Demand is the slipperiest of notions, and maybe ultimately unhelpful. Study household and job formation against vacancies, against units that need replacing, against housing starts, against interest rate trends, against affordability indices, and on and on, until you're blue in the face. Still, arguably, you will not have a clear, precise, and predictive picture of new-home supply and demand.
In many markets, 2006 has become the year that has driven a wedge between the need for new housing—which remains—and the demand for new homes—which is diminished. Statistical points in a vacuum tell us so little. Even when you see them trend, you can't really see psychology's role. Two—or even 22—analysts can look at the same figure and interpret it in diametrically opposite ways.
Here's a scenario: Take investors out; subtract contingency buyers who can't or choose not to sell their current homes right now; set aside—in the business forecast sense—people who can no longer afford a down payment and/or monthly payments. What does that leave? Nearly a million people who are buying a new home in the current 12-month period in today's extraordinarily challenging market, that's what.
However the calculus of current market conditions is impacting your business model planning for '07, there's a remarkable opportunity at this very moment. After the “Great Investor Exodus of '06,” your traffic today, and perhaps your orders tomorrow, reflect a customer base momentarily “scrubbed” of a good deal of speculative motivation.
“What we're seeing today is higher quality traffic,” says Jennifer Hubenschmidt, sales manager at Toll Brothers' Steeplechase at Northville, 25 minutes from downtown Detroit. As she talks about the difference, even in chronically challenged southeast Michigan, between today's market and the boom times of yore, she's encouraged. “You're truly seeing people that [are being] up front and saying ‘I don't want to build for another year'—but they're truly a potential buyer. You don't have nearly as many tire kickers.”
“In order to produce these customers, the entire corporation must be viewed as a customer-creating and customer-satisfying organism. Management must think of itself not as producing products but as providing customer-creating value satisfactions. It must push this idea (and everything it means and requires) into every nook and cranny of the organization. It has to do this continuously and with the kind of flair that excites and stimulates the people in it. Otherwise, the company will be merely a series of pigeonholed parts, with no consolidating sense of purpose or direction.”
In this issue of BIG BUILDER, we hold our lens close to the subject, your customers. Their satisfaction occurs when you manage not only your products' quality but your team's delivery of a time-released experience, starting with overcoming fear and ending well beyond handing over a deed of ownership. For the resources and time we've been able to devote to this critical topic of customer focus from cover to cover, we thank Timberlake Cabinet Co. for their single sponsorship. They underwrote the issue but left its planning, development, and editing entirely up to us.