Sentiment at the Pacific Coast Builders Conference this year was solid. Not overly optimistic, but not downcast either. The caution light is on.
Fact is, this may be the housing recovery the nation needed. In the wake of an utter abandonment of sanity during the mid-part of last decade, a glacial, painstaking, bare-minimum improvement may be best, although many of us want a more robust, more typical V-shaped rebound.
Still, builders we talked with in the hallways of the conference expect good gains in 2016 in their operational arenas—10% or 15% or even 20% volume gains, year over year--even as they see the market begin to pivot. Pace in the higher-end “core” communities has definitely begun to slow, while those who have been able to open the spigot of neighborhoods and product offerings at the lower end of the price spectrum—some builders call these “secondary,” farther outlying markets—are seeing strong traction.
That’s in spite of the well-known head-winds—high regulatory costs, labor capacity risk, mortgage credit tightness, student debt, etc.—and it’s probably a function of pretty solid job growth and the beginnings of household wage growth and expectations that demand is building among lower-price tier offerings.
Isn’t it this fundamentals-driven dynamic just what we would choose, especially as Brexit, a shock to global financial market hardwiring, convulses through the world economic infrastructure?
People getting jobs at companies who need to add human capacity, and being able to look out ahead a couple of years without fear of being out of work leads them to think and act more forward-looking in their financial lives. Somewhere between 60% and 65% of these people will head into homeownership. Demand will be good, even if the Wall Street investment community takes a bit of time to figure out which way is up after the Britons’ vote to leave the European Common Market on Thursday.
Frustrating as a nearly-flat line recovery may be, what we see underlying the data points of slow economic growth speaks more to the future of housing than a slight, anemic year-over-year change in permits and starts.
It’s the resilience and re-ignition of trust, slowly working its way back into the system of housing. The middle part of the last decade blew up that trust. What was left—everywhere you looked in housing—was the sure sense that whoever it was on the other side of every deal meant to f*** the other party somehow, and was willing to say anything, bend any truth, to get to that point.
Getting this trust back was never a given, but we see signs of it reappearing.
Last night’s Gold Nugget Awards was proof aplenty. One project after another spoke of the ways trust has rekindled—in vision, in passion, in “stupidity” which is the flip-side of bravery, in stubbornness, and, ultimately, in triumph. One individual after another attested to the fact he or she could not have done it without another. One team after another said that were it not for a rare client, an inspired architect, a town or community leader that wanted to go beyond, a builder who worked magic, and a whole host of other ecosystem members playing a part, the work would not have gotten done.
None of that happens without trust; without love; without human nobility in its finest form. It’s the recovery we need.