In the beginning of the classic 1989 film, Back to the Future: Part II, 17-year-old protagonist Marty McFly travels 30 years into the future to visit his grownup self in the year 2015.
Double-digit revenue growth for these home builders during the recovery started with pre-planning, re-examination, and retrenching during the recession.
July 09, 2013
DSLD began offering larger house plans that mostly disappeared from its markets in Louisiana and Mississippi after the industry bottomed out a few years ago. The J-swing product, which features a side entry, invokes a home typically handled by a custom builder; but DSLD saw an opportunity to provide unconventional value by incorporating the layout in its production housing, said managing partner Saun Sullivan.
Encompassing a living area from 1,800 to 2,600 square feet, the J-swing product ranges from $210,000 to $270,000 and includes amenities such as a fireplace, 42-inch custom cabinets, crown moulding, and a litany of perks in the master suite: double vanity, jetted tub, separate shower, and walk-in closet. DSLD introduced similar floor plans in a few of its subdivisions two or three years ago, but now offers the home package in “almost eight or nine” of them, said Sullivan, who attributes the product’s success largely to burgeoning activity and razor-thin inventory following a lengthy downturn.
“There is an increased demand because a lot of the older product is tired; there wasn’t a lot of stuff produced over the last five years,” he said. “So you’re not really competing with a 3-year-old house—you’re competing with an 8-year-old house.”
DSLD reported $198 million in revenue on 1,116 closings in 2012, up 71 percent from $115.8 million on 687 closings in 2011. The builder ventured farther south in Louisiana and entered the Thibodaux and Houma markets in the past year, but remains focused on filling holes in its current footprint—such as Lafayette, La., where it recently expanded after limited initial exposure.
Even though DSLD has enjoyed considerable growth in the last few years, Sullivan understands that quality control, sales communication, and ultimately customer satisfaction—all of which drive referrals—will keep the company afloat when the housing market takes another dive and prospective buyers must deliberate more before they make decisions.
“As the market comes back, a lot of builders are going to get some market sales where the people just have to move,” he said. “When the economy gets bad again and people have choices, that’s what’s going to separate companies that care about it from a lot of companies that don’t.”
DSLD, which adheres to a strict 42-day frame-to-finish schedule, has found it increasingly difficult to uphold that assurance amid a spreading labor shortage within the industry. “It’s definitely more a struggle now to find qualified people than it ever has,” Sullivan said. “A lot of these guys have been burned by the last six years, so their willingness to just go and do absolutely whatever to chase volume is going to be limited.”
The company has produced YouTube videos that aim to train new trades entering the business, and has sought to ensure its existing partners have the ability to “beef up” their crews when appropriate. Sullivan predicts DSLD will grow slightly less in 2013 compared with previous years because its markets did not plummet as far as Phoenix, Atlanta, and Las Vegas, and thus do not have as much ground to gain back.
“I’d much rather see slower downturns and slower upturns than being down 25 percent a year then up 25 percent a year,” he said. “That creates all sorts of logistical problems.”