There are two "nows" for home builders and residential developers. One is the current Spring Selling period, the present moment that is fraught with noise, hype, the buffeting seasonal conditions, the counter-forces of global economics and domestic payroll growth, lots of "ifs"and "maybes."
Another "present moment," perhaps even more important to most home builders and residential development investors, is 36 months from the current season's hijinks. It is the cutthroat business of picking, pricing, investing in, and building belief around land beyond the 24-month zone most firms have disciplined their models within which to operate their models.
This "now," the 36-months from now now is practically unique to home building, and it's particularly compelling in the current cycle.
How is it practically unique to home building? Virtually no other business bases its success so wholly on betting such huge upfront resources of money, time, talent, and materials to acquire land, attain entitlement, install infrastructure, and market "place" on what is, for home buyers, a deferential, highly capital intensive consumer cyclical durable.
Why is that so especially compelling--as in "do well, or die"--in the current cycle? Fact is, much of the land, many of the lots currently being offered in thousands of new home communities around the nation was acquired two to three or more years ago. The "vintage" of these lots carried none of the sticker-shock that lots bought in the past 12 to 24 months and the ones that may be bought in the next 12 will bear. More than a few companies emerged from the destruction of the Great Recession with clean balance sheets, a land pipeline that was pristine and unweighted by the legacy ball-and-chain of having been priced to a bygone, insane market. Now, those companies face a turning point. For 2018 and beyond, they're going to have to join others in the hunt to buy new lots, develop them, put value into them, and sell them for a profit in 2019 and the "long now" of home building and development.
By many home builders' lights, the risk of the current "now" is far less than the risk profiles of the latter one.
This is why most people in home building and residential development tend to be thick-skinned and may come across as, perhaps, less than focused on present, Spring Season 2016 urgencies. And, they tend to obsess about deals.
The U.S. Census counts 3,143 counties, boroughs, independent cities, parishes, and other county-equivalents in its geographic tallies of this great land. For 50% or more of the new home development and construction economy, 100 of those counties, and how they're going to grow, are material to the businesses in the arena.
If they can get a land deal that's off-market, or otherwise not prone to a multiple-bid process--which is a hard thing to find these days, then they're more comfortable, understandably, with their risk. If they can, elsewise, use predictive data and analytics to match strengths in their design and marketing models with the "moving puck" of population and jobs geography trends, then they're going to have an edge.
This is why it's always helpful to keep track of what Cheryl Russell's focusing on over at New Strategist Press, where she's been editorial director for just about forever. Here, she takes a look at USDA Economic Research Service data, which scopes into 2015 County Typology Codes. This kind of research underlies many of the "hottest" or not-hottest markets in real estate rankings we see from other media, association, and real estate channel sources.
There are two data sets we'll spotlight for illustration's sake, and then turn you loose to go-get the data that may be most helpful, particularly as the lens fixes on land and lot pipeline needs for 2018 and 2019. We know that many companies are pre-disposed toward generating cash over the next 12 months to a greater extent than growing their land investment portfolios. But, to avoid continued land and lot constraints, it's still worth zeroing in on some farther out opportunities, especially if they can be had without attracting the attentions of other bidders.
So, here's a look at, first, the USDA Economic Research data set for Retirement Destinations, where the population of adults 60 and older grew by 15% or more as a result of net migration between the years 2000 and 2010.
And, here, too, is a look at the counties most aligned with growth in "recreation counties," which the USDA, Economic Research Service defines along three measures, 1) jobs and 2) earnings in the following: entertainment, recreation, accommodations, eating/drinking places, and real estate; and 3) the share of vacant housing units intended for seasonal/occasional use.