The economy shrank by 6.1% in the first quarter of 2009, so the recession is far from being over. But as consumer confidence slowly returns, and as the deterioration in home sales finally abates, it might be a good time for builders to look back on their industry’s performance over the past three years, learn from past mistakes (or rare successes), and adjust their own strategies to avoid—or at least minimize—the damage from future cyclical downturns.
Builders can’t control some negative factors—such as the 5 million American jobs lost since the end of 2007. But in many ways builders predetermined their own recessionary destinies during the last housing boom, when they let slide so many elements of their operations—sales training, customer service marketing, trade-partner relations, and supply-chain management—and instead pursued frenzied growth by accumulating land and building homes whose escalating values were never supposed to recede, much less crash, to where they are today.
Many builders would argue that recessions come and go, and this one, too, will pass, so why make dramatic changes? But many of these same builders have called this recession the absolute nastiest they’ve experienced, and no one wants to go through this again. So, to help readers who want to avoid such scenarios in the future, BUILDER has assembled six “lessons learned” from the housing bust, based on our reporting since last fall, when the economy took a severe turn for the worse.
Some of these strategies would require simple changes. Others are more complicated to achieve. All of them, though, do ask builders to muster the guts and the vision to look beyond the status quo, and be flexible and open to new ideas for operating a home building business for the long term, through the booms and the busts.