Bring it on. We think the big number to watch as home building and its ecosystem of vested and invested stakeholders try to improve on their game in 2016 is $60,000.
That's the spread between median prices for new homes in 2015 vs. median prices for resales. That asymmetry, the reasons for it and the creative and compelling ways to solve for it, is this year's No. 1 challenge for the "new" community, many of whom we'll look forward to seeing in Las Vegas next week at the National Association of Home Builders International Builders Show.
A marketplace of buyers, sellers, intermediaries, and observers will gather, fast on the heels of the Consumer Electronics Show that was there last week. The International Builders Show, you could say, accounts for the little matter of the "things" in the Internet of Things, one of the new economy's sexier topics. Put it this way, if housing can keep getting healthy, the IoT can keep promising to be the next big thing.
The IBS, however, is the NAHB annual "grand bazaar," the front end of one critical outcome for the United States economy in 2016 and beyond: the American Dream.
Now, the American Dream may sound like theoretical, metaphysical, social myth-making. It's not. The American Dream is a real-world, hard-fact, economic quantity. Here's how vulnerable that value looks in real-world terms these days. Each 100 new homes delivered translates at some level nearly 300 full-time jobs, $28 million in wage and business income and $11.1 million in federal, state and local tax revenue. Tallied up, new housing is about 15% of the U.S. economy.
What the home builders show serves as for many of the people who decide how much, when, and where to commit investment resources into the front-end of the American Dream is visibility.
Here--as everybody well knows--are the clouds of uncertainty:
- Oil prices
- Interest rates
- Wage stagnation
- College debt obligations
Closer to home, a few issues blend external world factors, and things we can control:
- Labor capacity constraints
- Acquisition, Construction & Development lending access
- Mortgage borrower credit access
- Household formation trends
- Risk-levels among young adult households
- Closer-in density and cost challenges
Here, now, we enter the realm of what residential developers and home builders can and do control:
- Balance sheets
- People, culture, focus, and talent development programming
- Precision location and lot selection, and optimized land planning
- Pricing that closes the gap between new (median $281K) and resale (median $221K) homes
- Process that benchmarks measurable current performance, and sets doable implementations that improve, speed, cut cost, etc. from the current level to a higher level of performance
- Design that inspires would-be and can-be owners to aspire
- Collaboration with and among manufacturers to produce greater value per unit of cost expended Brilliant community outreach, local commission persuasiveness, and win-win permitting and zoning value propositions
- Marketing that listens, discovers, and maps data on behaviors and preferences into fully-formed leads and champions of new home construction
- Trust building
The last item, which is entirely within the control of every residential developer and home builder, whatever the size, is, perhaps ironically, the most important.
It's not a coincidence that the graphic above on the American Dream is in an Esquire article that focuses on "American Rage."
This critical economic quantity, the American Dream, became captive to powerful, immensely rich, and maniacally greedy people who wanted to commit a fraud by attacking the American Dream at its core.
They almost succeeded, as the data here shows. People are angry that a causal relationship between working hard and getting ahead has been messed with, and at least somewhat destabilized.
Which is where home builders and developers come in in 2016. Restoring trust. Making it clear that there is a relationship between working hard and getting ahead, and owning a new home is the job that the industry, the community, and its individual people in all walks (and aisles) at next week's grand bazaar has ahead of it for this 12-month patch of recovery.
And, while we're at it, working on that $60,000 spread between new and used will go far to restoring that trust.