As the Fog of Recession Lifts, Builders Take Stock in How They've Changed

Betenbough Homes of Lubbock, Texas, had “fantastic, record,” sales in 2010 and 2011, says its owner Rick Betenbough. But healthy markets turned out to be a double-edged sword when the builder realized it wasn’t delivering an extraordinary buying experience for customers who were less than thrilled with the cleanliness and orderliness of the construction process. “The end didn’t justify the means,” admits Betenbough. For a company that relies on referrals, such dissatisfaction could jeopardize future sales.

Other builders have made similarly uncomfortable discoveries about their customers, companies, and markets during the five-year-long housing recession that finally showed signs of easing during late 2010 and early 2011. “It’s been a fight for survival, where there’s no such thing as ‘too big to fail,’” says William Brooks, CFO of Georgia-based Crown Communities, which nevertheless enjoyed steady growth over the past four years. Robert Bowman, president of Charter Homes & Neighborhoods in Lancaster, Pa., compares the recession to “driving in a fog and not even being able to see the hood ornament. Now, there’s more visibility.”

The recession’s harshness is already beginning to fade for Ball Homes’ communities in Kentucky and Tennessee, which sold 60 homes in February 2012, versus 29 in the same month last year. “We’ve seen things improve quite a bit,” says owner Ray Ball, who is projecting at least a 30 percent increase in closings this year.

Ball Homes has been in business since 1959 and remains standing today, says Ball, because it traveled a conservative route. The same is true of Tropicana Homes in El Paso, Texas, says its president Randy Bowling. “In good times and bad, we’ve erred on the side of caution. We probably didn’t make as much money as other people, but we had less to work out, too.”

But these last several years have also been “a gigantic reality check” for most builders, observes John Wieland, CEO of Georgia-based John Wieland Homes and Neighborhoods. “If you thought things could get worse, you were right.” And nowhere have builders’ preconceptions been knocked for a loop more than in the shifting inclinations of customers toward purchasing a home, the price they are willing to pay, and what they expect that house to include. “Housing is as psychologically driven as it’s ever been,” observes Larry Nicholson, CEO of California-based Ryland Homes. Bowman adds that now that his company has come to grips with the fact that it is a buyer’s market, “everything we do needs to be of value to the customer.”

Meeting Buyers Half Way

For some builders, that’s meant taking the mountain to Mohammed. In other words, sending their messages to where buyers prefer to congregate. In an effort to enhance the buying experience, Betenbough Homes started equipping its field inspectors with Apple 4GS smartphones to take pictures of homes under construction. They’ve been posting those photos the same day, with comments, on buyers’ Facebook pages, so the homeowners don’t have to go out to the jobsite as often, but also “to take advantage of the Facebook experience,” says Betenbough, who notes that the average Facebook user has 230 friends.

Oklahoma City–based Home Creations has refocused its marketing toward first-time buyers and “where they are,“ such as colleges and bridal fairs for newlyweds, says Anita Wagoner-Brown, the builder’s vice president of sales and marketing. Every quarter, Home Creations conducts home buying seminars with buyers and lenders, which regularly draw 40 to 50 prospects. “We go over everything, like what they need to get credit, what they need to put down, and general creditworthiness,” says Wagoner-Brown.

To win over prospects, the Ohio-based on-your-lot builder Wayne Homes relies on “deeper branding” that attempts to convey greater empathy for customers’ needs. Co-owner David Logsdon explains that buying a home is always “a life experience,” which is why one of his company’s post-sale survey questions asks, “How much fun did you have?”

“The customer has changed,” says Bill Post, who with Logsdon acquired Wayne Homes from Centex four years ago. Since then, “technology exploded and has had a major impact on our business. Customers are savvier and have higher expectations.”

Taylor Morrison CEO Sheryl Palmer, though, isn’t so sure customers have changed all that much. The Arizona-based company recently completed “a significant piece of research, with tens of thousands of touch points.” Using that research, the builder updated its divisions’ customer profiles. But Palmer says she expected more variation in customers’ values than the research revealed. “The dream of homeownership is still alive. It just might not be the priority it used to be at [age] 24 that it is now at 32.”

Learn more about markets featured in this article: Oklahoma City, OK, Columbus, OH, Atlanta, GA.