Now the company is demanding some relief from suppliers and subcontractors. Division presidents are pushing land sellers, who had agreed to an option price, to reduce it.
'It doesn't make any difference whether we're short [of] land in that market or not,' he said. 'We're basically using the excuse that the market is softer across the U.S. ... Across the board, we're asking for decreases in our land prices.'
The company is getting some discounts, just not as deep as they need to be, Tomnitz says. Some land sellers are still in denial, and he wants the big write-off to send a message: 'The first loss is the best loss, and we're going to walk away if we can't get the land price correct,' Tomnitz said.
Horton had 396,000 home lots, 43 percent of them secured through options. It plans to reduce that to 340,000 and get a 50-50 mix of lots owned and optioned.
Subcontractors will get similar treatment, as Horton tries to drive down costs everywhere. The company won't start the number of homes it planned (nor will other big builders), so it figures to have leverage.
Tomnitz said framers and plumbers will have to get used to making less per hour than they did last year, which prompted an analyst to ask whether it was reasonable to squeeze their 'thin' margins.
Tomnitz took exception, saying that contractors had done exceptionally well in the past few years.
'They may not be fat, but I can tell you that they, as well as we, all have room for improvement,' he said. 'The quality, low-cost producer always wins, and that's what we tell our subs.'
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