A still-wildly attractive property of the theory of synergy is that one plus one can equal an amount greater than two. In free-enterprise new-home building, 500 companies in this country supply about three out of five new homes, attached and single-family detached, and thousands of entrepreneur-cum-general contractors account for the other two out of five.
But scarcity needs to come first. We're as many as a million new homes away from scarcity today, and further, scarcity will never happen if speculative starts don't stop where they need to stop. Here's a thought: Everybody needs to stop starting houses in markets whose absorptions collectively add up to less than the number of homes being started or added back to inventory by virtue of buyers' inability to continue paying for their new homes.
It may sound like antitrust-violating collaboration, but until demand for existing homes at a baseline price range emerges and sustains itself, starts should virtually stop–the sooner the better.
Everybody needs to do it and, without conspiring, report that they've got a two-homes-delivered hurdle for every start.
There are economic factors that could become anomalous helping forces–second home demand, which relies on neither job nor primary household formation trends, could be one of them. Baby boomers helping their adored new homeowner children with impending adjustable-rate mortgage resets could be another positive driver of stability, if not demand. The calculus of demand, after all, has always had a psychological dimension to it. When renting seems smarter than buying, builders need to stop talking about headlines and stop production of homes until the balance shifts again and it becomes smarter to buy.
You are your own best friends when it comes to consumer psychology–you're the one and only sources of scarcity in the marketplace. One plus one, in this case, could equal a new market outlook and a bright 2009 "spring selling season"–but only if speculative starts stop.
Inventory is the enemy, not headlines. Customer care is your friend, not part of the budget to kill as you look for cost savings. As home buyers, lenders, bondholders, and equity investors discriminate among their myriad options for home builders of choice, a bona fide customer care strategy with measurable returns not only in J.D. Power scores, but also in lower cancellation rates, warranty costs, and higher referrals, is a must–not an option. While there's no guarantee that an order these days is a final sale, managing customer expectations and satisfaction levels through the rollercoaster journey to homeownership may be the best way to secure your backlog.
Our Nov. 22 issue flashes on the pragmatism and profitability of satisfaction. We delve into why home building should make customer care a strategic linchpin in good times or bad, and how companies integrate higher levels of service across their operations. For the second consecutive year, we thank Timberlake Cabinetry, a division of American Woodmark Corp., for its single-sponsorship of our cover-to-cover analysis of customer focus's indispensable place in the balancing act between survival and future growth. While their support has allowed for the issue's development, our friends at Timberlake have left the editorial process entirely to the Big Builder staff.