It fascinates us to imagine looking backward at this time next year. We think the perspective of 12 months will not necessarily begin to have restored what we have lost, but we do think the passage of a year will confirm a few hunches about 2011, positive ones.
Having made hay for almost a decade in the sunshine of Ritalin-laced demand, firms of all sizes hit a wall in 2006 and turned inward, focusing on survival. Plans consisted of f responses: cuts, debt mitigation, random flashes, occasional inspirations, and reaction to stimulus. If the tax credits did nothing else, they allowed many companies to keep a pulse in the deepest freeze any home building veteran had ever weathered.
At any rate, deep freezes don't last forever. This one may have begun to thaw.
So, while for three years we've reported on the externals of macroeconomics and policy exerting themselves on internally focused home building organizations, we think 2011 is the year that changes. Consolidation, innovation, escalation of initiatives will be the bread and butter of our titles, rather than the latest Capitol Hill scrum. The shift will be dramatic: from spectators to players.
As for prediction 2, we believe some builders will be first to grasp the mega-change in household formation. They're changing around new values about who makes a family, what and where work takes place, and the permeability of international borders, allowing for global migration as a fluid ongoing reality.
To understand demand is to understand that households have changed from the standard married-with-children economic engine. Still, house-holds today are no less economic engines than the mom-dad-and-two-children house-holds that dominated the 1950s and 1960s. Households that had a male, a female, and young kids had needs, and 25 percent or so of 110 million households still have those needs. It's the other 75 percent that causes the cognitive dissonance in home building.
Households will continue to see their home as part of a holistic business plan. The mega-trend still unfolding is one that puts multiple earners under the same roof, working for aligned goals. Whether or not this is a husband and wife is becoming less relevant than the fact that multiple earners want a maximum return on their combined financial resources, and the house may be one part of that.
Winners in the next 12 months will be home builders who are fluent in the “unmet need” in a market. This does not only mean a home buyer who plans to spend eight or more years in the place they purchase, but it means “new,” “alternative,” “unconventional,” or “multi-generational” households are the ones who'll budge from the sidelines first.
Which brings us to point 3, the operational imperative of 2011: to strike opportunistically. Understanding that each home building enterprise has its own tolerance for risk, we believe it still necessary for each to exploit its own horizon of opportunism. Or simply pack it in, because it's not going to get a lot easier for at least a couple of years. Your to-do list:
Another 12 months, and we're going to be all about what you're doing versus what's happening to you. We look forward to that.