Several home buyers have already signed contracts for homes still in development in a new community in Fort Myers, FL. Although the new lots have yet to open, the lure for early investing comes from attractive prices starting at about $140,000.
The company motivating such early sales at low entry level prices is WCI Communities Inc. They have earned a competitive advantage in the housing market after a promising bankruptcy court outcome.
WCI's 1,150 home community project is the first new sales and construction project since the company came out of Chapter 11 litigation last year.
While under court protection, the company cut its costs and overhead by almost 75%. Adding to the savings, WCI has been able to write down the values of its properties to the current market - a major influence to the housing market crisis.
While vast majority of home builders have met their fate from the collapse of the housing market, some builders now fully revitalized from bankruptcy are realizing less debt, top picks for land, and a better approach to business. Like the case for WCI, these reorganized companies are likely to be owned by their creditors.
Without the previous pressure from shareholders to maintain their stock value and break even with expenses, these builders are granted significant write-downs on their land value, which was commonly the case during the industry's opulent past
Overall, that enables the competitively competent to drive home prices low enough to attract buyers while still earning a profit.
Publicly traded rivals of companies like WCI are struggling to keep pace with the new competition. Unlike their revived peers, these companies who have avoided bankruptcy based on solid business are finding themselves in a tough situation.
On the other hand, some experts in the industry believe that lack of access to public markets and tightened credit will keep the bankruptcy veterans in check.
The CEO of a Cleveland home remodeling company claims his underlying concern is the lack of recovery in the housing market.
"Even for companies in decent shape, the business for new construction, room additions, and overall home remodeling in Cleveland Ohio is inconsistent," said the CEO. An inflated surplus of low priced resale and foreclosed homes makes it a challenge for many home builders to reel in consumers.
However, the market for homes is cyclical. "This housing slump won't last for forever," says a bankruptcy attorney at a Pennsylvania law firm.
A profitable turn of the cycle is what Orleans Homebuilders Inc. is relying on. Initially, the company intended to sell most of its properties to a rival. Instead Orleans chose to pursue reorganization.
The mission for Orleans's is to succumb from bankruptcy later in year, and as a result, slash its debt in half. The company seeks to improve organizational efficiency and reduce expenses by cutting back on the variations of homes it offers.
Housing experts claim the rejuvenated Orleans could sell off less-prime properties. Acquiring buyers shouldn't be an issue because many builders are offering bargain-priced properties as they ready themselves for revival in the market.
Other companies are finding a niche to overcome a tough housing market. One building company that specializes in bathroom and kitchen remodeling in Cleveland is keeping pace with an unpredictable market.
"We promote more affordable and realistic services for the penny pinchers trying to improve their living standards." said the company's owner. "You'd be surprised by the amount of homeowners who are electing to redesign, rather than sell and re-purchase. We have experienced a high volume of sales simply through our Cleveland Ohio Home Remodeling division." He adds.
Meanwhile, several home builders are taking the approach of new construction sales for higher margins.
Florida based WCI Communities came out of Chapter 11 last fall with debt of nearly $450 million. The company sold off land that didn't align with its new business plan and kept roughly 9,000 acres for future construction.
The cost of land for the company now averages 10% of the price tag for one of its properties, down from about 20% at the market's peak.
In addition, WCI reduced its labor force and the variety of options for homes it offers. Overall corporate costs per year dropped from over $150 million to about $40 million.
