If BUILDER's May issue is important each year for its role in identifying and developing a cast of big-player characters in the epic American story on the resilience of new homes and neighborhoods, the June issue gives the narrative its sense of place and plotline.
The most telling factor right now for residential new construction—whatever the scale, positioning, and geography of one's operation—is that catalyst of all catalysts in housing markets: urgency. Urgency only happens on a home-by-home basis in the present. Urgency's consequence is both volume and margins.
To kindle it, home builders—whether a pickup truck builder or a Fortune 100 company—need to think differently about thinking differently. We tend to believe that thinking differently in home building means doing things right and doing the right things on a home-by-home basis, and that's been true up to now. But will it continue to be?
We've also tended to believe that thinking differently in home building means improving scalability, manufacturing quality control, scheduling, and workflows to optimize time and value toward the finished home deliverable. But is that different enough?
Who, five years ago, would have guessed Google and Apple would model their way into the car business, with high-design concept, driverless cars? Who's to say Google and Apple, and Amazon, for that matter, may not soon be modeling their way into the home design and construction business, using a combination of drones, big data, and inspired applied brilliance in design to give people homes they can afford and enjoy? How long before information and engagement captured by a temperature comfort system or a wearable like a watch will turn into clear specifications on how a person may want to live in his or her home?
As we look at the story of Local Leaders, we see narratives around who best combines market knowledge, scintillating design, best-of-breed workflows, and superior customer experience in a site-by-site, home-by-home, neighborhood-by-neighborhood series of filters.
New community openings will drive more volume this year. Our specific inquiry into where those new neighborhoods are opening as operators begin to extend their net, at a submarket level, reveal home builders' collective push into pricing tiers they haven't been accustomed to courting. The closer we move the lens in on the job, the more we see that our tendency to look at the blend of profitability and customer satisfaction on a single home basis may not be a fine enough filter. We may need to look at what's right and what's wrong with an operation on a square-foot-by-square-foot basis. If the investment, design, operations, sales and marketing, etc., are off one iota at this granular level, the consequences quickly multiply into big-time variance in one's business model.
It's also in that square-foot dimension that we can see whether we're doing what we need to do for a potential buyer—i.e., one who can, if properly motivated, put saved resources, income, and housing finance resources to work.
Urgency is a spark that needs to take over from discretion to keep the recovery on track. Nice-to-have needs to become must-have. Opportunism must shift as a motivator that the moment to seize is now or it will be lost. Urgency is a need all home builders share. Parts of the market may move temporally as if they're de-coupled from the rest, but that will pass, and unless buyers and sellers get into a groove together, our recovery will founder.
Ever since the market began to spot "green shoots" in 2011, we've seen a front-half vs. back-half swing in momentum, sentiment, and business each of the following years. Parts of what's been called pent-up demand have come around, but at midyear each year, there seems to be a gut check. Will this year be a repeat?
Perhaps the better questions are "Who are we?" as a home builder, and "Who do we want to be?" as a provider of service and engagement for those who still dream the dream.
To begin to answer those questions, home building companies and home builders need to think differently about thinking differently.