By Boyce Thompson Home building certainly has its share of frustrations--the endless scheduling uncertainties, the big financial risks, the customer service nightmares. But you'd be hard pressed to think of a better business to be in during the last 15 months.
Many of the numbers for 2001 are in, and they paint a picture of an industry that heroically defied the economic odds. In a year of rampant layoffs and negative economic growth, housing starts rose 2 percent. A record 900,000 new homes were sold last year.
Nearly everyone, especially economic "experts" who don't know squat about the fundamental changes afoot in this industry, expected home building to go down for the count in the event of a national recession, just as it had every time before. Instead, the industry stands triumphant in the ring, one of the few champions of the national economy.
The demand for a better place to live in this country runs incredibly deep. Tens of thousands of Americans who aspired to move out of rental apartments finally bought a place of their own last year. Many more realized the dream of buying a nicer home, with more space for their children to grow, or in the case of mature buyers, less space to maintain.
That demand was aided and abetted by some of the cheapest national financing in years. In the space of a year, Alan Greenspan went from being the builder's favorite whipping boy--can we forget that the Fed systematically raised interest rates two years ago in part because housing appreciation was rising faster than the rate of inflation--to its poster child.
Boyce Thompson, BUILDER Magazine Editor in Chief [Photo: Jo Lance]
Now Greenspan has found housing religion. In a speech a couple of months ago, he extolled the virtues of homeownership, noting that the homeownership rate in this country hit a record 68 percent. He said that when homeownership flourishes, "it is no surprise to find increased neighborhood stability, more civic-minded residents, better school systems, and reduced crime rates." He must be angling for a job, upon retirement from national office, as the CEO of Pulte. Lest we grow too confident about our prospects in the coming year, don't forget, we're not out of the woods yet. The economy may be inching its way into the economic clearing. But many local markets are still in shock from job layoffs. Interest rates, it would seem, have nowhere to go but up.
Now is not the time to abandon the business controls put in place during the last two years. It doesn't make sense to take unnecessarily aggressive land positions. Entry-level and move-up housing, with its faster rates of sale, makes more sense to be in right now than luxury production.
Many builders took advantage of the "lull" during the last two years to focus attention on their internal systems. They trained key employees. They put in new purchase order systems. They looked at scopes of work with subcontractors, variance reporting systems, and the other procedures that tend to get away from them during the hard times.
It's important as we go forward not to lose sight of the need to continually refine and improve your business. Your very future may depend on it.
Editor in Chief