In 2012, Housing Giants have the land positions, the financing, and enough new strategies to finally begin to capitalize on an improving economy.
Each year, the town of Pamplona, Spain hosts a festival where fearsome bulls run through the streets as they make their way through town to the central arena. It is called the “running of the bulls.” Ahead of them, dressed in white and wearing red bandanas, are hundreds of townspeople and tourists who tempt fate plying the same narrow streets.
In 2012, Housing’s Giants are generally bullish. And by all accounts, they are positioning themselves to take advantage of the generalized lift of an improving economy. But these bulls are not as fearsome as they might be in a full-blown recovery, which has yet to appear. So they walk or jog to the stadium on their way to solid gains — a “walking of the bulls.” We see this in the Giants results for 2011. And we see this in their outlook for 2012.
In 2011, the top 225 Giants closed 24,000 fewer homes than they did in 2010, with a resulting decrease in revenue of more than $6 billion for the group. And compared to non-Giants, their share of closings also slipped to 29.5 percent of the market. At one point, Giants accounted for more than half the annual closings. These figures are a stark reminder that the market is still at or near its cyclical bottom.
Housing Giants Report Contents
• Housing Giants Rankings
• 5 Takeaways From the Housing Giants Report
• The Innovators: Great Ideas From the Giants
• Next Move: Giants Share Their Top Opportunities for 2012 and Beyond
• Sales Strategies: What’s Working for the Giants
Despite this, optimism persists for the year ahead. More than half of the Giants ventured a positive projection of their revenue for 2012. The bulk of those firms are predicting double-digit improvement over 2011. And that is the point about walking vs. running. Double-digit gains are not what they used to be. These projections for growth are coming off historically low basis values. As Pat Curry reports as part of our Giants coverage (page 36), even the biggest of bulls, David Weekley Homes (No. 17), in the strongest of regions, Texas, sees 2012 as a year of gains from non-traditional niches for the firm — infill and custom home building. New master-planned communities and subdivisions will break ground, but those will be few and far between.
If our Giants data holds true for the market generally, 2012 will be a year where the survivors of the downturn make solid gains via numerous incremental wins in several ways. Giants are operationally more efficient and continue to look for cost savings in their operations.
Niches that were explored for viability in recent years will be expanded and solidified. Lastly, many Giants are aggressively pursuing new design ideas as a way to revamp their product line to attract new buyers. Denver-based Oakwood Homes, No. 109 on this year’s list, was among the 30-plus Giant firms that cited improved design as their “single biggest change” last year.
“We introduced new product in all of our areas and focused on ‘smart space,’ outstanding home design, and energy efficiency,” the company’s completed Housing Giants survey stated.
Underpinning the rebound advantage for the Giants vs. non-Giants is financing. At this point, the markets and banks are more willing to extend credit to the big guys and larger regional firms. More than half of Housing’s Giants see their cash holdings and their active lines of credit as a market advantage over smaller firms. This will be particularly true when demand grows. No. 39 on this year’s list, McBride and Son of Chesterfield, Mo., was among those that cited finance work as their top accomplishment in 2011. Due to localized sluggishness, the firm is projecting a slight decline in its revenue for 2012, but has stayed well positioned in the St. Louis metro area by “renegotiating” its lines of credit. In doing so, the company says it has reduced its cost of borrowing and ensured its ability to grow in the future. We heard this theme over and over from the Housing Giants.
Meanwhile, evidence continues to mount that the generalized lift in the economy may actually materialize. Late last month, a survey of economists by USA
Today found that, as a group, economists were making upward revisions for their forecasts this year. Having been burned before by false hopes of a recovery, most Giant firms are cautiously optimistic. They are preparing for continued slow growth and are ready for a rebound.
Professional Builder has been compiling its list of Housing Giants for over 40 years. Firms that wish to apply for the list must complete a questionnaire. In addition, Professional Builder retains the services of researchers who contact large building firms who have not volunteered information in order to cast the widest net for the biggest home-building firms. The rankings are based on new-home revenue only. Firms with less than 30 starts cannot be included in the ranking. To learn more or to inquire about applying for next year’s list, please contact Professional Builder Awards Coordinator Heidi Reidl at firstname.lastname@example.org or 847.391.1000.