Flash. The new home business sits squarely in the consumer credit business, so should it be any surprise that those who build homes for a living are more dour in their outlook now than they were during the summer?

Until jobs and income turn tide, we're reminded of this stunning statistic noted in this month's Harvard Business Review:

While a little off its high point, the [consumer debt to disposable income ratio] number now stands at around 130%. In other words, it will take American consumers nearly 16 months ( 1.3 years), on average, to pay off their debt, assuming that they spend absolutely nothing on housing, clothes, or food.

The HBR provides a calculator for businesses to map their "consumer leverage exposure" ratios.

Still, home builders must use another calculator as they put together budgets for 2010 and beyond, because it's probable that their CLEs would all be off the charts. One of the lessons learned this year--the third consecutive year of hard times for home builders--is that "waiting out the downturn" is not an option. For private builders, it's either find cash within one's own universe of resources to go vertical and get orders in hand to keep the trains running, or it's give back one's rights to the rest of the lots.

For publics, you'll recall their CEOs making this clarification: "We didn't say the industry was no longer cyclical, we said we were better prepared to endure and secure opportunity through the cycles."

For them, waiting out the pain has also been a non-starter as an option. Public home builders have had a critical business model change to make as they cut costs and eliminated as many as six of every 10 employees.

They're making this change, which some will say is a sacrifice of that "entrepreneurial spirit" and "local autonomy" that their divisions enjoyed during the halcyon days of yore, when headquarters could make money hand over fist running a holding company model.

Clearly, now, home builders public and private need to be operating companies. They need a business system that applies across regions, divisions, and communities, so that variability is taken out of the equation, so that they're products can do battle with foreclosures. Foreclosures will likely come in measured waves, on and on, for the next few years, and increasingly, they'll show up at every price point imaginable.

So home builders must have operational systems and product positions to battle foreclosures at every price point. Public home builders like KB Home, D.R. Horton, Meritage, MDC, and M/I Homes responded strategically to the need to have foreclosure-fighters at the entry-level where monthly payments have been the story for home buyers.

Key to CEO Richard Dugas' strategy at the newly merged Pulte-Centex is to heavy up headquarters systems and controls so that every community in its portfolio--Centex, Pulte, Del Webb, and a to-be-named luxury brand--operates according to accountability to consistency standards.

We’re telling our local operations, ‘focus where you can add the most value,’ which is in two areas: ‘You pick the right consumer group to focus in on in your market based on the supply demand imbalance. That is not a Detroit decision. So, if you, Mr. Dallas president, want to focus exclusively on Centex and on Del Webb because you think that we’re overbuilt for the Pulte brand, fine with us. No problem. That’s one area you can add the most value.’

Number 2… how to literally put that land strategy together, because land is very local and unique to each market. So whether you’re buying developed lots or whether you’re auctioning property from the government, or buying big raw tracts and developing it yourself… all of that is the local decision.

So, consciously, instead of it being unspoken in the past, we’re going to consciously say ‘we’re focusing you, specifically at the local level, on which consumer groups to go after and the land strategy.’ And the rest of it, we’re saying, ‘leave up to experts who are really good at understanding what drives each of these local brands.’

I envision taking it down to specifying what’s inside the home, what mortgage programs we use… everything about how to operationalize that.

So, one of the bigger changes we're likely to see coming out of the housing recession is an end to the roll-up mentality in new home building corporations, and the beginning of nationals needing to become real operating companies with success at their core, rather than as a loose confederation of independent-minded builders working under one stock symbol.

We're seeing evidence of this in our work on the Big Builder '09 Virtual event, where we've created mash-ups of big time talent working to solve a present or future land position challenge in five different markets.

In Phoenix, the team consists of:

• Kevin Egan, president & coo for T.W. Lewis Homes
• Jim Jenkins, vp, acquisitions, Shea Homes
• Michelle Mace-Basha, founder, M3B Inc.
• Kimberley Clifford, marketing director, Newland Communities
• John Fortini, principal, Silver Fern Management
• Brad Sonnenburg, principal, BSB Design

They're working on cracking the code for Mt. Pleasant Heights, a 1,100-acre parcel, currently being marketed to potential builder/developer buyers by AmTrust Bank, in Phoenix's Northwest Valley, in the town of Peoria, just east of the Vistancia master planned community.

The big challenge of the project is to deal with a currently overserved competitive market for new homes, not to mention some difficult topography and access issues. The flip side is that the completion of the Rte. 303 loop in the near future, as well as access routes into the Mt. Pleasant Heights community, will bring good traffic from downtown Phoenix to within a stone's throw of the community, and that the topographical challenge translates into remarkable views of rough terrain rips and rills--a rare natural amenity.

The Big Builder Dream Team needs to strike a harmonious balance among the needs of the land, the competitive offerings of neighboring master plans, and the new economics of demand in that region, i.e. "The Who" that lies at the base of a community's value proposition.

Going back to what Pulte CEO Dugas was saying, a Dream Team might crystallize the consumer buyer need, and bring strong local land knowledge to the party, two critical aspects of the operating company equation. After that, a big builder needs to have a system in place--construction operations, merchandising management, and selling optimization--to make a plan such as the one the Big Builder Dream Team will conceptualize work profitably in the marketplace.

Where's evidence of that fire-in-the-belly cultural entrepreneurialism that private home building companies say is their secret sauce in finding and satisfying home buying customers?

Dugas's answer:

If, as I predict, we’re going to be more financially successful this way, everybody wants to work for a financially successful firm. That’s the way you transition that. I’m not too worried.

Look for more forceful corporate headquarters control, and less on-site variability in the public home building model in 2010 and beyond.