Inman

Builders rank high on service despite financial losses

While many large home-building companies are struggling with large losses during this housing-market decline, some are still scoring high with consumers.

J.D. Power & Associates this week reported that it has awarded builder Centex Homes a Platinum Award for Excellence in Customer Satisfaction, as the company ranked highest in 14 of the 34 largest home-building markets in the country.

Pulte Homes placed second in the 2007 New-Home Builder Customer Satisfaction Study released this week, as its combined Pulte, Del Webb and DiVosta brands ranked highest in 11 markets.

Centex and Pulte also led the newly launched J.D. Powers New-Home Quality Study and New-Home Design Study, and Centex mortgage subsidiary CTX Mortgage rated the highest among builder mortgage originators in most of the markets studied, according to a first-ever Builder Mortgage Originator Study by J.D. Powers, followed by Pulte.

The survey results are based on feedback from 50,399 buyers of newly built single-family homes who have lived in their homes for an average of four to 18 months.

In the customer-satisfaction study, other builders that were rated highest for at least one market area include: David Weekley Homes, Granville Homes, Huntington Homes, John Wieland Homes, Mattamy Homes, Shea Homes, Standard Pacific Homes, Tim Lewis Communities, and Van Metre Homes.

Customer satisfaction levels remained roughly flat with the 2006 survey, J.D. Power reported, with the largest overall improvements in customer satisfaction in the Central Valley, Calif.; Jacksonville, Fla.; Minneapolis; and Nashville markets.

The J.D. Powers study, now in its 11th year, gauges nine factors in customer satisfaction, including warranty/customer service, which accounts for 16 percent of the overall score; construction manager, at 15 percent; builder’s sales staff, at 13 percent; home readiness, at 13 percent; price/value, at 12 percent; workmanship/materials, at 10 percent; recreational facilities, at 8 percent; builder’s design center, at 7 percent; and location, at 5 percent.

Based on survey data released by J.D. Power, Centex ranked the highest among all building companies and brands operating in at least five markets, based on scoring. The company earned a score of five for “among the best” in 20 markets, a “better than most” score of four in six markets, and an “about average” score in three market areas.

A score of two, or “the rest,” is the lowest score awarded to builders. J.D. Powers noted at its Web site that its publicly released ratings “may not include all information used to determine J.D. Power and Associates awards.”

Pulte Homes earned a score of five in 13 markets, a four in nine markets, and a three in three markets, and its DiVosta Homes brand earned a five in three markets while its Del Web brand received six fives, three fours and two threes.

Next on this list of top-scoring building companies and brands operating in five or more markets was Shea Homes, followed by David Weekley Homes, John Laing Homes and Standard Pacific Homes.

Meanwhile, Richmond American, D.R. Horton, Ryland, Kimbill Hill and Beazer were among the home-building brands operating in five or more markets that ranked lowest in the latest annual customer satisfaction survey.

Richmond American, a brand of MDC Holdings, received a score of two in all seven markets measured by the survey where the company operates, while builder D.R. Horton received 17 twos, seven threes and one four.

Ryland Homes received seven scores of two, nine threes and one four. Kimbill Hill received three twos, two threes and one four. And Beazer received nine twos, 10 threes, one four and one five.

The J.D. Powers Platinum Award honors a building company that operates in at least half of the markets surveyed in the study, achieves scores above the market average for each division of the company, and earns an average index score that exceeds the 90th percentile of the study average, according to a J.D. Power announcement.

Paula Sonkin, vice president of the real estate and construction industries practice at J.D. Power and Associates, said in a statement, “The downturn in the housing market over the past year has presented numerous challenges to home builders, some of whom have had to curtail building as sales have slowed.

“As a result, the new-home selling environment has changed dramatically, and new-home builders must now increase their focus on providing buyers with a satisfying purchase experience — which is a shift from the order-taking mode that was common in the industry until recently.”

Centex ranked highest in 12 of 34 markets studied in the new J.D. Powers New-Home Quality Study, while Pulte Homes ranked highest in eight markets. That study incorporates an index that accounts for “the number of problems that occur, the severity of problems and size of the home, and …. 48 different problem categories” for different parts of the home, including the exterior, flooring and stairs, kitchen, drywall, windows and doors, electrical system and appliances, bathroom, and interior paint.

Centex and Pulte each ranked highest in nine of 31 markets included in the first-ever New-Home Design Study, J.D. Powers also reported. That study measures customer experiences with the design and aesthetic aspects of the new home, including satisfaction with the design of flooring, the master or primary bathroom, kitchen, interior comfort and environment, exterior architectural design, floor plan and layout, and windows and exterior doors.

In the Builder Mortgage Originator Study, Centex’s CTX Mortgage subsidiary earned top ranking in 12 of 17 markets studied, while Pulte’s Pulte Mortgage subsidiary ranked highest in three markets. Beazer, which is facing a series of investigations and lawsuits related to its company-owned mortgage operations, did not rank highest in any of the 17 markets.

That study measures the experiences of new-home owners who use a builder-owned mortgage company to originate a home loan. The study ranks three factors in customer experience, including: the loan officer or representative, closing, and the application and approval process.

While Centex and Pulte were leaders in the 2007 round of surveys released by J.D. Powers, these companies and other publicly traded building companies have been pummeled by the housing downturn. The National Association of Realtors trade group this week forecast a 24 percent decline in new single-family home sales and housing starts this year compared to 2006.

And the U.S. Census Bureau reported last month that new single-family home sales dropped about 10.2 percent in July compared to the same month last year.

In an Aug. 1 quarterly report for the second quarter ended June 30, 2007, Centex Corp. announced a net loss of about $128 million, compared with net earnings of about $160.3 million for the same quarter in 2006. The company reported that revenues for the quarter ended June 30 fell 30.8 percent compared to the same quarter last year.

“The decline in home-buyer demand can be attributed to concerns of prospective buyers of new homes about the direction of home prices, which has increased general uncertainty about whether now is the best time to buy a home,” according to the Centex earnings report. Also, the company reported that declining affordability and deterioration in the mortgage markets have also impacted earnings.

“The increase in inventory of new and existing homes is in part a result of speculative investors becoming net sellers of homes rather than net buyers, as well as the inability of prospective buyers of new homes to sell their existing homes and/or to qualify for mortgage financing,” the company announced.

And Pulte Homes reported a net loss of $507.6 million for the second quarter ended June 30, 2007, compared with net income of $243.9 million in the same quarter last year.

MDC Holdings, which operates Richmond American — one of the lowest-scoring brands in the J.D. Power customer satisfaction study — reported a net loss of $106.1 million in the second quarter ended June 30, 2007, compared with net income of $76.5 million in the same quarter last year.

In an earnings statement in July, MDC Executive Vice President and Chief Financial Officer Paris G. Reece III stated that “the high level of competition for new home orders caused us to reduce prices, increase incentives and, as a result, decrease our performance expectations with respect to certain subdivisions.”