Near the beginning of the housing recession in 2007, most home builders were confident that business would be back to usual by the end of 2008. Not Pat Neal, president of Neal Communities in Florida.

“In my case this is my sixth [down] cycle, and there is the benefit of the experience, particularly here in Florida where there is an inclination to overbuild,” says Neal, a Wharton School business graduate. “I thought it would be worse than most of the pundits were predicting, but not this bad.”

So, unlike so many builders in 2007, who kept operating as though the falling market was a short aberration, Neal, both a developer and builder, started retooling his product, making his homes into smaller “cottages” targeted to empty-nest buyers who he thought would be more able to buy homes even during hard times. At the same time, he went to work streamlining production processes, examining every feature and standard offering, and re-engineering all the plans for cost savings and efficiencies. The company started doing things such as creating cutting sheets for the plywood so subcontractors would make the most efficient use of materials.

Neal’s changes worked, because, rather than waiting for the old market to return, he figured out where what was left of the market would be. As a result Neal Communities, which operates in Southwest Florida, one of the hardest hit markets in the country, posted operational profits every year of the recession, though 2009 was a squeaker when operational take-home was close to zero.

While Neal was making big adjustments to his business, other builders were wringing their hands waiting for the old market to return. By the time many realized that they needed to make changes it was too late and they had run out of money and luck.

“We think we saw what was happening earlier,” says Neal. “You can’t make a market. You have to find the market that is there and follow the lead where it will take you.”

Sometimes that means going in the opposite direction of the crowd. Neal was selling land during 2005’s market peak when almost everybody else was in a buying frenzy. And he bought and developed River Sound in Manatee County in 2009 when nobody else was developing communities and when no bank would finance it.

“We built it with cash, and it saved my company,” says Neal. The neighborhood, stocked with the new cute cottages Neal had rolled out a year earlier, was a success.

Neal Communities is on the upswing now. Its business is expected to climb 30 percent in sales and 40 percent in profit this year. It has a community that’s selling 20 homes a month. Neal is out buying land again in Florida. And he’s plotting his next contrarian move. While many builders are focusing on move-up buyers, Neal is continuing to bet on the active adult buyer and expanding his target audience to starter-home families, with homes starting near $110,000 with monthly payments in the $600 range.

“We have a lot of pent-up demand expressing itself now,” he says.

Zigging Instead of Zagging

Even as small builders closed and big builders left Denver, Cardel Homes’ business improved.

Like Neal, it stayed away from where the large production builders played, concentrating on building higher-end homes in the best located developments. “We don’t want to build the most and the cheapest,” says Rod Mickelberry, the builders regional president.

However, when times got tougher it did do some re-engineering, shrinking its lots, building a bit smaller, and lowering its prices.

“We actually improved our performance in the downturn,” says Mickelberry. “We tripled our ‘A’ locations.” Cardel was able to pick up well-priced lots in the desirable Solterra community because the developer was anxious. And it was able to acquire some distressed condominium/townhome lots in Highland Ranch from a failed builder. “We hit that perfectly,” he says.

“We are nimble, and we do things our own way,” says Mickelberry. “We do our own plans and designs, our own marketing department. We made it through the recession by being wise and improving ourselves.

Big Reality Check

Private builders aren’t the only ones who have learned to make money in the markets they have rather than the ones they had in the “good old days.” D.R. Horton, the largest builder in the U.S. by volume, is among the few that have returned to consistent profits, and a lot of its success was due to nimbleness.

Big as it is, Horton was able to retool quickly, building speculative homes for first-time buyers to take advantage of the federal tax credit. Since, it’s been moving back to the middle-priced, move-up buyer that provides larger margins and doesn’t have as much trouble getting a loan.

Horton, with its huge war chest and Texas-sized ambitions, chose to think of the recession as an opportunity rather than a tribulation.

“I see this as our opportunity to take market share,” CEO Don Tomnitz said in a conference call earlier this year, “not only from those small and medium under-capitalized private builders, but I also believe and know that for the first time in our company’s history that we have the opportunity to continue to take market share away from our public competitors who I perceive are way overleveraged compared to us and it gives us an opportunity … for us to continue to take market share from them.”