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To compete against national builders, smaller companies are diversifying their product mix and cozying up to developers.
WHEN IT CLOSED 250 homes two years ago, Altmann-Ott Homes ranked as Reno, Nev.'s fifth-largest builder. But this western market of 200,000 people, which issues around 5,000 permits per year, has since become a magnet attracting national builders, several of which "are finding ways to get 500 homes on the ground," says Dan Ott, co-owner of AltmannOtt, which closed 200 units and generated $75 million in revenue last year. "They're willing to put 50, 60 spec homes out there and offer all kinds of incentives to get buyers to sign by a certain date. I don't want to be in that dogfight."
Such brawls are becoming unavoidable in what once were considered secondary markets such as Reno, San Antonio, and Jacksonville, FIa. Tb gain footholds in markets with mushrooming populations, big builders are buying land and constructing homes at levels that fall outside the financial reach of many smaller companies. The competitive maelstrom that nationals can stir up is reshaping these cities' housing markets to the point that "entry level" in Reno equals $240,000, versus $150,000 only a few years ago, says Jon Delaurentis, president of Reno-based Lifestyle Homes.
This latest wave of competition has forced local builders to reassess everything, from their land acquisition strategies to what kinds of homes they can build and still make money. That analysis is leading some builders to turn themselves inside out, although most say that they continue to grow by staying close to developers and tweaking their product mixes. And while these builders espouse the virtues of smallness and local market savvy, "it's all relative now," quips Ed Hatcher, who owns Hatcher Homes in Atlanta.
HUG YOUR DEVELOPER
No one is actually under siege yet, as strong demand provides plenty of business all around. "We all can say grace over what we have right now," says Jerry Linder, who owns Vintage Homes in Jacksonville, FIa., and is president of that market's HBA. Florida is nirvana for builders looking to elevate to a higher tier. Every day, 1,100 people move into the Sunshine State, and the four counties in the Jacksonville metro market increased their permits to 17,753 m...