Private Builders’ Survival Guide To Compete With Public Homebuilders

The playing field in homebuilding – as capital-driven as the business is – has tilted in favor of publicly traded firms for years. Now, perhaps more than ever, private builders looking to survive, thrive, and compete need to differentiate themselves and focus obsessively on operational efficiency as a spear tip to their customers’ hearts and minds. 

By focusing on what others aren’t building, solidifying relationships on the ground, improving processes incrementally, and carving out a niche where they can stand apart from peers, private builders can achieve stronger margins, maintain brand value and grow sustainably despite the advantages held by large public competitors.

Those were some of the main takeaways from a session held last week at the International Builders’ Show. Michael Berke, Founder of Tempo Capital Group, organized and moderated the session, “Private Builder Playbook: Proven Strategies to Win in a Big Builder World.” 

Dave Erickson, President and CEO of Georgia-based Grand Oak Builders, Clint Mitchell, CEO of Indianapolis-based Estridge Homes, and Jon Grabowski, CEO of Charlotte-based Red Cedar Homes, led a session aimed at spreading the word about what can work in a headwind market to a privately held homebuilder’s advantage.

Delivering a differentiated product

For private builders looking to stand out in 2026 and beyond, offering a differentiated, high-quality product is essentially “table stakes” needed to get ahead of the pack. Erickson warned that private builders need to be careful of the “siren song” that pushes competitors in one direction. 

In his experience, leading brokerage firms or research firms will often present data to builders with a large bell curve, and emphasize the importance of positioning oneself squarely in the middle of it. 

“What they do is they create a stampede because they’re going out to you and four or five other builders and say, ‘you all need to be over here at $400,000, or you all need to be here at $600,000.’ And they generate this tidal wave of activity where there’s way too much competition,” Erickson said. 

The panel’s consensus was this: instead of competing directly with the national public builders, private operators should focus on providing value through a differentiated product. 

“Build what’s not being built is an important ingredient. And to do that, you need to be looking into the future – six to 12 months down the road. The projects in the pipeline – where are they going? You don’t want to pile on top of them if there are too many of them,” Erickson explained. 

Estridge Homes, for example, provides a premium master-planned community product, typically in the $800,000 to $1.0 million range. The builder’s average sales price of $900,000 is about 3.5 times higher than the average price of nearly $225,000 in their home market of Indianapolis.

This means that there aren’t many buyers in that price range, but there also isn’t much competition either. The public builders in the Indianapolis market rarely build homes at that pricepoint. 

Estridge Homes has doubled their average sales price over the last ten years. Part of that is simply because of appreciation and inflation, but much of it was an intentional shift towards higher-end, master-planned communities, a small but underserved segment. This is because Mitchell wanted to carve out a niche that is different from what the public operators are doing. 

“They do what they do really well, and we don’t want to try to compete with it. So over the last 10 years, we continued incrementally to move up market and get even more custom looking on the architecture in terms of the scale, proportion and materials. And then we embrace and encourage a lot of customization,” he said. 

Red Cedar Homes also avoids going head-to-head with the public builders. According to Grabowski, one method his team used was finding properties with room for 50 to 80 lots located next to a larger community from a public builder. They would compete with public builders for the same buyer pool but differentiate themselves by offering a slightly more expensive product. 

For example, if the public builder came to market with a $325,000 home, Red Cedar Homes would offer a $350,000 house with some key upgrades. 

“We spent a lot of time vertically integrating ourselves, whether it was through cabinetry, countertops, solid surfaces, or flooring options — not to a full custom program, but being friendly on options, giving choices, and doing things that the public builders have essentially taken out of their business to find more value, efficiency, and cost savings. We found that if we were within about 25 grand more than their price point, it was the same buyer pool, at least in our market,” Grabowski said.

This strategy also enabled Red Cedar Homes to tap into the public builder’s marketing, as the national builder would already be driving traffic to the site. 

Maximizing operational efficiency

For private builders, maximizing profit margins through operational efficiencies is another ingredient they view as critical to success and survival. However, there isn’t a single magic wand that will improve operational efficiency. 

“The industry average over the years for the building industry is about 7% net [on each home delivery]. If you’re not already at 7%, you need to be digging hard. And quite honestly, the difference between 7% and 12% net isn’t one, two, or three different things; it’s 50 different things. Picking up a 10th of a point here, two tenths of a point there. You’re looking for waste,” Erickson said. 

Builders can pick up efficiencies through quicker inventory turn times, tighter budget estimating, negotiating on land or finding better deals with contractors, to name a few. According to Erickson, his team regularly tests new trades willing to offer better deals by putting them on a small spec job. 

Grabowski highlighted the importance of achieving labor force efficiencies. While public builders often have about 20 people per 100 homes, Red Cedar Homes employs seven people per 100 homes. Part of this is because of efficiencies in the company’s BTR business. Investing in technology and AI can also help builders to scale without adding additional employees. 

Countering public builder incentives

In an environment where public builders are pursing aggresive incentives, should private builders follow suit? The consensus from the panel is that private operators shouldn’t try to replicate what public builders are doing, but should instead experiment with what works best for them. 

At first, Red Cedar Homes attempted to match the public builders’ aggressive incentives, including interest rate buydowns, as they thought that was necessary to stay competitive. After offering buyers multiple incentive choices and reviewing the data, Grabowski’s team saw steady traffic and conversions. 

About 85% of buyers chose closing costs or upgrades rather than rate buydowns, so Red Cedar Homes doubled down on value-added incentives to protect both pricing and brand positioning. 

“We created enough incentives that we were still capturing traffic, playing off of the larger builders and creating value there, but not necessarily just giving it away,” Grabowski said. 

Erickson argued that what works in one market may not work in another, but if a product is unique, high quality and in a good location, it will often require fewer incentives to sell. 

Mitchell explained that Estridge Homes takes a product-by-product approach to incentives, as some may sell well while others are struggling. 

“We try to be disciplined and resistant. Like everybody, there does become a point where we may need to download some inventory or create cash, but we don’t have the quarterly earnings calls to deal with,” Mitchell said. 

Coopetition with public builders on land

Big builders have an advantage in land, so how can smaller, private operators compete?

“They’ll overpay for land. They will enter into contracts and then back out, forfeiting their deposits, and it doesn’t faze them. It’s kind of an unlevel playing field on the land game,” Berke said. 

In the case of Estridge Homes, Mitchell’s team decided to partner with the public builders. One master-planned community that Estridge Homes is working on has about 600 homes, 500 apartment units and some retail and healthcare uses. Mitchell said there is strong interest from public builders who want to be part of the project. Estridge Homes will build the upper end, and a public operator will build the entry-level homes. 

“In this case, we were getting a lot of strong offers, and we were playing the game of trying to get these heavy deposits from the builders. One of them finally spoke up and said, ‘Hey, why don’t we be your equity in the project?’ We pretty quickly put something together,” Mitchell said. 

Erickson emphasized the importance of investing in land. Early in his career, he noticed that access to land was tight and controlled by only a few developers, so he focused on securing overlooked parcels. He steadily built land inventory, and years later, he became the primary player in his market. 

If a private builder can’t finance land deals on its own, Erickson argued that partnering with two or three financially stable builders to control land is a worthwhile option. Private investors are another good financing avenue. 

Access to capital

For private builders, competing with public counterparts on capital would be a futile effort. Public builders have enormous access to inexpensive capital and have huge balance sheets, giving them an unfair advantage. However, there are still numerous ways for private builders to access capital. 

Red Cedar Homes uses traditional local and regional bank loans, but private debt has also become increasingly attractive for them due to its higher leverage, non-recourse terms, and competitive rates. 

Erickson also explained that he has always used banks for his financing, but also stressed the importance of leveraging equity partners. 

Estridge Homes relies heavily on community banks for AMD and vertical lending, but their capacity limits mean that Mitchell’s team often works with multiple banks or increasingly considers competitive debt funds. For land, the builder usually partners with JV or institutional equity investors, trading a significant share of profits to access the necessary capital. 

Counterpunch

One of the main takeaways from the session was this: instead of always competing directly with the large public operators, private builders should seek ways to establish a differentiating factor.

This involves differentiating themselves through unique, high-quality products targeted at underserved market segments, offering thoughtful value-added incentives, optimizing operational efficiencies, strategically partnering on land opportunities and leveraging diverse financing sources. 

The session made it clear that private builders can’t outspend public competitors, but they can leverage creativity, focus, strategy, operational efficiency, and above all, trusted local relationships with land sellers and partners to stay competitive and customer-centric in an increasingly cutthroat homebuilding environment.