New home builders have taken severe losses in the defunct housing market. The prior 2 decades showed that new home builders held a 16% market share in total home sales. A recent report showed that in January 2010 the number of new homes sold was 309,000, 11.2% below Decembers numbers.
D.R. Horton is fighting back and beginning to show some progress. For the first time since the market crashed they were able to show a quarterly profit. This turn to profitability was not an easy task. Approaching business decisions from a totally different perspective has opened up business opportunities during a time otherwise drought. Curtailing their business models down to a more buyer friendly level has allowed this second largest national home builder to regain some of the market share that it once lost.
Meritage Homes is another major new home builder who is attempting to “think outside of the box” when it comes to reacting to a not so friendly market. In addition to building homes that are in the lower price range, Meritage Homes is reducing its costs by using suppliers and contractors who are offering their services and materials at lower costs. This has added savings helps to increase Meritage Homes total profitability on new home construction.
KB Home has re-tailored the style of homes that they offer to contain standardized windows and other options. Instead of offering various models across the nation, KB Home is now reducing the amount of styles to a limited few. This standardization will cut costs all across the board. Custom options on standard amenities have a way of cutting into the budget. These upgraded options were once affordable due to the amount of buyers in the market looking for new homes. Since that is no longer the case; amendments have had to be made to cut cost which allow the builder to offer new homes at far below national median price.
The battle to increase new home sales is reaching beyond cost cutting implementations. Since most of the losses that are being felt are due to the amount of foreclosed units in the market, some new home builders have had to change their marketing mix to combat the flood of foreclosed homes. Many new home builders have decided to start email campaigns and advertise online and in the newspapers expressing the risks of purchasing a foreclosed home. Everyone in the industry hopes that the number of foreclosures begins to decline; it is good for the industry and for the country to see a growth in new home sales. I know I for one would love to see the market share hit 16% again.
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