"Most of the smart people said 1989 was the wrong time to get into home building down here," says Steve Klein, 33. "Texas still had problems. The banks were hurting, REO was all over the place, starts were still low, and interest rates were high. "I felt like it was the best time. I figured we were just about to turn the corner."

Klein was right, and Texas started to turn around just about when he jumped in the market. How did he know it would? "I watch a lot of numbers," says Klein, who had worked in marketing for a large Texas builder and as a Realtor before starting his own business. "I track the multiple listings every month. At the time, I saw inventory was decreasing and the average age of houses was getting up to eight or nine years old. When houses get that old, people aren't going to find what they want in an existing house."

Klein's growth has outpaced the Texas market over the past three years, expanding from three sales in 1990 to 20 in 1992. He is the largest volume custom-home builder in Victoria, a town of 65,000 about 120 miles southwest of Houston. Despite the rapid growth, his company has a strong financial base. He turns his inventory almost 3.5 times a year, he has a 3.16 debt-to-equity ratio, and his return on investment is 29.27 percent. Klein's early and enduring success has been built on some brash marketing moves and constant monitoring of buyer preferences.

"Lot control is the key to financial stability and to creating a market impact," says Klein. "But I didn't have the money to put into land. I had to find a different way.

"Victoria had a lot of upscale lots owned by individuals who couldn't sell them," says Klein. "People don't like to buy lots from Realtors or owners because they don't know what to do with them afterwards. I told the owners, 'Let me put my builder's sign on the lot.' People would call me to find out how much house they could get on the lot We sold pretty well.

"For the lot owners, there was no real estate commission and we agreed on a net price for the lot ahead of time, although if I got a higher price for the house than I'd planned, I'd pay more for the lot because some of these people had friends who owned lots.

"It gave the public the illusion that we owned all these lots, when all I had tied up in them were my $45 signs."

Klein builds what he calls "This-Is-It" houses, homes for people who are buying their last house. "They know what they want and they expect you to give it to them," he says. Klein has been successful because he knows what his buyers want before they tell him.

"Most people in this business are so busy being busy that they don't have the time to stick out their antennas to see what's going on around them," says Klein. "By delegating, I've got the time to go out and study the market and check out the competition."

Klein also goes to other markets to check out housing, attends conventions and seminars, and stays up to date on trends in the industry.

The biggest difference between today's buyers and those in the past, says Klein, is that "They demand quality. They can pay for it, but you better give it to them." Klein has geared his business to do just that.

Klein works closely with his subcontractors to provide quality construction. "We have a preferred subcontractor list and if subs don't keep up the quality, we take them off." He adds that quality isn't just workmanship, it's prompt scheduling, competitive pricing, and good customer service. In return, Klein keeps his subs busy and pays "like clockwork."

Klein plans to keep expanding his company. He wants to grow to about 50 custom homes annually over the next two or three years. He also plans to start a development company in the spring of 1993 and a light commercial operation by 1995.

Builder, January 1993