"People in Houston were walking away from land deals, bailing our of the housing industry," Russ Hutchins was explaining over his car telephone from Dallas, where he was waiting our a traffic jam. "We were young and lean and moved in quickly." The "we" was Hutchins, his brother Bob, and Frank Romero -- the founders of Gemcraft Homes Inc., a Houston-based homebuilding company that weathered a crippling slump in the local market-place to become the total sales leader on this year's INC. 500 list (1983 revenues: $228.3 million).

The company was launched in 1978, during the peak of Houston's housing boom, when interest rates were still hovering around 10% and the oil-and-gas industry was roaring. At the time, Gemcraft was only one of hundreds of companies competing for land, contractors, and building materials. Following a conservative growth strategy -- which involved not building on any lot before 80% of the units had been sold -- the $125,000 start-up began to market single-family, detached houses catering to a targeted clientele (those aged 26 to 44) with particular lifestyle needs (such as convenience kitchens and multiple-car garages).

Gemcraft grossed $4.4 million in 1979. Then, the Federal Reserve Board made its historic decision allowing interest rates to rise and sending Houston's robust housing industry reeling. For Gemcraft, though, the move was a blessing. Unburdened by any significant debt or overhead, the company snapped up talented personnel from its troubled rivals and bought up single-family homesites at bargain-basement prices. The company also emphasized energy efficiency and smaller units with space-expanding architectural detail.

"It was a question of juggling our emphasis," explains Bob Hutchins. "If interest rates were up, building costs were down, because competitors were being driven out of the market, and both land and materials got cheaper. If you pay less to build, then you can give folks a heck of a lot more for their money."

By the time interest rates returned to earth in 1982, Gemcraft had become the 10th largest single-family builder in the country, with developments spread from Texas to Oklahoma. "We had more competition to contend with then," admits Bob, "plus higher costs and fewer available lots. But by then we had the reputation we needed, and we'd diversified. We could survive more competition because all our eggs were no longer in one basket."

Among the other baskets were five subsidiaries developed to service in-house needs: media, architecture, mortgage lending, development, and homebuilding. As semi-independent companies capitalized through retained earnings, these subsidiaries provide Gemcraft with plenty of in-house talent, and function as autonomous profit centers as well. The 350-employee homebuilding division, for example, projects 1984 sales of $200 million.

Nevertheless, says Russ Hutchins, "we're not growing just to grow. Forget the biggest: We just want to be the best -- and the most profitable."