several market specialists and recruiting experts. With slower absorption rates, builders have larger land pipelines and are finding that there is no need for deep land acquisition departments. Project management and construction positions are also seeing the impact as new product introductions slow and these roles find there aren't as many new communities to transition into. Human resource functions and all regional management roles also are reported to be in the crosshairs. (For a more in-depth look into how the layoffs are affecting the industry's overall employment outlook, check out “Survey Says!”.)
“A good salesperson is worth their weight in gold right now,” says Veronica Ramirez, president of Joseph Chris Partners, a Texas-based search firm. “Everyone is starving for good salespeople.”
Another protected class: division presidents that have leadership skills in addition to finance knowledge. “If they understand finance, as well as the sales and the people side, [they] are in high demand,” notes Ramirez. “A lot of companies went on a craze to hire division presidents that came out of finance, but when times are tough, you need to be able to motivate your people.”