An estimated 75,000 attendees voted with their feet last week as a signal of confidence that 2014 will be "the year" recovery truly takes hold in the American housing landscape. They packed the aisles and swarmed the installations at last week's National Association of Home Builders International Builders Show/KBIS combo, known now as Design & Construction Week, at the Las Vegas Convention Center.
Global jitters over a Chinese economic retrenchment and domestic angst in the face of the Federal Reserve's plan to move determinedly apace with its plan to pare back its blitz of monetary accommodation each successive month have riled investors for a fortnight. Those fears notwithstanding, by an overwhelming margin, the builder sentiment at IBS last week was positive, if not fearless.
For perspective, we decided to take a half a day off the ranch at the on the eve of the to put boots on the ground in a couple of communities in the Las Vegas Valley. We toured Toll Brothers' Santaluz community in the heart of Summerlin, and Harmony Homes' family oriented Silhouette neighborhoodin Southwest Las Vegas to get a sense of the "barbell" of demand at the higher and lower price spectrum in the market.
The contrast, on the eve of selling season, was palpable in the respective sales centers. From Toll Brothers Las Vegas division president David Straub we got a strong sense that, having sold 39 of the community's 53 properties already for mid-$500s to mid-$600s, demand at this higher end has held up through 2013 and into the start of this year. What's not so clear, as we ascertained from Harmony Homes general sales manager Geoff Gorman, is what the optics are on demand at the lower end of Las Vegas' price continuum.
So, with this perspective from outside the corral of the Convention center, where everything about IBS spoke to builders who were anxious to address their various operational issues and get moving into recovery, we'll fire our 10 burning questions of the moment:
1. Will the entry-level, first-time buyer participate this year, and stabilize demand for new homes at the low-end of the spectrum?
2. An indirectly-related question: will the economy create enough well-paying jobs to lead to household formations and new-home demand levels at a normalized level vs. a level suppressed by economic anemia?
3. What will new-home builders' active role be in stimulating those entry-level buyers to move off the sideline with disruptively low-priced opportunities at homeownership as an escape-route from spiralling rents?
4. Will less uncertainty vis a vis bank regulation in the wake of clear-if-tough guidelines on ability-to-repay criteria eventually cause both mega national banks and regional banks to move assertively back into mortgage finance?
5. Will vacant-developed-lot supply constraints in the few markets that have robust job markets and thriving household formations and income continue to bubble, while other markets and submarkets operate on a slowly improving trajectory?
6. Will Asian and other non-U.S.-based residential property buyers play as significant role in housing markets this year as in 2012 and 2013?
7. Will builders and their materials, labor, and manufacturer vendors work toward greater Shelf-keeping-unit (SKU) visibility and transparency, as a means of slicing time, errors, do-overs, and other cost run-ups out of the construction cycle ... as a cash-preservation and margin improvement strategy?
8. Will the opening of dozens of new masterplanned communities in the Southern and Northern California regions, Texas, and Colorado, give home builders more visibility into the pace and price of the demand?
9. Having booked profitability for eight or more quarters on the back of land-asset write-downs and other massive overhead cost-cuts, will builders be able to scale their expansion of community counts and add 2015 and 2016 lots in a way that continues to show profits?
10. Perhaps the biggest question of all: who is out there to hire? What is that person's job description? And how does one retain, motivate, and inspire the current talent base to excel at every operational level?
Learn more about markets featured in this article: Las Vegas, NV.