Something Different  Blue Heron Homes offers Las Vegas–area buyers an alternative to Mediterranean-style estates.
Richard Brian Something Different Blue Heron Homes offers Las Vegas–area buyers an alternative to Mediterranean-style estates.

How often have you heard someone say there’s no such thing as a national housing market?

That old adage would have to qualify as wishful thinking during most of the last four years, as the national economy wreaked havoc on local markets throughout the country. And even as annualized estimates for permits and starts yo-yoed up and down last summer, 2011 is poised to be the worst year on record for new-home sales.

Yet some builders have managed to valiantly buck the trend, growing—or at least holding the line on revenue and making money—even in some of the hardest-hit markets. In the following pages, we profile four overachievers—Stonecrest Homes in Atlanta, ProBuilt Homes in Northern Ohio, Highland Homes in Polk County, Fla., and Blue Heron Homes in Las Vegas.

How did they do it? The companies point to flexible customer service, innovative design, consistent marketing, systems-driven operations, and land-light balance sheets. But when it comes to why these builders are on the road to prosperity even while their markets remain stuck in a ditch, the explanations are much deeper.

Las Vegas

Staying Airborne

Contemporary designs and sharp prices lift Blue Heron Homes.

Reflecting Modernity Blue Heron specializes in contemporary  high-end design.
Richard Brian Reflecting Modernity Blue Heron specializes in contemporary high-end design.

In that desert otherwise known as Las Vegas’ housing market, Blue Heron Homes keeps finding oases in projects and niches that can attract those rarest of birds, home buyers.

Generally moribund demand didn’t stop Blue Heron last February from starting its fifth community—Marquis Seven Hills, with 33 custom lots near a golf course in Henderson, Nev. It took over this $55 million project via a joint venture with Diversified Real Estate, which acquired the property from KB Home after the Los Angeles–based production builder built two $3 million models and then walked away.

This year, Blue Heron expects to generate $25 million in revenue, or half again its 2010 sales. It had nine confirmed sales at Seven Hills as of Aug. 19. House plans there range from 3,000 to 11,000 square feet, and from $750,000 to $3 million. Their sleek, modern design is a counterpoint to the sea of Mediterranean-style estates surrounding them, or what Tyler Jones, Blue Heron’s co-owner, mockingly calls “stucco-terranean.” He adds, “There’s pent-up demand for something innovative and contemporary.”

Jones, 34, grew up in the business (his father builds ultra–high-end custom homes), and has worked with architects since he was 16. From the outset, Blue Heron, which Jones launched with three other principals seven years ago, has specialized in stylishly unique dwellings priced below competitors’ models. It began with 23 loft homes in a project called Stone Canyon and has steadily moved into semi-custom and custom designs.

Its fourth project, Marquis Las Vegas, included the 9,000-square-foot New American Home featured at the International Builders’ Show two years ago. That edifice, despite its size, demonstrated Blue Heron’s commitment to energy efficiency, and, lately, passive solar. “It’s all about the orientation of the glass,” says Jones. “If you can get a northwestern exposure, you can nail it.”

As he considers new projects in Las Vegas and elsewhere, Jones thinks joint ventures such as the one with Diversified make sense because “there are a lot of broken developments, and we can come in and put together a complete sales and marketing package.”

What also makes sense to him is building higher-priced houses. “I can’t see how there’s much margin at a lower price point,” says Jones. “A customer can buy a foreclosure down the road, but it’s not the same thing as what we do.”

Cleveland/Northern Ohio

Yes Man

ProBuilt Homes gives buyers want they want.

Basic Approach  Staying visible has helped ProBuilt survive.
ProBuilt Homes Basic Approach Staying visible has helped ProBuilt survive.

When George Davis started ProBuilt Homes in 2002, nearly 30 builders were active in Lake County, Ohio, his primary market. “Now, maybe there’s six,” says Davis. “So even though permit volume is down, the chances of being called [by a buyer] are way up.”

Between 2007 and 2010—a period when residential permits issued in the Cleveland-Elyria-Mentor metro area fell by nearly 50 percent—ProBuilt’s business rose by 37 percent, and Davis expects it to go up another 10 percent in 2011 to around $5 million.

Davis, 38, builds about 15 homes per year that range from 2,500 to 3,500 square feet and sell for between $300,000 and $400,000. His company has survived by remaining true to a few business basics. For one thing, “we didn’t go into hibernation,” he says. Davis also didn’t cut ProBuilt’s ad budget and stayed “visible” by supporting different charities, such as animal shelters, Habitat for Humanity build blitzes, and the local YMCA’s annual Dream House (ProBuilt has built three of these).

The company also invested in technology during this period. When Builder interviewed Davis in August, he was equipping his field staff with iPads. And instead of beating up his trades for lower prices, Davis negotiated for higher-quality products. “To get people to buy, you have to improve the value proposition.” For ProBuilt, that proposition includes energy efficiency. Through its “Sensible Green” program, all of ProBuilt’s houses are Energy Star certified, but customers can select which energy-saving features they want.

Maybe the most important component of ProBuilt’s success is its willingness to “say yes,” says Davis. ProBuilt has become more of an on-your-lot custom builder and will customize floor plans or an entire house. “We’ve become less rigid,” says Davis, and his per-unit dollar volume has risen accordingly.

On-your-lot construction offers the added benefit of keeping land off of ProBuilt’s books. “When I started out, I had a mentor [Fred White, one of Wayne Homes’ original owners] who told me to get rid of my land. That was in 2005, when I was thinking of expanding to 50 starts a year. Thank God I took his advice.”

Davis has tempered his inclination to grow, partly because to get bigger he’d need to go outside of his two-county market, and because business in his immediate market has picked up a bit. “We’re very busy and have a good pipeline.”

Swimming Upstream

Despite a harsh recession, Highland Homes manages to stay profitable.

Attentive Service Sales training is key to Highland’s success.
Highland Homes Attentive Service Sales training is key to Highland’s success.

Bob Adams has been building homes in Polk County, Fla., since 1971. These past few years, he says, “have been the toughest times I’ve seen, across the state.”

The county’s permit activity is only about a quarter of what it was in 2007, and the median price for a new home has plummeted by more than 40 percent. This summer there was still a glut of unsold inventory and foreclosures on the market. And out of 936 markets tracked nationally, Lakeland, Fla., in Polk, between Orlando and Tampa, ranked 801st in household growth, according to Hanley Wood Market Intelligence.

Yet, Highland Homes—which Adams and his son Joel own and have run for the past 15 years—has stayed atop Polk County’s housing market and made money to boot, albeit “with difficulty,” Adams admits. As local builders have either exited the market or have disappeared, he says, “We’re one of the few regional builders left that can still compete.”

That doesn’t mean business is robust. Highland’s 16 active communities are on track to close 250 homes this year, or 20 fewer than in 2010. Adams foresees closings bouncing back next year and is counting heavily on referrals that result from the “tremendous focus” Highland places on customer service.

The builder trains its 20 salespeople continuously, Adams says. And Highland is among the more adept at using social media to stay connected with prospects and homeowners.

Highland primarily targets entry-level buyers with “customer friendly” mortgage programs, “even for people whose credit might not be the greatest,” says Adams. Its website in August promoted a USDA down-payment assistance and financing program that allows a buyer to move into a Highland home—whose selling prices range from $110,000 to $220,000—with only $99 down.

Another arrow in this builder’s quiver that’s throwing off cash is its portfolio of 350 rental apartments and townhouses. Adams wants to build more rental housing, but how many depends, he says, “on whether this recession is cyclical or secular.” He alludes to a recent Wells Fargo report that projects the country won’t hit one million housing starts again until 2015.

On the other hand, the 104 single-family home permits issued in Polk County in July amounted to 62.5 percent more than during the same month a year ago.

To Adams, that’s reason for hope. “We still believe buyers view homeownership like motherhood and apple pie.”

Jump Start

Stonecrest Homes wasted little time making its mark.

Leaning toward infill Research drives Stonecrest’s growth.
OBEO Leaning toward infill Research drives Stonecrest’s growth.

Starting a home building enterprise in Atlanta, where permits are down more than 80 percent from 2007, might seem like a suicide mission. But Stonecrest Homes, with highly computerized operations and a laser focus on market research, isn’t your average startup.

Launched in the spring of 2010, Stonecrest has quickly become one of Georgia’s fastest-growing builders. Company officers spent the first several months raising capital for projects. Within its first year of operation Stonecrest was active in 10 communities, with plans to enter four more before 2011 is over.

“We may be one of only a couple new home building firms in Atlanta that weren’t the result of an operation already purchasing distressed assets,” observes Jim Chapman, Stonecrest’s co-owner and CFO. Those start- ups, typically formed out of necessity, came out of the gate choking on excess lots. Stonecrest, by comparision, carefully selected its first projects based on market research.

Stonecrest garnered almost immediate buyer recognition by virtue of Chapman also owning Jim Chapman Communities, an established active adult builder that last year closed 51 homes in six communities, good enough to rank among Atlanta’s top 10 builders.

Chapman and Charles Heiser, Stonecrest’s co-owner and CEO, believe that what sets their company apart from other private builders is a focus on operations. “We’ve invested in systems, not deals,” says Heiser, a former McBride & Son executive. Their startup has operated on Constellation’s FAST management system “from day one.” And Stonecrest outsources many of its non-construction–related functions, such as marketing and accounting. “The guys that will prosper going forward are operating like MBAs and understand research,” says Chapman. “Unless you’re doing your homework, you’re lost.”

Stonecrest leans toward infill projects, and when it enters a community it pays for reappraisals of existing homes as a gauge to reprice its own products. It then uses those reappraisals as leverage with buyers who might be considering a foreclosure.

On Aug. 26, Stonecrest became the first builder in Atlanta to partner with EquityLock Solutions, through which it offers buyers a home price protection guarantee. The arrangement gives buyers a payout if their local House Price Index, as reported by the Federal Housing Finance Agency, is lower when they sell their house than when the contract with Equitylock took effect.

Stonecrest has 13 house plans in three series that range from 1,800 to 4,000 square feet and sell from $150,000 to $500,000. It expects to close 40 to 45 homes in 2011. However, its current systems and staff could manage 400 closings per year, “and the quicker we get to that level, the better,” says Heiser.

Crawling From the Wreckage

It's been a tough five years for four disparate metros.

All four markets have taken severe hits in permits issued and home prices, according to data compiled by Hanley Wood Market Intelligence. For example, new-home prices in Las Vegas were off by more than 37 percent. In three of four metros tracked, unemployment rates have more than doubled since 2007, which has had a devastating impact on new construction and home sales.

*Annualized permit total as of 2Q 2011

**Unemployment rate as of 2Q 2011

***Prices YTD

Learn more about markets featured in this article: Lakeland, FL, Atlanta, GA, Las Vegas, NV, Los Angeles, CA.