The difference between a custom and a production home can be recognized easily by the public and realtor community. But for Shaddock Homes – whose president, Peter Shaddock, started as a custom homebuilder – the difference is more difficult to detect. “What we do is we give people a custom home without charging a custom home price,” Shaddock emphasizes. “Shaddock Homes is a large-scale, custom homebuilding operation.”
Shaddock Homes achieves its custom feel by making the changes its customers want, such as enlarging a master bedroom or adding two bedrooms. “We come from a custom-builder background, and making changes is pretty easy for us, whereas people we compete with don’t seem to be able to make changes easily,” Shaddock declares. “If they want a red front door or to move the garage to the other side, fine – we’ll do it.”
At present, Shaddock Homes specializes in building homes north and east of the Dallas/Fort Worth metroplex in Allen, Frisco and Murphy, Texas.
“In the city of Dallas, Preston Road has always been the centerpiece of wealth as it expands north from downtown Dallas,” Shaddock emphasizes. “The buying public perceives being near Preston Road as being very desirable and the place to live.”
In addition to Preston Road, housing development is aided by a toll road that parallels Preston Road as development expands north. “When people buy homes in the subdivisions we build in, the buying public is looking for the best house in the best public school district for their kids, when they don’t send them to private school,” Shaddock maintains.
“I found in good times and bad times, the safest place to build houses is in the best school districts, whether it is north, east or west,” he adds. “We sell to families with children and older people and all kinds of people, but we stay in good school districts.”
Shaddock Homes range in size from 2,500 to 5,000 square feet and from $350,000 to $550,000. Shaddock estimates approximately half are built on spec. “We sell mostly to people who want to live in the best suburbs and public school districts,” Shaddock notes. These may be first-, second- or third-time homebuyers or people who may want to downsize from a $1.5 million house.
“We’re generally close to neighborhoods already there,” Shaddock says. “We don’t pioneer a new piece of property 10 miles out. Generally, a developer like Shaddock Development Company develops the lots, and builders like Shaddock Homes move in. Most homebuilders don’t do land development; they buy lots from developers, and that’s the way they want to do business.”
Shaddock Development also sells to other companies. “We sell to high-end production builders and custom builders,” Shaddock explains. “We supply a builder with lots ready to build on and street sewers, and they do the landscaping and they do each lot. We go to the very best places and best school districts – that’s where we develop lots and that’s where we sell. I have an ability to buy correct pieces of property because I know what people will buy.”
Shaddock Homes built 100 homes in 2010 and is planning to build 135 in 2011. “There’s a great new area called Phillips Creek Ranch that is a pretty big land block in Frisco, and we’re going to be building there,” Shaddock says. “The main inhibiting factor to a builder in the Dallas market is a shortage of good lots. It can take over a year for a developer to develop new lots, and there isn’t much development activity happening in the Dallas metroplex. I’ll start as many houses as I can, provided that I can find good subdivisions to build in.
“The problem is, most of the banks aren’t lending developers money, so not many developers are developing new lots,” he stresses. “The good lots are in the hands of the builders already. A lack of good lots is not our only problem. The availability of large blocks of interim financing for spec homes is also a problem, since all the major banks are, for all practical purposes, out of the interim business. Generally, we obtain our interim financing from a larger group of smaller local banks.”
Large Vs. Custom Builders
The percentage of homes being built in the Dallas area by large production builders has been increasing steadily over the years since Shaddock got into the business in 1964. “When I first got into the business, small custom builders built most of the houses,” Shaddock points out. “I built custom homes for many years, and for many years, I was the largest custom builder in the Dallas area.”
Each economic downturn in the Dallas area accelerated the move from the custom builder to the large production builder. During the savings and loan crisis of the 1980s and the financial downturn from 2008 to 2010, large production builders picked up a larger percentage of homebuilding, which Shaddock estimates is now approximately 90 percent of the market. Custom builders generally are responsible for only the most expensive houses.
The Dallas market slowed appreciably in 2008 and 2009, Shaddock says. “We’re very flexible to start, stop, go faster and change plans,” he emphasizes. “We can change our whole business model in six months. We keep it thin – a typical company building the same number of houses as Shaddock Homes probably has one-third more employees. We have the best houses, the best product, the best location – people who are not as sharp as us are having a lot more problems selling houses than we are. We don’t have any problems selling houses – although we could use a little more interim financing. We generally sell everything we build before it is completed.”
Decades of Experience
Since Shaddock Homes was founded in 1967, “We’ve been through four recessions, but only two were bad ones – the other ones were just interference,” Shaddock says. The savings and loan crisis in the late 1980s hit Texas particularly hard. “Hypothetically, every bank and savings and loan that we had stock in or did business with went out with the exception of none,” Shaddock says.
Today, Shaddock Homes is incorporating stricter energy standards that will include improved thermal enclosures, efficient heating and cooling, a complete water management system and more energy-efficient appliances and lighting. “These changes save our homeowners energy costs,” Shaddock points out.
The corporate culture of Shaddock Homes engenders an entrepreneurial spirit. “Employees care about their jobs – they just don’t leave at 5 p.m.,” Shaddock stresses. “When we’re doing something, they’re involved and care – it’s like a family. We’re small enough that everybody really cares about everybody. Everybody is there to do the job. We demand perfection from everybody. We are the very best people and get the best results, and it’s expected. Our corporate culture is to do what it takes to be the best.”
Shaddock sees good taste and design being a competitive advantage for his company. “Shaddock’s designs are so good that our competitors have a real hard time competing with us,” he declares. “They just can’t match our design and the finesse of our houses. They’re perfect – nobody can do it any better than Shaddock Homes.”