A House A Day -- Quadrant Has A New Way Of Doing Business: It Starts One Home Every Day, Each Optioned - Like A Car - To Its Buyer's Tastes

For years, Quadrant Homes built houses pretty much the way everyone else does: It put up a house and waited for it to sell.

Now Quadrant, the region's 10th-largest homebuilder, has turned that formula on its head.

These days, the company waits for a home to sell, then builds it.

"We build houses the way Boeing builds airplanes," said Quadrant vice president Peter Orser. "We don't begin the manufacturing process until we have the order in hand."

Abandoning the time-honored practice of building "on spec" gives Quadrant several advantages, Orser said. It reduces the company's exposure in the event of an economic slump, it allows buyers to customize their homes as they're built, and it gives Quadrant and its subcontractors a steady, predictable flow of work that saves time and money.

"Essentially, we've created an assembly line, like Henry Ford did with the Model T," said Orser. "Except we leave the house in one place and rotate the crews."

Every working day, somewhere in its 12 current developments, Quadrant starts one house and finishes another. The steady, clockwork pace of one house a day allows Quadrant to schedule its subcontractors like assembly-line workers, each trade moving into place on its allotted day.

"On day one, we drop lumber," said Todd Hagstrom, construction superintendent at Keswick, a Quadrant development on the Sammamish Plateau. "And on day 63, we hand the buyer the keys."

That's about 15 days faster than the industry standard, he said.

The method, called variously "selling out front," or "demand building," was pioneered by Rayco, a homebuilder in San Antonio, which used it to build a 40 percent share of its local market. Rayco sells 2,600 houses a year. Those figures got the attention of Quadrant, a Weyerhaeuser subsidiary that was under stockholder pressure to improve performance.

"The biggest builder in the Puget Sound area has 2 percent of the market," said Orser. "These guys have 40 percent. We figured they must be doing something right."

Rayco, now a part of the giant California homebuilder Kaufman and Broad, was a typical speculative builder until the mid-1980s, when a recession in the Texas oil business badly hurt the local economy.

"Real estate was hit pretty hard," said Barbara Tate, a senior Kaufman and Broad executive in San Antonio. "It was so bad, in fact, that a large part of our competition came from FHA repos (homes repossessed by the Federal Housing Administration)."

To survive, Rayco decided to build only those houses it could sell in advance, and to build them at a steady rate that maximized savings. To compete with the cheap repos, the company drastically changed its floor plans, eliminating vaulted ceilings, fireplaces and other luxuries once considered standard, using the savings to expand floor space.

"We discovered that if you gave people a choice between a fireplace, say, and more floor space, they would choose the space every time," said Tate.

As it set out to replicate the Rayco experience, Quadrant made the same discovery.

"In the spec-building days, we would try to make guesses about what people wanted," said Orser. "We would build a spec house, load it with all sorts of goodies like vaulted ceilings and fireplaces and hardwood floors, and wait for it to sell. But a lot of times, those houses stayed on the market longer than they should have."

To find out why, Quadrant last year surveyed 12,000 homebuyers. The results, said Orser, were something of a shock.

"People didn't want vaulted ceilings, or brass kickplates on the door, and half of them even said they could do without a fireplace - in the Northwest, that's almost heresy. What they wanted was floor space, lots of it. They also wanted storage space, big closets, big pantries. Space was the No. 1 issue."

So Quadrant radically changed its floor plans: Space once used for cathedral ceilings was allotted to an extra upstairs bedroom or a loft-like family room. Each bedroom, even children's and guest rooms, got a large walk-in closet, and kitchens got a walk-in pantry. Storage areas were designed into leftover spaces, such as under stairs.

The survey also showed buyers wanted more choices. "People didn't like moving into a house where someone else had already made all the choices for them," Orser said.

So Quadrant stripped its standard houses down to the basics and made almost everything but the bare walls an option. There are more than 2,000 options, ranging from elaborate fireplaces to extra electrical outlets.

"We've made it almost like buying a car," said Orser. "You decide on the basic model you want, and then you choose the options you want to add."

The changes - a simpler floor plan, the assembly-line building method, and the spinoff of options, have helped Quadrant keep prices within range of its middle-class target market. Houses at Keswick, for instance, sell in the $250,000 to $280,000 range, about 20 percent less than their immediate neighbors. They range in size from 1,945 to 2,592 square feet.

Typically, options add between $10,000 and $11,000 to the cost of a Quadrant home, said Tisha Edelman, an interior designer who helps customers with choices at the company's design center in Bellevue. "I suppose if you picked all the most expensive options, you could spend as much as $30,000," she said. "But no one ever does. Usually people will upgrade their carpet or kitchen cabinets, or add a fireplace or a soaking tub."

Many builders offer options; but it is Quadrant's building method that has raised eyebrows in the building trades. Like most general contractors, Quadrant has no crews of its own; instead, it relies on subcontractors: framers, roofers, plumbers, electricians, drywallers.

"A lot of subcontractors told us, `It'll never work,' " said Hagstrom, the construction superintendent at Keswick. "And at first, when I saw that 63-day schedule, I thought it was impossible myself. But it did work, and it does work."

On one wall of Hagstrom's construction trailer is a four-foot-long chart that shows the current status of each home Quadrant is building that day. Hagstrom has seven under way at Keswick, and the chart shows Lot 102 is getting second-story walls and stairs, Lot 104 is being plumbed, Lot 103 is getting heating ducts and outdoor trim, Lot 93 is getting underlayment and millwork, Lot 48 is being prepped for millwork, Lot 94 is having drywall punched, and Lot 95, one day from closing, is being tidied up for final inspection by the owner.

The genius of the one-house-a-day system, Hagstrom said, is that no two of these jobs ever have to be done simultaneously. A subcontractor, such as an electrician or plumber, can work on one house at a time, then move on to the next.

"When you're building on spec, you're always dancing things around, trying to fit the subs in," he said. "Sometimes a sub will come to the site and find that it's not ready, so that's a wasted trip for him. Sometimes you'll have two subs trying to work in the same space, bumping into each other.

"The way we're working now, every sub knows exactly what day he needs to be at every house, exactly how long he has to finish, and that when he gets there, it's going to be ready for him. The framer, for instance, knows that on day 12, the plumbing goes in, no matter what."

That predictability means subcontractors often can bid lower on a Quadrant job, said Orser, since they are almost guaranteed a certain number of days' work and can plan their hiring and material buying in advance. That translates into savings for Quadrant.

Doug Quinn, general manager of Pacific Heating and Air Conditioning in Kirkland, is the heating subcontractor on the Keswick site. "I already have the schedule for next month, and I know exactly what my crews are going to be doing each day a month from now," he said. "That's real unusual in this business."

The system has its perils: if one subcontractor gets behind, all the others are held up. If bad weather closes one job site, all the others have to be shut down, too, or the system gets out of sync. And it's self-limiting: The company can't sell more houses than it can build at the one-a-day rate.

Still, there's a lot of interest among Quadrant's competitors.

"A lot of other builders ask about this job when I go to other sites," said Quinn, the heating contractor. "They want to know how well it's working."

The idea is spreading, though slowly, said Tate, the San Antonio executive of Kaufman and Broad. The builder liked the original Rayco concept so well it adopted its program throughout the company. Most of Kaufman and Broad's homes, including those in California, where it is the largest homebuilder, are now sold in advance. A builder in Cincinnati is trying the system, and another in Indianapolis.

"I'm sure other builders in other markets are going to be looking at it," Tate said. "But it's a different way of thinking for a builder, and so there is some reluctance. It's not the way we're used to thinking."

Quadrant's experiment has been under way since March. Eighty percent of Quadrant homes are now sold in advance - the remaining 20 percent are spec houses built as model homes, or to meet the demand from people, such as business transfers, who need a house right away. The company expects to close 280 homes this year and has set a goal of 400 homes for next year. That will meaning starting - and finishing - two houses a day.

"A year ago, that would have scared me to death," said Hagstrom. "Now I know we can do it."

Kerry Webster's phone message number is 206-464-2539. His e-mail address is: kwebster@seattletimes.com