I had a client in my car last week as we drove through Northern Albemarle County neighborhoods. We were talking about some of the new subdivisions that were being worked on, and we drove through at least one new neighborhood that was did not have any activity at all. As we pulled into Greene County, my client asked about the Ryan Homes that were being built on the Western Side of 29 at Holly Hill. He remarked that they looked just like one of the neighborhoods in DC that he remembered being built several years ago. It got me thinking about Ryan and the landscape of Charlottesville new construction.
So, I came home and pulled two pieces of information. First off, I grabbed all the new construction that closed between July 1 and December 31 of 2005, and then I pulled the same data for the same period of 2008. Not surprisingly, there were a lot less homes sold in 2008 than in 2005. I did not select only one county or another, I pulled the whole MLS. And what I found was not surprising, but when you look at it visually, it is pretty clear: the builder landscape is changing, and its changing fast.
In the second half of 2005 there were 99 builders that sold property in our area. Ninety Nine… That’s huge given the size of our market. As you look at the graph to the right, you will see that there were only 6 builders who held more than a 2% market share, the largest of whom was Hauser Homes. In 2005, Hauser was flying high with a new sales center on Route 29. They had brought in a new mortgage company to add to their all around sales effort. Bob Hauser was touting a new neighborhood that would be coming along in the next few years that he and Frank Stoner at Stonehaus were working on: Belvedere. Hauser was starting a custom home building division and had two custom jobs going in Old Trail. Further, he was moving into the high end condo / townhouse market with pricey Poplar Glen.
Not far down the list was Church Hill Homes who seemed to be able to do no wrong in the market. They launched the new Avon Park, and all the units flew off the market faster than the builder could put them up. The bought land in Wickham Pond, in Belvedere, in other counties. Church Hill was moving along. But how could they do wrong? It was 2005 and if you built it, they would buy it. There were so many builders in 2005, that 46% of the market was served by 89 builders.
Important to note in the list of top 10 builders in 2005 is the absence of any major national home builder. There were rumors that Toll Bros. might be looking at coming into Charlottesville, but it never materialized. In 2006, Ryan Homes entered the Charlottesville game. The builder eyes watched as Ryan opened up shop at Old Trail with 27 lots. They entered into agreements with Kenridge near Farmington Country Club and Cherry Hill in Johnson Village. Everyone watched to see what would happen and whether Charlottesville natives would shun the outsider giant and their production build mentality. After several months, Ryan walked away from almost all the lots at Old Trail. After 3 years, they walked away from the remaining lots at Kenridge. Many could say that Ryan was not successful in Charlottesville.
However, they’d be sorely mistaken. Ryan sold out Cherry Hill, they moved to the Pavilions at Pantops, they built at the Hollymead Towncenter, they built at Holly Hill… and more… They may not have struck gold in their high end practice, but they certainly proved that a national homebuilder can compete with the locals. Maybe Brueggars can’t beat Bodo’s in a head to head, but Ryan is showing some serious strength in proving a strong value proposition for their homes.
When you look from 2005 to 2008 numbers, you notice that once unstoppable Hauser Homes has dropped from a 13% market share down to 4%. While 2005 may have had 99 builders closing on properties in the second half of the year, there were only 72 builders by 2008. And outside the top 10 builders, the market share dropped from a cumulative 46% to 44%. The biggest winner was Ryan Homes. Within less than three years in our area, they went from a zero market share to 24%. I have heard it said that they want a 50% market share in 2009. I can’t say if that is a real goal or simply a rumor, but if it is their goal, I think it is achievable.
In 2008, Church Hill still made the list despite their foreclosures and sale to Eagle Construction of Richmond. This would be the last quarter we will see Church Hill making sales under their own name. Sam Craig, with Craig Builders made the top 10 list. Most interesting of all in my opinion is that Southern Development has managing to hold on to their market share throughout it all, which is a testament to their flexibility.
I find all of this interesting, but what I really look forward to is seeing how the market shakes out when a rebound does occur. Will Ryan just grow faster? Over this period, on a National level, Pulte Homes lost over 60% of its market value, and Centex Homes lost over 80% of its value. Ryan (NVR) lost just under 40%, which may not sound great, but for a home builder in this era, its pretty good.