Builders and remodelers who work steadily on readjusting their business practices in response to the current economic downturn stand a good chance of surviving until better times arrive and trouncing the competition during the recovery, according to housing industry veterans appearing at the International Builders’ Show (IBS) in Orlando last month with the battle scars to prove they have weathered previous housing slumps.

“Today’s housing market is obviously not the same housing market that existed a couple of years ago, and that means you can’t afford to run your company the same way you did then,” said Michael Sivage, of Sivage Community Development in Albuquerque, N.M., who moderated the panel. The industry faces “another challenging year” following a “tough” 2007, he warned, and the burden is on builders to persuade consumers to consider the home-buying opportunities in today’s market despite the daily barrage of negative reports in the news media.

Sivage asked each builder to track where their businesses have gone since the start of the downturn in 2006 and discuss what they are doing to get through 2008 and prepare for better times ahead. Among the accounts shared with the convention audience:

Robert Camp, of Camp Corporation in Lakewood, Wash., said that his company closed sales on only 35 homes last year, compared to 125 in a good market; saw declining profit margins; and ran into cash-flow problems. This year, his objectives are to reduce the inventory and cut interest costs by 50%. To get out from under the interest burden, he is offering his customers the opportunity to rent houses in the existing inventory and then purchase them in two years, with rent set aside to help them qualify for a mortgage.

Camp has also resorted to “bare bones pricing” that has cut the selling price an average of $20,000 per unit by trimming construction costs, such as scaling back to a one-car garage. In a new subdivision going up on developed property owned by the company, on a pre-sale basis only, starter homes are being offered for just under $200,000, compared to $250,000 to $275,000 previously.

“The idea is to do something every day to help your company get through this downturn,” he said. For example, he has stopped accepting bids on projects. “We tell subcontractors what we can afford to pay, making sure they make a profit so we all will be in business in 2009.”

Camp is looking for 60 sales this year and has already made it a third of the way to his goal. “Don’t crawl into a hole thinking you can avoid all of this. It’s not going to go away,” he said. He also advised builders to take advantage of the resources available at their local home builders associations and “find people who can tell you how they got through things.”

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