Right Place at the right price
By David Bailey
H&H HOMES Headquarters: Fayetteville Owners: Ralph and Linda Huff Employees: 58 Founded: 1991 Projected 2010 revenue: $100 million Business: Homebuilder
While other builders struggled in 2009, H&H Homes’ sales grew faster than any other homebuilder in the United States. That, according to Builder magazine. Revenue topped $89 million, a 52% increase over 2008. You might attribute the sale of 469 houses last year to the company’s seemingly recession-proof market surrounding Fort Bragg. But you’d be wrong, says Brad Wilson, CEO of Destination Homes in Layton, Utah: “I think they have one of the most compelling success stories in my industry, in the whole country.” And it wasn’t luck: “I think it was a culmination of experience, smarts and strategy,” he says. “Real estate is location, location, location,” concedes Ralph Huff, CEO of H&H, “and we are doing what we’re doing because we’re in Fayetteville.” But consider that H&H’s share of that market went from 8% in 2008 to 23% today.
Huff, 60, had tried his hand at textiles and banking after graduating from UNC Chapel Hill. In 1978, he discovered real estate, buying a company in 1990, then starting a construction arm in 1991. Wife Linda, H&H’s president, joined the company in 1994. Over the decades, he noticed a pattern: “After the Carter years were over, interest rates went down, and the market took off. And after ’91, when the recession was over, the market took off. So I knew that after 2000, there would be resurgence in construction. And that happened.”
Huff praises the advice he got from the Builders 20 Club, aka the “Dirt Dogs,” a peer group organized by the National Association of Builders. “My goal before joining the Builders 20 Club was to build 120 houses a year,” he says. But members from cities including San Diego and Las Vegas urged him to aim for 300. He hired a consultant, mapped out a strategic plan and assembled a young team to help with marketing, operations, information technology and finances. H&H ended up building 285 houses in 2008. Problem was, people stopped buying.
“We spent much of 2007 and 2008 getting rid of old inventory that was overpriced and too big for our market, too nice, too fancy,” recalls Greg West, H&H chief of staff. Blame it on the public’s short-lived fascination with the deluxe features of McMansion-style houses. H&H came out of a strategic planning session in October 2008 with a conservative goal of building 250 units in 2009, 35 less than 2008. In November, Huff heard that a Raleigh builder, Savvy Homes, had entered the market selling homes for $66 a square foot — H&H’s cost more than $100 a square foot. “We went out to see the product and saw a field of lots with sold signs on them.” Touring the model, “we were amazed. In six weeks, we created the plans, the look, the marketing materials, and we started the first house in February.” West adds: “We pretty much pulled all-nighters to develop new plans.”
Using Savvy’s price point and model as a touchstone, H&H developed its American Dream Collection. Priced as low as $73 per square foot, they were an instant hit, with such features as big garages and getaway rooms — and names like the Patriot and the Liberty — that appealed to military personnel. H&H sold 34 houses in February 2009 and 45 in March. That pace has continued, with sales estimated at $100 million for 2010. “Had we not had the system and the people and the machine in place,” Huff says, “it would have been impossible.”
But hasn’t his profit margin on the American Dream Collection dropped compared with the more-upscale homes? “Not necessarily,” Huff says with a chuckle. “Our margins have gone up significantly because we’ve reached an economy of scale in everything we’re doing with these large numbers.” Just like the Dirt Dogs said they would.