The cover story of the May issue of Builder, the magazine of the National Association of Home Builders, came as a shock when its editors named Clayton Homes the homebuilder of the year and the fastest-growing homebuilding company in America.
Santa Feans might recognize that brand because anytime one heads to Albuquerque, they drive by a lot full of Clayton Homes on the south side of Interstate 25 near La Cienega. They’re on axles and wheels and were built in the Karsten factory in the South Valley of Albuquerque.
What’s new for Clayton, and why the company has bridged the sneering disdain stick-builders at NAHB have for factory-built products, is that under Berkshire Hathaway — Warren Buffett’s half-trillion-dollar diversified empire — they have entered the stick-built market.
Watch out Pulte, D.R. Horton and other publicly traded mega-builders: Mr. Buffett and Kevin Clayton have their eyes on a market bigger than Pulte’s and D.R. Horton’s combined — one that the “publics” walked away from when the going got good in the comeback from the crash.
Buffett, the so-called Oracle of Omaha, knows the first-time buyer market is huge, underserved and ready for an army of local builders spread across America to save the day.
Clayton Homes started manufacturing homes on axles in 1956 in Tennessee. It earned national market dominance as a privately held company and came under Buffet’s gaze in 2003 when it joined the privately held Berkshire Hathaway family, companies that keep their brand identity and management teams but benefit from Buffett’s largesse, loyalty, and long-view look at markets and products.
What Clayton and Buffet recognized in 2014 was that there were hundreds of small builders across America who had done well up until the crash of 2008 but were getting shut out of the game as local financing dried up in their smaller markets while the “publics” fought it out in major markets with Wall Street as their financial backers.
Clayton’s first foray into site-built homes was in Gainesville, Ga., where they sold so well the company began reaching out through its network of supply chain vendors to identify other builders. Clayton began buying building companies owned by individuals and teams that fit the ethos of Buffett — a culture predicated on trust and long-term loyalty.
The builders all kept their local brand identity and management teams in place, but their financing worries were over. And they committed to selling homes affordable for first-time buyers, in many markets well under $150,000.
They could do it because the vertical Berkshire Hathaway supply chain has many companies making stuff necessary for homebuilding, plus mortgage financing, real estate services and more. The partnership with Clayton Homes, which epitomizes maximum efficiency and minimum waste, became a mentoring phenomenon that at first blush may seem like selling one’s soul but upon further reflection is like being called up from the minor leagues to join the Yankees.
Clayton Homes has grown 376 percent since 2016 and is on track to produce over 4,000 site-built homes in 2019 through its growing family of builders. Could Clayton Homes make a play in Santa Fe and find a local builder with access to lots and who could bring in entry-level homes under $200,000? Not a simple answer. Finding and empowering just the right builder, or builders, is the key to understanding Clayton Homes’ success.
On the other hand, there are over 1,000 lots in Tierra Contenta ready and waiting for just the right sugar daddy.
Kim Shanahan is a longtime Santa Fe builder and former executive officer of the Santa Fe Area Home Builders Association.