03 Mar Building a Legacy
Barry Rutenberg chooses his words carefully and speaks softly, but he exudes a quiet energy and joyousness when he gets talking about homebuilding.
That’s no surprise, since it’s been his life since he was a youngster. Rutenberg started by picking up trash at job sites for his father, builder Arthur Rutenberg, then in high school moved up to various construction crews for the Clearwater-based Rutenberg Homes, earning a perspective on the building industry from the ground up.
After high school, he majored in business administration at Northwestern University, followed that with an MBA from Harvard, then returned to work in his father’s company, which by then had merged into U.S. Home Corp.
Three years later, he bought the local assets of U.S. Home and started his own business. Over the years, Rutenberg has built more than 1,000 homes and developed 10 communities.
Now, Rutenberg has come full circle. In 2008, he teamed up with his father to become a franchisee of Arthur Rutenberg Homes, a company Arthur started in the 1980s after resigning from U.S. Home.
While he remains very active as a local builder, Barry Rutenberg is also prominent nationally, having just risen to first vice chairman of the board of the National Association of Home Builders. This puts him in line to chair the organization in 2012.
Now 62, Barry has no plans to retire. Rather his goal is to follow in the footsteps of his father, who is still working at age 83.
Neither has anything to prove. Their reputations are firmly in place, as the only father and son in the Florida Builders Hall of Fame.
What are some of the values your father taught you?
He always taught me, “It’s what’s right, not who’s right.” Sometimes someone else on our team or one of our subcontractors has a better idea than I do. I welcome their wisdom.
Dad also believes in organization. He believes in systems. One of the benefits of affiliating with Arthur Rutenberg Homes is to have access to its proprietary software system. It helps us operate more effectively and deliver more value to the homebuyer.
How does your software system benefit the customer?
We have an online system that makes the home-buying experience much simpler and much quicker for the customer. And we have additional information available online in our model home. When you do come into our model center to ask about buying a house, we can respond with your initial quote in 48 to 72 hours – much quicker than before. And we are able to do it at a better price because of national contracts that Arthur Rutenberg Homes has negotiated and because we have access to information about what other franchisees are paying for both material and labor. You can negotiate more fairly when you know what other builders are paying for an item or service.
We have the best of both worlds. We have combined the personal attention that we have in Barry Rutenberg Homes with the house designs, software and the other resources that we have available to us within the Arthur Rutenberg system.
What is the balance between staff and subcontractors in your company?
We rely on subcontractors for building. We’ve worked with most of them for years, and they have proven that they perform up to our standards. We have eight members of the team, including me. We have a construction manager and a service manager. The rest of us are working with the customers and making the wheels turn – all the things that have to happen.
What values do you look for when adding someone to your team?
Our turnover has been historically low. When we do add a team member, we’re looking for intelligence. We’re looking for skills. We’re looking for reliability. Most of all, we are looking for character because if you don’t have the right character, it doesn’t matter how smart you are or what your skill level is. We are looking for the person who we would trust to build our house. I only want to use people who I would use on my personal house. Our customers are not experiments. We use local references. If we’re looking for a construction manager, we’ll ask our subs, “Who knows someone who you’d like to work with?” And someone within our Arthur Rutenberg Homes group may know someone who is trying to move.
How do you approach marketing?
Historically, we have focused on word of mouth, model homes, the parade of homes and the Realtor community. We are especially pleased to have repeat customers, both on new homes as well as additions and remodeling jobs. We’ve done nine homes for one family. We have others that we’ve done multiples for. Sometimes, it’s been 20 years, and they’ve decided to downsize. We’re very honored to be their builder of choice and to have them come back to us. For us, it’s a business that you earn. It’s not a business that instantly happens. We’ve attended the home and garden show in the last couple years. In the last two years, we’ve been working hard to increase our renovation and addition business. We will be sending letters and postcard to neighborhoods where we’re doing work, starting with the Huntington subdivision.
How else have you adapted to the challenges of the past three years?
Like everybody else, we’ve had to manage the reality. You can’t manage to what your “hope” program is. You have to go, “This is where we are. What do I have to do?” We have focused on improving our house designs and specifications as well as the systems I mentioned. Everybody has had to transition. It hasn’t been our most fun three years of our lives. It is what’s real, and we’re grateful our efforts have been well received. We have six homes and one addition under construction. We’re grateful to have the opportunities we have, and we’re working with a number of prospects.
Isn’t it hard to sell a new home when the price of an existing home is below replacement value?
Some people are only going to be satisfied when they have the lowest cost per square foot. Fortunately for us, a number of people are looking at more facets of the purchase. New homes are built to new codes. They’re more energy efficient. They’re tighter. They have better windows. I can go through a long list of reasons that a new house is better. And we build better than the building code. With a new home, you can have the design you want. You don’t have somebody else’s problem. And you have the new warranties. New home prices have always been a little bit higher. We have been pretty aggressive in delivering value to our homeowners. Most people who come in here are pleasantly surprised by the value.
What’s your assessment of the state of homebuilding nationally?
People talk about the shadow supply, the foreclosures coming forward. What I like to talk about is the shadow demand. There are a couple million people who have not yet started looking for their home because of the economy. You hear the classic stories of the divorced couple that is still living in the same house. That’s an economic challenge. You’ve got the kids who have not moved out of the parents’ house. You’ve got people who are living together who, if they felt better about the economy, would be living in one-bedroom apartments.
Nobody really knows what’s out there. Houses have led us out of every recession since World War II, with the possible exception of this one.
One of the problems is that the rules are different. You do not have financing for investors. They have to do cash. Mortgage applications are much more difficult. The housing finance pendulum swung too far one way, and then it swung too far the other way. If we can get back toward the middle, then housing will help the economy. That will happen. For every house that is built in this country, three jobs are created. That’s just on one house. But you also have furniture; you’ve got appliances; and you’ve got all the other things that happen with a new house.
When do you see things straightening out?
The demand for housing is there, and we will continue to see improvement. Homebuilders across the state are reporting that sales traffic is up. Housing prices are significantly reduced. Interest rates, by historical standards, are still very low. The best homes are being sold.
I think that there is going to be a slow, gradual improvement. People have to feel comfortable. At some point, and I can’t tell you when, we will collectively decide that it’s a good time to act, and we’re going to have a surge in demand.
How did you move to a leadership position with the National Association of Homebuilders?
I’ve been on the association’s executive board since 1994. I’m in my 18th year of participating in the leadership. I was elected to the senior officer ladder in 2009, and I am pleased to be part of a capable leadership team. It’s been a tremendous personal growth experience for me, both in skills and opportunities.
I recently had a two-day trip that included meeting with congressional leaders’ some of the leaders of the House and Senate, as well as committee and subcommittee chairmen and ranking members. It was really interesting. And we also had the opportunity to meet with people from the Treasury Department, the White House and FHA. My biggest surprise about the reaction to my appointment is how many people I know overestimate the travel commitment. I do most of my communication for the organization by conference calls and webinars.
Are you championing a particular agenda with the NAHB?
Of course, housing finance is the major topic. The administration was under a requirement to bring forth a plan for the government-sponsored entities – Ginnie Mae, Fannie, Freddie and the Federal Home Loan Bank Board. The administration brought forth a plan with three options. It doesn’t mean that any of those three might be adopted. It could be No. 4 or No. 5.
What was the response of the people you met with in Washington?
I’m finding that the members of Congress are developing a better understanding of the situation. I also found it interesting that, privately, a number of them are working across party lines to come up with constructive solutions to the problems that we face. That was very encouraging. Whether or not the ideas that are being discussed come to fruition, we’ll have to see, but the right things are being said.
The regulators in the mortgage industry did forbearance for the farmers in the ’80s, and they tried it in the savings and loan problems in the early ’90s. They got beat up pretty good. They don’t want to get beat up again.
The people in the field, who are not politically connected, are concerned that they have to do a good job of enforcing the rules as they see them. It would take revised instructions from Washington to change them, so we’re in the middle of this.
A number of associations are working on reforms, including the American Bankers Association, the Community Bankers Association and the Mortgage Bankers Association.
One of the things that happens in Washington is that coalitions of associations work broadly on a consensus. It’s a process.
What lessons have you learned over your career in homebuilding?
Like many people in the industry, I wish that I had the insight four years ago that I have today. I think all of us are humbler. I think I should have been a little bit more financially conservative. Those people who went through the Depression were changed forever. I think that this recession will not have the same impact, but there will be residual lessons, and more people will be more careful in their financial planning. In the long run, it’s going to be good for this country.
How do you keep up with all your responsibilities?
I focus on what’s important and continue to work hard. Everybody has his or her own definition of what that is. I have been called a workaholic. I do a lot of my calls when I’m not in the office. I do them when I’m in the car and I have to go some place. I do them in the evening. I find comfort in being able to work a lot of hours for a long time, but I try to make the hours be smart.
That’s what I did when I had to fly to L.A. for a one-day seminar recently. I flew out of here on a late afternoon flight and used the Internet on the flight from Atlanta to L.A. I attended the meeting all day, and I met my cousin for dinner at the airport. After a “red-eye” back, I was on the job in the morning. I was out of here less than a day and a half, and I learned a lot that helped both my company and the association.
Your daughter, Lisa Kinsell, and her husband, Dale, are now involved with the company, with Lisa managing sales and marketing and Dale serving as president of the building company. How did they get involved with your business?
Lisa didn’t work with me while she was in high school. She came here, against my advice, out of college. I said, “Lisa, what do you want to do?” She said, “I want to come work with you.” Dale was working in his family’s business and was able to bring a lot of experience to us. Lisa and Dale are not going to follow in my footsteps. They’re going to make their own way. They are very much their own people. We work well together, and it gives us more capabilities. Together we have more opportunities. I look forward to the future.
You seem to have a lot fun with your work.
I do enjoy it. People come in, and they have a dream – whether it’s remodeling the house, doing an addition or building a new home. We are able to take their dream and make it real. When we’re done, they wave to us in Publix – with all their fingers. Most of my friends are my customers and business associates.
Building homes wasn’t so much fun in ’09, and I would be lying if I said it was. But we got through it. The market has been rewarding us for hard work. If we were busting it and not getting rewarded in the marketplace, it would be negative.
The future is bright, and I’m excited.