LAKEWOOD RANCH — At a time when most developers are running for cover, Neal Communities President Pat Neal is doing more than making ends meet.
In the first half of 2009, his company posted 180 contracts on new homes, the strongest sales record for the first half of the year in the company’s 30-plus-year history. Comparatively, at the height of the boom in 2004, the company signed 164 contracts on new homes — but at significantly higher home prices.
Despite the difference in prices, the numbers are good news for Neal — and quite possibly for the housing industry as a whole. For Neal, at least, it means that his company is profitable once again, after nearly four years of waiting.
“We think it’s a good year and that we’ll be fine,” Neal said. “We were profitable in the month of June, and (I think) we are moving out of the recession.”
Traditionally a luxury homebuilder, Neal has begun offering simpler, less-sophisticated homes in addition to its custom-designed houses — a selling point that has helped reduce starting prices on new homes and enticed prospective buyers back into the market.
“We knew what to do is to lower the price until the chance (to own a new home) overcomes fear,” Neal said.
The fact that Neal owns his land in full and builds in cash also lends itself to lowering home prices.
Neal opened River Sound off Morgan Johnson Road in February with prices starting about $16,000 below costs, about $110,000. The move generated a flurry of contracts in the community, and sales have continued to be strong although prices have since increased. Sales also have been strong in the Lakewood Ranch Golf & Country Club, where Neal is offering new homes for under $300,000.
But the success is bittersweet. Neal notes the most recent hit to the market has been the most devastating of any housing cycle he’s witnessed. His company’s workforce has been diminished from 160 employees at the height of the real estate boom in 2005 to just 58 today. An investment in technology also has helped offset the reduction in staff, Neal said.
Construction costs have been reduced by about one-third thanks to redesigned floor plans on new homes, which are more efficient, have refitted electrical and air-conditioning systems and more uniform truss systems, among other modifications.
“We’ve completely reprogrammed the house itself as well as our operating system, and we now build for about 45% less than we did four years ago,” he said.
The savings have been passed on to prospective homebuyers.
“We have the particular strength that we are involved in the house from A to Z,” Neal said.
Moving forward, Neal is looking at the down market as the perfect time to prepare for the next real estate cycle.
He hired David Rapp as the new vice president of land acquisition. Formerly with Centex Homes, Rapp has been charged with overseeing land acquisition. The strategy is simple: look for good pieces of land and buy below replacement costs.
“We’re pretty much looking at land, whatever process it’s in,” Rapp said.
Some sellers are developers looking to dump properties. Many listings are bank foreclosures. If it’s a good deal with a good location, it’s something to be considered.
Neal said the company is looking primarily in Manatee and Sarasota counties as well as in Collier and Lee counties. Neal said he could be lured to develop elsewhere in Florida if the opportunity were good enough, but there are limits to how far away he will go.
“This is a time of huge opportunity,” Neal said. “We’re buying all our product at a huge (discount). A builder who has his own hands on the steering wheel can really use this opportunity and pass it on to homebuyers.”
Contact Pam McTeer at email@example.com.
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