The housing downturn wrecked the hopes of many a builder, leaving even big outfits like Pulte Homes, based in Bloomfield Hills, Mich., with unsold homes and too much land. Once the nation's largest builder by revenue, it dropped to No. 4 after a bad 2006 but found solace in its Del Webb brand, aimed at people 55 and older. TIME's Cathy Booth Thomas talked to Pulte president and CEO Richard Dugas, who is banking on these baby boomers to help the bottom line. For the record, he is, at 41, too young to live in a Del Webb community.
Everybody thinks the housing market is dead. Is it?
I wouldn't say it's dead. Business is certainly tough. This slowdown has been, frankly, more deep and more protracted than anybody anticipated. Cancellation rates-- people canceling on contracts for homes--have roughly doubled in the past six to 12 months, to just under 35%. One thing causing cancellations is the inability to sell existing homes. A lot of these folks may not have sold a home in 20 or 30 years, so the furnishings and carpets may need to be updated [to help them sell].
With many baby boomers turning 60, the Del Webb communities might be Pulte's savior in a shaky market, right? In 2006, Del Webb represented almost 40% of your business.
That's fairly accurate. But it's a particular type of housing that's in demand. This group is not looking for a home. They are looking for a new lifestyle. All Del Webb communities have full-time lifestyle directors. They arrange trips to local games, organize club events, hold fitness classes--all things not found in a traditional community.
Del Webb seems to have gone upscale. When it was started in the 1960s, it was aimed at the average family, but now you have homes costing more than $500,000.
Del E. Webb, the founder, wanted anyone on Social Security to be able to afford a Del Webb home, but we have broadened the range.
I'm a 56-year-old boomer who is still working. Am I really going to find people like me in a Del Webb community?
Absolutely. We opened up a community outside Charlotte, South Carolina, last year--Sun City Carolina Lakes--and it's been our most successful Del Webb opening ever. We sold 700 homes in nine to 10 months. Almost every resident has signed up with a high-speed Internet provider. That's because they're working. We are finding more and more adults who continue to work past traditional retirement age.
Your competition is looking at building communities with no age limits. Are you sticking to the 55-plus restriction?
We do offer some without age restriction. Something we started in the past few years was multigenerational communities with one section open to any age, so you might not have children living right next door that might be noisy but you have the ability to be close to family.
You opened a record number of Del Webb communities in 2006--17--but project only nine openings for 2007, and most seem to be in the Sunbelt, Florida and California. Why?
We have already had a big push in Washington, the mid-Atlantic and the Northeast. We have not opened many in Florida, candidly, so we kind of need to catch up there.
Pulte's earnings for 2006 were down. Will you do anything differently in 2007?