Through the first nine months of 2011, Challenger Homes of Colorado Springs, Colo., expects to close 141 homes, a 56.7% increase over the same period a year ago in a market that was one of the first to feel the nation’s economic pangs but is now showing signs of coming back to life.

Sales of existing and new home sales in the area jumped by nearly 21% in August, to 832, the biggest percentage gain in 18 months, according to the Pikes Peak Association of Realtors. Through the first eight months of this year, sales are off by less than 1% compared to 2010. More important, August's supply of unsold homes on the market, at 4,498 units, was down 22.9% from a year ago, the area's lowest level for any August in five years.

Challenger has seen wild swings in the market since Brian and Heather Bahr founded the company in 2000. But the builder is on track this year to close 200 homes and generate $40 million in revenue, which would represent a nearly 43% increase in dollar volume over 2010, says Todd Anderson, the builder’s president. If it hits that closings mark, Challenger would vie for No. 1 in the market, from 11th just a few years ago.

Most of the homes that Challenger builds are in the $175,000 to $250,000 range, and more than 70% of its business comes from buyers who are military personnel or employees of the area’s four military installations: Fort Carson, the U.S. Air Force Academy, Peterson Air Force Base (from which NORAD operates), and Schriever Air Force Base. (In addition, the National Center for Homeland Security operates out of the University of Colorado’s campus at Colorado Springs.)

Housing starts in Colorado Springs

(single-family detached)

    August 2011 117
    August 2010   118
    August 2009 111
    August 2008 78
    August 2007 171
    August 2006  298
    August 2005 482
 Sources: Pikes Peak Regional Building Department; Colorado Springs Gazette

Despite the military’s dominant presence here, however, Anderson notes that the number of permits issued annually fell to 1,000 during the recession from 5,000 during the last boom. “So builders with high lot inventories got stuck.”

Challenger took a more conservative approach to land, and has benefited from other strategic decisions, too. For example, two thirds of Challenger’s annual production used to be specs, but this year, Anderson decided to reduce spec inventory to between 25% and 33% of total construction.

Recently, Challenger entered into a partnership with Rocky Mountain Community Land Trust Group—a Habitat-like organization that retains ownership of the land it builds on—to build three affordable homes. One of them—a 1,600-square-foot, three-bedroom house that went for $156,000—won eight of nine prizes in its category at the area’s Parade of Homes.

And last month, Challenger hired a new marketing manager, Kyle Fisk, to fill a slot that had been open since 2008, when the company—gasping for air in a weak economy—eliminated its vice president of sales and marketing position.

Anderson was its de facto sales manager when he was promoted to president last January after Brian Bahr, Challenger’s co-owner, stepped down to run for Mayor of Colorado Springs. Bahr finished third in that race and remains the builder’s chairman. In that capacity, he focuses on land deals and is also working on starting up a few non-homebuilding-related businesses. (The Bahrs recently adopted two children from China to add to the brood of five kids they already had. “So he’s pretty occupied with his family,” says Anderson.)

Anderson joined Challenger from CP Morgan in Indianapolis, where he was vice president of housing. He brought with him key team members and Morgan’s business model, which relies heavily on building systems, market research, and working closely with trades.

Learn more about markets featured in this article: Colorado Springs, CO, Chicago, IL, Anderson, IN.