Murphy has his law, my family has ours. Growing up, two disconnected abstractions could add up to a single concrete moral. Call it Shirley’s Law. My mom would move the pepper to one part of the dinner table, a spoon to another, and a glass to a third spot. From three such objects, a fourth-grade math word problem, a cautionary tale, or a snippet from her North Providence childhood during the Great Depression would crystallize in our minds.
So, here’s an abstraction whose intent is to shed light on home builders’ present moment in time. One of the Great Depression’s most memorable utterances applies. “Let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.”
Fast-forward to today, and it’s the same thought: “We should be afraid of too much fear.”
So let’s take the pepper, spoon, and glass, and start.
Palms mirroring one another, fingers pointed upward, hold your hands about 12 inches apart. Now, switch your hands’ positions so that one faces down directly above the other, which faces up. Now, repeat the two gestures. First, to the side, now above and below.
The space you create with the two gestures is about 1 square foot. That’s big enough to contain the deepest questions, the brightest solutions, and the toughest challenges you and your peers in the business of new housing face today.
How much did you or will you pay for that square foot of real estate? How few or many of them will it take to make someone a home? How many square feet of sheltered space will work in an acre? What will you pay for input materials for that 12-inch-by-12-inch space? How about labor costs per square foot? Will you use robotics, BIM, big data, and social networks to shape, manage construction of, and market your square foot? How will you shape that square foot of space to create excitement, delight, urgency? How will you price it to your home buyer? How much will it cost him or her to run that square foot of home? What will they trade it for and when?
If America were a single home builder, one estimate is that it might build and sell about 953 million square feet of new homes in 2013, up from 810 million square feet this year. How confident are you that your share of the 953 million new square feet of homes sold in 2013 will be profitable for you?
It comes down to your ability to make your square foot more alluring, valuable, and resilient than the next guy’s, regardless of whether it’s a bank selling REO, an existing home seller, or a new-home competitor in your submarket.
It also comes down to your ability to deliver your square foot as an inventory turn. We’re hearing of subdivisions in Phoenix and other markets where developed lots have slabs waiting for framers, framed-out homes waiting for stucco teams, and stuccoed places with roof tiles piled atop the roofs of houses awaiting the arrival of roofers. Sorry, but telling a willing and able buyer that his house is on backorder isn’t a winning strategy.
Scarcity’s your friend only if you’ve got plenty of what is so scarce elsewhere.
Think again of Franklin Delano Roosevelt’s first inaugural address on a “nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.”
If ever there were a moment calling for the need to “convert retreat into advance,” it’s now. The way there, however, is not to contemplate the aggregate 953 million square feet now swirling in the vortex of debt reduction, political machinations, and economic uncertainty. Think instead of lot cost, materials input costs, labor costs, design value, performance value, and price value—one square foot at a time.