Let me ask you a question. Maybe it's a tough one. Maybe it's the wrong one.

What's your biggest worry on April 12, 2016?

  • Lots
  • Labor
  • Lending
  • Demand

If you had to rank your worries in order--most worrisome on top and less worrisome lower--which would come first? Or else, tell me the question to ask.

My guess is that for most builders, it's no contest. Demand. If there's demand, the other worries are solvable. If not, it might be pointless to worry at all, no?

In this recovery, demand showed up starting in 2014, mostly from among the buyers with highly discretionary resources. They'd seen the bleeding stop, and they were fatigued by downturn rigors and angst, and they saw great value opportunity just as the "falling knife" made contact with a surface.

In the two years since, that segment--the wealthy, the financially astute retiree, the up-and-coming young professional couple with no legacy debt obligations--buoyed the market, allowed many builders to cadence their operations so that they could achieve good margins, and, mostly, weather labor constraints to deliver good products.

On the margins, builders with terrific operational disciplines around lower margin product lines, the D.R. Horton Express and LGI Homes-type builders, sought and found demand among those more traditional, finance-bound buyers. Clearly, though, while most observers and analysts say that greater supply will stoke demand at the lower end of the price spectrum, the risks--on margins, management, execution, logistics, and externals like interest rates, credit box constraints, and secular dislocation in industries like energy and mining--make it a tough call on how much to pull the trigger on low price new home development.

Spring 2016, we know, is all about a reality check on demand.

So, there are these questions. Who are you (as a builder/company)? Who do you want to be (as an organization)? And this one, which is increasingly important. Who do you want your customer to be?

A prospective home buyer needs two things from you. One is for you to appeal emotionally and intellectually to the part of your buyer who may be compelled by the value proposition of your home--location, design, engineering, functions, and features, etc. The other, increasingly more important one in this day and age, is your buyer prospect expects that you'll deliver on a promise to help him or her improve their own value as a resident, a dweller in the community, one who lives in and creates a life of greater worth in your home.

It's a lot to ask of you. That's why every interaction, every transaction, every touch with every web visitor or traffic unit, etc., needs to be about both learning from and training your prospective buyer to be a customer who sees his or her own value increase as they deal with you.