David Prutting seasons his optimism with a healthy dose of caution. His southern Connecticut custom market, heavily dependent on Wall Street money, has been shaken to its roots in the past year. He believes government numbers understate the true level of unemployment and weakness in the general economy. Meanwhile, he reports, his own niche—showpiece houses by prominent architects—still has momentum. “Our clients are collectors, and they’re passionate,” he says. “They want to pay less, because they can, but they haven’t lost interest. They approach housing as one might approach an art or car collection.”
Prutting’s crews remain active—“I still get inquiries, even in this depressed market,” he says—but he is realistic about the hazards that may lie ahead. His near-term plan includes four major elements. The first is to advertise. “There are still jobs, but they’re fewer,” he says, “and I want those people to call me. You advertise when you can afford to, not when you’re desperate.” Second, he is demanding realism from subs and suppliers. He went back to the supplier of a man lift he was renting and said, “Give us a better deal, or come and take it back.” The result: “Boom: instant 20 percent discount.” Third, he is reviewing his payroll in case he has to cut personnel. Last, and most important, he says, he’s sharpening his focus on his clients. “What do they need to make them happy?” he asks. “Bottom line, times five: customer service.”
Brian Bailey says his Austin, Texas, custom home market remains in better shape than most. “We still have people moving here,” he says. “We’ve only had one super-jumbo house—and that was an $11 million project—put on hold. And that wasn’t canceled; it was put on hold.” But Bailey reads the papers, and he’s far from complacent. “I’m not making five-year plans; I’m making one-year plans and two-year plans.”
An elder statesman among Austin builders, Bailey finds his advice much in demand among younger colleagues. Those who listen to him, he says, “are going to look at every position in their company and whether that position adds value to the company. That’s what we’re doing.” Expect price flexibility from trade contractors, he suggests, but be realistic. “They are going to be more competitive, but they’re looking at their break-even analysis.” And to builders unfortunate enough to have spec inventory on hand: “My reaction is, get out now. Go ahead and realize the loss. Get your plate clean. Don’t worry about how much money you’re making; worry about how you’re going to survive to fight another day.”
If Bailey is right, that day may come sooner than some expect. “I don’t believe that what we’re seeing here is a long-term situation,” he says. “I think [lower interest rates] are going to spur a lot of activity in the coming year.” His own retirement portfolio consists of income-producing properties he began to buy earlier in his career, and he advises younger builders to keep an eye out for bargains in the current depressed real estate market. “They’re going to look back in two or three years at some of these opportunities,” he predicts, and wish they had bought before prices began to climb again. On the other hand, he notes, “Being in the home building business, you have to be an optimist. If you’re a pessimist, you can’t be in this business.”
