Location is everything
Although Columbus accounts for the largest percentage of M/I’s sales, it is not the company’s largest market in physical size. In fact, it is the smallest. M/I relies on the Columbus market, but the profit contribution from other markets has been steadily growing.
Growth potential is the primary consideration for Schottenstein when determining both the markets and the neighborhoods in which it will build.
In addition to its hometown of Columbus, M/I builds in Cincinnati, Indianapolis, Charlotte and Raleigh, N.C., the Washington, D.C. area, Tampa, Orlando and Palm Beach, Fla., all strong markets for new home construction.
According to Vincent Squillace, executive vice president of the Ohio Home Builders Association, the state affiliate of the National Association of Home Builders, the South and Southwest are the nation’s home building hotspots.
"The south and southwestern states have been the hottest housing markets for at least 10 years," says Squillace. "In Ohio, Columbus and Cincinnati are the two busiest markets."
Following statistics from the U.S. Census Bureau that show the number of building permits issued in metropolitan areas, Schottenstein has opted for markets that represent solid growth potential. But with the exception of Washington, D.C., M/I’s markets are not the largest.
By the end of 2002, Atlanta, Phoenix, Riverside, Calif., Houston, Dallas and Washington, D.C. led the nation in building permit activity, with Orlando, Tampa, Charlotte and Raleigh not far behind.
In 2001, M/I stopped building homes in Phoenix, one of the largest homebuilding markets in the country, because the city represented only a small percentage of the company’s business. M/I’s total home closings dropped by 2 percent in 2002, partly as a result of the closure of the Arizona division, but this was offset by a 6.7 percent increase in overall home price, according to Standard & Poor’s.
Schottenstein says the company withdrew from that market to focus on areas where M/I’s market share was increasing.
"We are very strong in the Midwest, in Columbus, Indianapolis and Cincinnati," he says. "We are one of the leading builders in Tampa, too."
In addition to growth potential, the company also considers the market and neighborhood’s ability to meet its target pyramid sales distribution.
"We look for that in the locations we choose," Schottenstein says. "Identifying and securing new communities is the most important thing we do. We look for the best possible locations for new neighborhoods."
