November 2012

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FEATURE ANALYTICS Resilience Renders Results for Survival Instincts: Homebuilders Homebuilders remaining intact post-crisis are setting the pace, establishing a new standard for industry success. By Phil Britt H Association of Home Builder figures. During the downturn, several smaller homebuilders—those with little in ways of financial resources—went under. But those who were better capital- ized, while still suffering losses, were able to survive through the worst of the downturn and are now leading the homebuilding market back, albeit slowly. "We found that the market was extremely hyped in the mid-2000s," said Tim Costello, CEO of Builder Homesite, Inc., a consortium of the nation's largest 32 homebuilders. Many home- builders could not withstand the precipitous drop in demand, though Costello says the industry 62 | THE M REPORT omebuilding dropped precipitously between a high of more than 2 million housing starts in 2005 and a low of 554,000 in 2009, according to National still withstood the dropoff better than those in other industries could have. "There aren't many in other Blue Ocean Strategy C are leading the rebound in housing, though Costello admits that the recovery will be a long process, not a quick snap back from the trough. industries who could survive an 80 percent decline in demand," Costello said. The largest build- ers, who erect some 30 percent of the nation's homes, had that financial wherewithal, though they, too, had to cut back. But they also had the funds to buy property during the downturn to prepare for the rebound. Those surviving homebuilders following a "blue ocean strategy," according to Costello. "Homes that were built in the early 2000s were not all that much differ- ent than the homes built in the 1980s. The homebuilding com- munity realized that they had to do something different. Builders today are communicating to buy- ers that the new homes are very differentiated from those built 15 or 20 years ago." So rather than just making ompanies that are leading the way back are doing so by Renewed Energy- Efficiency Focus O been the move to increasingly green building to offer homeown- ers significant energy savings over the homes built 25 years ago. This is more than just a high-efficiency air conditioner or furnace or some extra insulation, which in and of themselves sound good but do little when it comes to the eventual sell- ing price of a home. Now the new homes include ne of the biggest changes, according to Costello, has minor tweaks on models that had been selling for years prior to the downturn, these builders instead reacted to the changing desires of homeowners entering the market and those expected to enter the market in the next few years. "Builders are being much more aggressive in trying to gain mar- ket share," Costello said. not only the high-efficiency units, but also energy-sipping ap- pliances, full insulation, energy- efficient windows, and materials used throughout the residences to reduce energy consumption— so much so that they are 70 per- cent more energy efficient than those built a generation ago. "You can't get that energy ef- ficiency with an older, existing SECONDARY MARKET ANALYTICS SERVICING ORIGINATION

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