Hansen & Horn sidesteps housing carnage

August 23, 2007

Hansen & Horn Group Inc. is sailing through the slump in housing construction relatively unscathed because it began shifting out of the tract-home market about four years ago-while the industry still was going gangbusters.

The local builder had operated in the upper end of the tract-home segment, but feared it couldn't continue competing with giants the likes of C.P. Morgan Co. Inc. and national builders such as Beazer Homes USA Inc. that had moved into the region.

Hansen & Horn migrated toward a higher price range-now $170,000 to $400,000-and spiffed up designs with varying rooflines, better-quality materials and bold colors.

The upshot: profit margins are "normal" despite a 25-percent drop in the number of houses sold, according to Vice President of Sales and Marketing Bill O'Gorman.

"The timing couldn't be better," O'Gorman said. "We're not cutting and slashing our pricing just to move product."

The Indianapolis area generated only 4,432 building permits through July of this year, compared to 7,822 in the same stretch two years ago, according to the Builders Association of Greater Indianapolis. One national builder, Los Angeles-based KB Home Inc., said in July that it would pull out of Indianapolis.

Most of the carnage has taken place in the entry-level market, where buyers were lured from apartments by subprime mortgages, said Dax Meredith, who heads the Indianapolis office of the Houston market research firm Metrostudy. Three of four houses built in the region are priced below $200,000, Meredith noted, and move-up buyers like the ones who Hansen & Horn now caters to typically spend at least $170,000.

Hansen & Horn owner Wade Horn was sparked to move upscale after visiting Minneapolis, Denver and other cities where houses had some of the designs and colors the company advertises in local magazines and on billboards.

The company also began offering four-year warranties on materials and workmanship, the best in the nation, O'Gorman claims. Another selling point was "vista" basements set partially out of the ground and equipped with full-size windows to make the space more livable.

The changes weren't an easy sell to buyers accustomed to valuing houses primarily on price and having their choices in siding limited to white or earth tones. Some of the first models sold slowly.

"It was different," O'Gorman said.

Hansen & Horn has gained enough momentum to build at least 175 houses a year in several developments in the Indianapolis area as well as in Columbus, Ind.

Sales would be greater if existing homeowners were able to sell their houses at prices they're comfortable with, O'Gorman said.

"If this were a normal market, our numbers would be very, very high," he said.

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