Pat Neal is no stranger to bad housing markets. In the 1974–1975 recession, for example, the owner of Lakewood Ranch, Fla.–based Neal Communities watched his sales plunge from 50 a year to six.

He learned a lot of lessons that have served him well including owning land free and clear, building strong teams, having non-recourse debt “when you can,” and creating a culture of continuous improvement. But his main strategy for surviving the ’70s downturn—and every one since—hinged on introducing value-priced houses to jumpstart sales.

“Building a smaller, less complicated house is part of the ebb and flow of the housing cycle,” Neal says. “Those are the circumstances we bargained for as builders … . People prosper when they make a decision against the trend.”

Q: What is it about a difficult housing market that sparks innovation?

A: Necessity is the mother of invention. The business reality is we have to make a profit. I have a long-term investment in people. ... The better decision [than laying off staff] is to create less-expensive homes at a low profit. People can now buy a new home at a price I would have told you three years ago was not in the cards.

Q: What is most important for builders to do to survive this downturn?

A: These are tough times for people in our business. It’s easy to feel like this is bad luck. But whatever we are as business managers, it’s our job to keep our chins up and keep a smile on our faces and lead the team. Our job is to make sales every day, no matter what the price is. I’ve been surprised by some of my friends who have taken their bones and gone home. When they come back, I’ll have a team that’s way down the field and they’ll be fighting to work back up to the market share they used to have.

Q: What’s your next innovation?

A: We’re designing a 1,080-square-foot cottage with a rear-loaded detached garage, and a new group of houses that are 16 feet wide and as small as 960 square feet. We intend to create a series of smaller, smarter, more energy-efficient homes for what we think is the new world of housing for the next three years. Though we have been mostly a luxury builder, these will keep our machine going.