It’s a terrible time to be a homebuyer. In 2023, mortgage rates spiked to levels not seen since 2008 and, despite coming down in recent months, remain higher than they’ve been in more than two decades. Home prices have also skyrocketed, up 30% nationally on average over the past four years while real median household income has stagnated.
Yet, given a nationwide shortage of at least four million housing units, according to the National Association of Realtors, it’s a great time to be a homebuilder. There simply aren’t enough homes.
Since 2008, Smith Douglas Homes has built 304 communities in five states. Sales hit $765 million in 2023. Shares of Smith Douglas, which Tom Bradbury took public on the New York Stock Exchange in January, are up 56% since then. The 80-year-old Bradbury, who still owns 88% of the stock, wants the company to continue on as the "low cost quality provider of housing with choice".
Read the full story on Forbes: https://www.forbes.com/sites/richardjchang/2024/09/23/the-homebuilders-getting-rich-off-americas-housing-shortage/
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Yet, given a nationwide shortage of at least four million housing units, according to the National Association of Realtors, it’s a great time to be a homebuilder. There simply aren’t enough homes.
Since 2008, Smith Douglas Homes has built 304 communities in five states. Sales hit $765 million in 2023. Shares of Smith Douglas, which Tom Bradbury took public on the New York Stock Exchange in January, are up 56% since then. The 80-year-old Bradbury, who still owns 88% of the stock, wants the company to continue on as the "low cost quality provider of housing with choice".
Read the full story on Forbes: https://www.forbes.com/sites/richardjchang/2024/09/23/the-homebuilders-getting-rich-off-americas-housing-shortage/
Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1
Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:
https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript
Stay Connected
Forbes newsletters: https://newsletters.editorial.forbes.com
Forbes on Facebook: http://fb.com/forbes
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More From Forbes: http://forbes.com
Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.
Category
🛠️
LifestyleTranscript
00:00In 2023, mortgage rates spiked to levels not seen since 2008 and, despite coming down in
00:09recent months, remain higher than they've been in more than two decades.
00:13Home prices have also skyrocketed, up 30% nationally on average over the past four years,
00:19while real median household income has stagnated.
00:23Yet given a nationwide shortage of at least 4 million housing units, according to the
00:27National Association of Realtors, it's a great time to be a home builder.
00:32The health of the home building industry right now is probably as good as I've seen it in
00:37my 19 years of doing this.
00:39We are benefiting, and people who are homeowners in this country right now are benefiting from
00:45one of the biggest population shifts that we've seen in a very long time.
00:50I think there's like 9 million more millennials than there were Gen Xers, and then you add
00:55on the Gen Zs right there in the mix too, which I think the leading edge of Gen Z is
00:59like 27, 28 right now.
01:02So you have this amazing amount of demand for housing, and we just can't build them,
01:08the industry can't build them fast enough to meet the demand that's out there.
01:12This housing dilemma has allowed for smaller builders to thrive.
01:16Tom Bradbury is the executive chairman of the board of Smith Douglas Homes, based in
01:21Woodstock, Georgia, a company that since 2008 has built 304 communities in five states,
01:27and whose sales hit $765 million in 2023.
01:33Shares of Smith Douglas, which Bradbury took public on the New York Stock Exchange in January,
01:37are up 56% since then.
01:40The 80-year-old Bradbury, who still owns 88% of the stock, is now a billionaire.
01:46The first job I had was selling airplanes.
01:48And I did well at that, and in 1969 interest rates went up and it just stopped.
01:54So I said, well, I'm going to get in something stable like real estate.
01:59After selling his first house in 1975, Bradbury started Atlanta-based Colony Homes.
02:05I asked my dad, the first house I built, I said, Daddy, can you give me advice?
02:10And he said, son, if you watch the pennies, the dollars will take care of themselves.
02:16And even today, we have every month, close to 250 houses a month or so, we'll have one
02:24or two houses that cost to the penny what we said it would cost.
02:29And no other home builder has those strict controls.
02:32Well, Tom and I met in the late 80s.
02:36I went to work with Tom.
02:38And at that time, Tom was still overseeing all of the development activity and the development
02:43crews.
02:44So I just got to hear him live out loud that never give up, never quit.
02:49We can find a way always to get things done.
02:54As Colony Homes evolved, Bradbury took an interest in construction software.
02:58I started going to a seminar in Denver, Colorado.
03:03Lee Evans, who was at the time, was the dean of the building construction degree program
03:09at the University of Denver.
03:11The first meeting I went to, Lee was right in the process of the early stages of working
03:18with a programming company to computerize the home building process.
03:24I bought that software during that meeting and over the next year, implemented it, which
03:31gave me the ability to grow the business and still maintain the strict controls that we
03:39have today.
03:41Bradbury held on to Colony Homes for almost three decades before selling the company to
03:45KB Home in 2003 for $67 million.
03:50When Colony sold to KB, I really was pushing them to use the software because it was by
03:57far superior to what they had.
03:59But I had in the definitive agreement with KB that if they didn't use it, that I would
04:04get the software back.
04:07Five years later, when KB Home pulled out of Atlanta, Bradbury, who was frustrated they'd
04:12abandoned the market, started Smith Douglas Homes.
04:15Tom and I maintained a very close relationship through that time, but it was Tom's persistence
04:22more than anything else that brought me back.
04:26Since then, Smith Douglas has built 15,000 homes, mostly for lower to middle class buyers
04:32like autoworkers, teachers, and first responders, mainly in growth markets in the South, such
04:36as Nashville, Charlotte, and Raleigh.
04:39If you think about what differentiates Smith Douglas from their competitors and some of
04:44the other builders, public builders as well, I think it's being able to give people a home
04:51that's priced at or below the FHA limit and give them some optionality in the home.
04:59In July 2024, Forbes had the opportunity to visit Smith Douglas' build site in Cartersville,
05:07How long does it typically take to build these sort of communities that we're in?
05:11I'm seeing probably close to 50 houses right now, but how long does it take to build out
05:18these communities?
05:19Well, the length of time to build a community out depends on how large it is.
05:24But our average cycle time across the footprint is 59 days, and we've got to go to get that
05:34back down to 47 days.
05:38And Greg and I were in the home building business earlier.
05:41We sold a company called Colony Homes in 2003, and at that time, our cycle time was 46 days,
05:51which is unheard of in the industry.
05:54And that's how we get, you know, the contractors overhead is the same, no matter how much volume
06:00they do.
06:01So the more houses that they can do in a given period of time, the more profitable they are.
06:07And as a result, we are too.
06:10So we get good pricing from our trades, and we take good care of them.
06:14My passion is to get people in a home that otherwise can't do it.
06:21And it's been tough because since the pandemic, our costs have gone up 30%.
06:26And yet still, we are the low-cost, quality provider of housing with choice.
06:33Yeah, I've really enjoyed learning about Smith Douglas, learning about the software behind
06:40the Smith Douglas, what they call the RTM and the Smart Build Strategy.
06:45It's I think definitely a novel concept among what I've seen from the other public home
06:50builders.
06:51We own the software, and we can tailor it to do exactly what we want it to do.
06:54We have programmers in-house that can update it and make changes as we see fit.
06:59It's real-time data.
07:00It doesn't require an integration in the middle of the night or once a week.
07:05If there's a change made to the schedule right now, us as well as our trade partners can
07:09see it within a second.
07:13It's all real-time.
07:14Everybody sees the exact same set of data.
07:16There are competing software packages out there that have some of the collaboration,
07:20but not an end-to-end collaboration like Smith Douglas.
07:24That is the reason that they get these houses built faster than most of their competitors.
07:31In 2019, Greg Bennett was promoted from Chief Operating Officer to President and CEO of
07:37Smith Douglas Homes.
07:39Closing in on 50 years I've been in business, I know most of the operators.
07:43I've seen them.
07:44I know what tools they have.
07:46I can tell you Greg Bennett is the best operator in the space.
07:51We would like to have larger share in each of the markets we're in, but we want to do
08:00that in a manner that we grow efficiencies at the same time.
08:05That slower growth has allowed them to maintain a balance sheet that has more cash than it
08:10does debt, and they've been very prudent and, I would say, very careful in their use of
08:17debt as they've grown the business organically.
08:20We want to be the most efficient, the most operational, excellent company, not necessarily
08:27the biggest company out there.
08:29As long as the builders like Smith Douglas can find ways to make these homes affordable,
08:34we think the demand trends for the next, call it five to seven years, look pretty solid
08:39for this career.
08:40We never rest on our morals.
08:42We are always looking for what's better.
08:44Okay, yeah, we're here, but there's a way to get better, and we're constantly pushing
08:51that envelope to improve.
08:54You know, if you don't know where you're going, any road will get you there, but if you do
08:58know where you're going and you just show up every day and you look at every obstacle
09:03that comes your way as an opportunity and trick yourself into thinking you're having
09:07fun, you're going to get there.