These developers used to flip houses. Here’s why they’re pivoting to high-end remodels

Higher home values and a stubbornly high interest rate has meant more Americans, even the well-off, are sitting on their homes , decreasing mobility and freezing up the housing market. One developer, Thomas James Homes, believes there’s big business in helping high-end homeowners remake, as opposed to resell, their existing real estate. 



Operating mostly in high-end neighborhoods in Los Angeles, San Francisco, Seattle, Denver, and Phoenix metro areas, the developer has pivoted a bit to helping homeowners in desirable neighborhoods—especially owners with low interest rate mortgages who don’t want to move—renovate and redevelop their homes without the stress and uncertainty of a custom build. 



This concept isn’t brand new, but Thomas James hopes to streamline and package the process. You could call it subscription boxing the McMansion. A new in-house app helps their sales teams provide this white glove treatment for high-earning households locked in during an especially challenging housing market. Flipping is out, and sitting on and reinvesting in your property is in.



“We go into neighborhoods, tear down old homes, and build homes for the way people live today,” says Gina Nixon, head of customer and brand experience for Thomas James. “It’s an unusual business model. We actually use a lot of technology to keep it organized, simple, and stress-free for homeowners as much as possible.”



A digital remodeling process



I met Nixon in an office park in Culver City, California to check out the new design studio experience the firm has developed to help homeowners reinvest and renovate. Inside the firm’s suite, the design studio space boasted a marble counter with refreshments, a charcuterie platter and a pair of large flatscreens. Nixon proceeded to take me through the firm’s new app, Reveal, which guides clients through a very curated design and remodel process.



[Photo: Thomas James Homes]



It would seem like the demographic least in need of a new way to buy or finance a home or housing remodel are those already living in homes in big U.S. cities. But for Thomas James, Reveal, and a new means of approaching clients, came out of observing shifts in the marketplace. 



Roughly a year and a half ago, at a time when rising mortgage rates were challenging Thomas James’s traditional model of buying, tearing down, and building new homes with the hope of attracting buyers, the firm pivoted to adding a private service model to help those who already own property reinvest and redevelop. Part of that meant reworking the sales process; the build library of different projects on their website was removed, in favor of an app-led process that lets buyers click through blueprints and renderings of different home styles. The firm could have built model homes in each of its five markets, but for a fraction of the cost, developed this new digital sales tool.



[Photo: Thomas James Homes]



As part of the standard route for building a new home or remodeling an existing one, contractors send buyers to design centers, filled with massive displays of different appliances, finishes and materials. Thomas James took a less cluttered approach. Clients get led through the Reveal app, either at their own home, via a salesperson with a tablet, or in the studio, and pick-and-choose. After choosing between 48 different styles (a black modern farmhouse style remains their most popular), clients can choose different arrangements and finishes.



It’s far from a true custom build—“we’re still offering choice, but it’s not sky’s the limit,” says Nixon—but users can select from an array of high-end finishes, layouts and colors, and click through an interactive blueprint to see what different rooms and arrangements would look like, with camera icons allowing them to get a 3D visualization of that part of the home. What does the kitchen look like in a five-bedroom farmhouse-style home with Nordic Storm marble finishes, and what if we add the media room option that adds another entryway? The app also allows a head’s-up option to compare two different plans next to each other.



[Photo: Thomas James Homes]



Reveal gamifies the process of designing a new, upgraded home, and rebuilding and expanding upon an urban lot. Clients even go home with a custom black box containing material samples and imagery they can show to friends to hype up their future home.



That guided sales process and select customization have worked; Nixon says that since being introduced six months ago, Reveal has had a 70% conversion rate.  “You’re sitting in your old kitchen, and I can show you what your new home is going to look like when we’re finished,” says Nixon. “It makes it worth the wait.”



‘It’s really hard to outrun the value of your dirt’ 



Homeowners locked into low mortgages, or investing in the Thomas James strategy of rebuilding on their lot, means fewer new home sales and a further stalling of the overall housing market. Over time, this phenomenon means these particular neighborhoods will be even harder to move into for all but the most wealthy. Consider mortgage rates, which were 3% in 2021, now hover above 7%, and home prices rose nearly 5% year-over-year, and it’s not hard to see why existing home sales nationally are struggling. 



[Photo: Thomas James Homes]



Behind the imagery, however, Thomas James has a dedicated team of building managers and its own supply chain (it still subcontracts most on-site labor); limiting options and keeping their own materials on hand means the builder is able to guarantee pricing and a finish date within a year of permit approvals (by the time contracts are signed, buyers have already made all their decisions about the home). The company expects to build 280 homes this year.



[Photo: Thomas James Homes]



It’s still a luxury product, with homes that can be thousands of square feet coming in at roughly $600 a square foot. But that’s a relative steal compared to custom building, which can run $1,100 a square foot or more. The company even has a team of preferred lenders, and a luxury vacation firm, Inspirato, to help those redoing their homes find a temporary stay.



[Photo: Thomas James Homes]



Thomas James’s new sales pitch also adroitly pinpoints opportunity in a market that has priced out so many other consumers. Thomas James CMO Brian Reid, who claims the firm is the largest teardown and replacement builder in the country, said last fall that the firm has managed to pivot and corner the high-end housing market in an interesting way. As he says, it’s not about the home: “It’s really hard to outrun the value of your dirt.” The location is so valuable, that TJ basically bills itself as financial engineering, maximizing the value of that dirt through buildouts and renovations. 



“We tell clients, ‘look, this is an asset in your portfolio, no different than a hedge fund that you own,’” Reid told me. “We’re starting to see it even more, which will make sense as a wealth transfer platform.”