The Great Recession of 2007 and the Housing Market Crash: Why Did So Many Builders Fail? Lessons for the Local Homebuilding Industry

Abstract

The “Great Recession” of 2007 created havoc in the homebuilding industry, more than any other previous economic down cycle. Countless seasoned local homebuilders across the country did not survive. The impact of their failure on the economy, community, employment, lenders, suppliers, and subcontractors was devastating. While previous studies have sought to identify the symptoms and causes of business failure, very little research has been done on home builder business failure due to acts, omissions, characteristics, or other events which are non-financial. Specifically, those that are attributable to the failed entities' top management and leadership during the housing crisis and the Great Recession. Therefore, the purpose of this qualitative inquiry is to uncover those nonfinancial factors and help to fill the gap in the literature. Additionally, we seek to find specific strategies that could be incorporated into the business models of local homebuilders which allow them to anticipate and navigate turbulent economic times. The ultimate goal of such strategies, however, is to shield the organizations of those builders from the negative effects of recessions and allow them to thrive in the aftermath