This Builder Has a Plan to Beat the Housing Market. Will It Work?

By Michael A. Natbony, CEO, New World Home, Atlanta, Ga.
It's the worst housing market since the Great Depression. You've got a giant overhang of homes selling at distressed prices. It's becoming increasingly difficult to get a home loan or any kind of financing from the bank. In spite of it all, in 2008 we started our company, which produces historically inspired, sustainable homes with a modern twist.

Even if we find buyers, it can be difficult to convert those buyers into sales because our contracts are often contingent upon financing, and the banks just aren't willing. So how are we going to survive in the current market? Our strategy is twofold: We market aggressively, and we use an innovative production technique to build our green homes fast -- only after we find buyers for them.

Albert Einstein said, "In the middle of difficulty lies opportunity." We want to use this challenging real estate market as an opportunity to show the world what the future of housing could look like.

We made a marketing push
I knew that in an oversaturated housing market, marketing would be crucial to distinguish our product from everything else out there. We decided to spend about one-third of our startup capital on marketing and PR, and so far it's worked.

In 2008, we landed a 10-page spread in Country Living magazine. The spread showed how we bring a house to completion in 90 days through our modular building process. We seized the opportunity to partner with Hearst, which owns Country Living, and developed a co-branded portfolio of Country Living Green Modular Homes in early 2010. Soon after, we were recognized as the Country Living 2010 House of the Year and installed a temporary home exhibit in the middle of New York City. In just two weeks, nearly 10,000 people toured the home. Our phones are ringing off the hook from inquiries generated by the display.

We save time and make better houses with modular construction
Perhaps the most crucial component of our business plan is that we build modular homes. The houses are constructed indoors and later moved to their destination, where they are typically assembled in a single day. This means that the homes are built in a controlled environment. Many homes built outdoors suffer from changing weather conditions. My own house was built when it was wet outside, and my wooden floors became warped and never recovered.

Modular construction also means we can build our homes to order, and we can build them fast. Many of our leads and contracts are with developers or large institutions that own empty plots of land on which that they want to build homes. Gone are the days when a homebuilder can get a giant loan from the bank to build houses on spec. Modular construction allows us to build homes within 90 days of when the plans are submitted. We can build only homes that already have buyers, so we aren't exposed to too much risk, and neither is the developer. That way, it's easier for both parties to get the financing they need.

Our houses can save homeowners money in the long run
Our houses cost anywhere from $200,000 to millions of dollars, so our target market is huge. We try to keep our price differential within 3-5 percent of the cost of a similar house without the same green features.

What many people don't realize is that there are financial incentives to spending slightly more for a more energy efficient home. All of our homes are better insulated than traditional homes. Water is heated only when used so the house isn't wasting energy powering water heaters.

Any premium for our homes is more than offset by the lower costs to operate the house and the savings generated by the technical building science. It's actually a myth that green is more expensive: In the short and long run, it pays to go green.

Once homebuyers begin to pick up on the financial benefits of living in a green home -- and they have already begun to -- it's only going to increase the company's momentum.

The future looks bright
In 2009, since we were still in the process of starting up our company, we didn't earn any revenue. This year, we've earned some strategic revenues. Based on current estimates, we project that in 2011 we'll make $32.5 million in sales. So far we've built or are in the final stages of building 11 homes, and we are working on 20+ additional contracts, as well as an affordable housing project in Atlanta.

-- As told to Harper Willis

New World Homes has been the recipient of several industry awards, including the 2010 EarthCraft Single Family Project of the Year award and the 2010 NAHB Project of the Year Award.
Resources

• Learn about "ecobrokers" and the industry of buying and selling green homes.
• Read this article about how the foreclosure overhang will affect the real estate market.
• View a slide show of nine cutting-edge modular homes.