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A report in BUILDER’s May 2007 issue predicted the oncoming crisis:

The train wreck going on in the mortgage market is going to hit 2007 home sales hard, with a cascading effect that will be felt for some time to come. With more than two dozen subprime lenders closing their doors within the last six months and more stringent lending standards in place for those that remain, a large percentage of the former pool of home buyers, perhaps upwards of 20 percent, will vanish.

Most of these buyers are in the entry-level sector; without them, homeowners looking to move up will not be able to sell their present homes, further diminishing the pool of potential buyers. Those who have already plunked down their deposits for a new home and can’t sell their old one will join the growing numbers of cancellations. Those who completed their purchases in the last few years and are now looking to refinance their way out of onerous exotic mortgages and can’t, because of lower appraisals and tougher underwriting criteria, will join the growing numbers of foreclosures. Additional cancellations and foreclosures will cause an increase in the numbers of homes in inventory. And so on and so on.

Where will it end? Some say in a full-scale recession.

Within a few months of this dire prediction, the country was plunged into what would become its worst economic decline since the Great Depression. Within four years the Dow Jones average lost more than half its value, falling to a low of 6,547 points, and the average price of a new home dropped 14.57% from its peak of $313,600 in 2007.

The Great Recession devastated world financial markets as well as the U.S. banking and real estate industries. It led to catastrophic rates of home mortgage foreclosures across the country and caused millions of people to lose their life savings, their jobs, and their homes.

In many ways, the U.S. home building industry, which had been riding high since the early 2000s, took the worst hit. Dozens of builders closed shop or merged with or were acquired by other firms. From 2007 to 2010, closings and revenue of the top 200 home builders bottomed out—dropping 62% and 64%, respectively, in the span of three years.

During this time, the Builder 100 and Next 100 lists of the country’s top builders monitored the health of the industry by following the ups and down of the country’s 200 largest firms. The rankings provide a snapshot of the highs and lows: In 2006, No. 1 builder D.R. Horton closed 53,410 units and No. 100 on the list, Ole South Properties, closed 743 houses. In 2010, the worst year for the industry, Horton was still on top but down to an annual total of 18,983 closings. It took only 247 closings to make it onto the top 100 list that year.

A deeper analysis of a decade’s worth of data reveals top firms’ struggles, challenges, and triumphs during that time frame, in addition to the recession’s lingering effect on home builders and buyers today.

The answer to the big question—Is home building back to pre-recession levels?—is no, but American builders are closing in on 2007 numbers. Data from the top 200 builders shows that closings continue to recover year over year, but are still roughly 63,000 units behind 2007’s total of 389,902 (see chart below).

The nation’s top builders are generating more revenue than they were 10 years ago, however. In 2017, the top 200 builders generated $133 billion total gross revenue, surpassing 2007’s $124 billion by $9 billion (see chart below).

The Builder 100/Next 100 data also shows that the effects of the recession varied across markets and firms: While 14.44% of respondents said they are smaller and 7.49% are less profitable than in 2007, nearly half report they are now larger (48%) and more profitable (51.34%). Some, like LGI, Wade Jurney Homes, and Mattamy Homes, are exponentially more successful than in 2007, and over 50% of builders said they are now more diversified and/or more streamlined. (See chart lower in the story for a list of the builders that were the most successful during the recession.)

Read on for the story of how America’s most enterprising building firms made it through the wild ride of the past decade to look forward to another 10-plus years of challenges and successes.

Cost- Cutting Strategies
More than anything, the great recession forced the country’s top residential building companies to regroup. They moved quickly to streamline processes on the construction site, in the sales office, and with vendors and trade partners. A large component of this realignment of resources was a downsizing of staff: The total number of employees at the country’s top 200 firms—a healthy 142,427 in 2006—bottomed out at 44,311 in 2011.

Employees at Houston-based David Weekley Homes tightened their collective belts as the company lost 1,000 employees before the recession ended, some through attrition. “We did our best to handle the reductions in a very caring way—we gave triple the severance pay, we offered to transfer them, and we tried to help them find jobs with other companies,” recalls president and CEO John Johnson.

Remaining employees were required to wear multiple hats even as their benefits were reduced. “We made R.O.C. (revenue generation, overhead management, and cost reduction) our mantra and the entire company pulled together to focus on those three things,” he says. Since then, the firm has more than rebounded, reporting revenue of close to $2 billion last year—a 46% increase since 2007—and a staffing level of 1,636 employees. (It’s worth noting that the firm has landed on Fortune’s “100 Best Companies to Work For” list a total of 12 times and ranks No. 36 for 2018.)

Operating in some of the country’s hardest-hit markets, Tempe, Ariz.–based Fulton Homes went from 200 to 50 employees during the downturn and filed for Chapter 11 bankruptcy in 2009. It emerged from Chapter 11 in 2011 after reaching a settlement with its lenders.

To keep going with so few staff members, Fulton flattened its management style by getting rid of middle managers, a system that’s still in place today with the firm’s current 100 employees. “We don’t even have a sales manager, and hold no regularly scheduled sales meetings,” says vice president of operations Dennis Webb.

The firm, which went from a high of 2,202 closings in 2005 to 345 in 2011, also switched to a paperless contracts system that required two employees to run compared with seven, and it launched BDX’s Envision software system for greater efficiencies in accounting, purchasing, and construction.

“It touches almost all areas of our operations,” Webb says of the software. “Buyers love the feature that allows them to browse through hundreds of available options from the comfort of their living room, well before they go to their design center appointment.”

Since buyers are well prepared, face-to-face meetings are now more thorough and less time consuming, he adds. These days, the company is on the upswing, closing 794 homes in 2017, its best showing since 2005.

To stay afloat in its West Texas market, Lubbock-based Betenbough Homes relied heavily on construction efficiencies that it had in place before the downturn, especially its progressive building process that involves working on sequential homesites down one side of a street. “Trade partners gain efficiencies in their daily work, which equals cost efficiencies and lower prices for our customers,” explains Jeanna Roach, vice president of sales and marketing.

In addition, the company’s cost-plus approach to pricing helped insulate it against the volatile market. “While most builders had to make major corrections, we didn’t have to re-tool what we offered or have significant renegotiations with our trade partners and suppliers,” Roach says. “Simply put, we add up our costs and apply a reasonable margin and that determines our sales price.”

Expansion Plans
During the downturn, single-family builders tested new types of products, expanding to related areas such as multifamily, senior, and student housing. Many also looked to new markets.

For instance, Pennsylvania-based public builder Toll Brothers beefed up its attached, active adult, and apartment and condo divisions. The firm also entered several new geographic areas, including western markets such as Denver and Seattle. Its acquisition of three local builders—Shapell Homes in California, CamWest in Seattle, and Coleman Homes in Boise, Idaho—helped to strengthen its geographic balance, a move that the company benefits from today.

“The western states have become a much bigger segment of our business,” says Fred Cooper, Toll’s senior vice president for finance, international development, and investor relations. “Denver and west to California accounted for nearly 50% of fiscal year 2017 revenues, and this has reduced our dependence on the metro Boston to Washington, D.C., corridor.”

The tactic worked: The company is predicting revenues of $6.4 billion to $7.4 billion in FY 2018, a jump from peak revenues of about $6 billion at the height of the previous cycle.

David Weekley Homes expanded into new markets, including Phoenix, Indianapolis, Nashville, Tenn., and Portland, Ore. The company widened its product offerings across several new lines that target customers in a variety of price points: Imagination for value-minded first-time and move-down buyers, and Encore communities for active adults. During this time, the company also grew its high-density division and Build on Your Lot programs.

In Boise, CBH Homes launched two companies that would help future-proof it against other downturns—truss and floor joist maker Vertical Components and HVAC supplier ICON Air. “These have allowed us to try new, faster processes and become more efficient,” says president Corey Barton.

Many builders also altered their marketing programs in order to reassure worried buyers. (See related article here.)

“They had real fears, so our messaging spoke to those potential buyers and shared with them all of the reasons that buying—especially at that time—was a wise investment for their future,” says Betenbough’s Roach. “We spent quite a bit of energy and advertising toward highlighting all of the assistance available to first-time home buyers, which is mainly who we serve.”

Gaining Ground
While some builders put land purchases on hold, others saw the recession as a time to bargain hunt. They leveraged the downturn to buy lots at discounted prices.

CBH purchased distressed lots as they went into foreclosure or auction and turned them around as quickly as possible. “This gave us the opportunity to enter new cities in the Treasure Valley as well as get very competitive with our pricing,” says Barton of the area primarily located in southwestern Idaho.

Roswell, Ga.–based Ashton Woods also invested in land deals when other builders were backing off. The company built a pipeline of distressed lots that fueled its momentum coming out of the downturn. “While the recession obviously forced us to be more choiceful with our resources, we chose to take advantage of the crisis and invest in our operation—a risk that we like to think has paid off,” says CEO Ken Balogh.

The company reinvented itself with an emphasis on customer service, design, and personalization and expanded to several new markets, including Austin and San Antonio in Texas; Naples and Sarasota in Florida; Charleston, S.C.; and Raleigh, N.C. It is doing better today than its 2006 peak of $735 million in revenue. Last fiscal year the firm’s revenues soared to $1.3 billion, representing 165% growth since the recession started.

During the recession, Fulton Homes also continued to develop new communities, introduce new products, and expand its design centers in sought-after neighborhoods. “Our brand-new communities were much more appealing than others in the area that were four and five years old,” Webb says.

Other builders looked to infill lots as a way to help find land in markets dominated by large public builders. Charlotte, N.C.–based Saussy Burbank bought land in and around the firm’s core cities of Charleston, Charlotte, and Raleigh. The scale was much smaller than what the company was used to—one-to seven-lot developments, some on empty sites and some teardowns of older houses, but they helped the company stay afloat and garnered a new type of customer.

“The infill houses took us to a new price point and quality level,” says senior vice president Al McNeill.

The Drive for Success
These days, U.S. builders are applying lessons learned during the downturn to create stronger, more resilient operations, but margins are thin and the pressure is on more than ever to satisfy customers. Builder 100 data shows that companies are slowly and carefully rebuilding their teams: The total number of employees in the country’s top 200 firms rose to 83,395 last year.

Many builders, like Betenbough Homes, are placing more of an emphasis on staff recruitment and development. “Since the recession we have made dozens of changes, but we have placed special attention and focus on our recruitment and hiring practices, leadership development within our organization, a more clearly defined sales process, and enhanced training for all sales team members,” Roach says. “We are better today because of the challenges we experienced during those tough times.” The company emerged from the recession relatively unscathed and has grown to earn $170 million in revenue last year.

Its employees, she says, are now more focused on the bottom line: keeping customers happy.

“We were reminded to truly treasure every person that walks through our door and to serve them to the best of our ability,” Roach says. “We learned that challenges like a recession can bring out the most creative ideas and actually highlight your blind spots or areas that need improvement that haven’t received your attention in past, busy seasons.”

One thing that has not changed over the past 10 years is the importance of a multifaceted approach to home building, says Fulton Homes’ Webb.

“We have learned that every single product in every development has got to be a home run,” he says. “From buying the land, developing the infrastructure, planning who the buyer is, and developing a product and community that will fit that buyer to the marketing and sales aspects, and the entire buyer experience, you have got to be working at 100%. You simply cannot afford to have any strikeouts.”

With a little bit of luck and a lot of hard work, the firms on this year’s Builder 100/Next 100 overcame a range of market challenges to stay on top of the industry. For many, the net effect of the past 10 years has been a positive one.

“We are, in every possible way, a stronger company today than we were pre-recession,” notes Ashton Woods’ Balogh. “No matter how you slice it—our sales and revenue, our balance sheet, our management team, our brand, the discipline with which we drive the business—we are better positioned for short-term and long-term success today than we were prior to the recession.”—Charlotte O’Malley contributed to this report.