This morning, a fresh reading comes through on home building's closest approximation of changes in confidence among those who make a living doing it. Signal or noise? Clearly, housing's data trends are forming quite the Hell's Gate of tricky, swift and difficult-to-navigate currents and cross-currents. Here, we explore less about what you need to know--given that so much is either contradictory or uncertain--and more about a few things you may need to do.
Our simplest, most elegant, and best sense of what's changing in the market is not the noise interest rates rising, price increases slowing, volatile data prints, etc. The change is that institutional investors--who were making the market for a solid 12 months or more--are dialing back their transactions in for-sale homes, and retail buyers--you and me--are slowly, slowly taking the place of the bulk purchasers.
Does this shift distort the data? We believe so. Critically, don't take eyes off the prize of winning your retail buyers' hearts and minds, even as headline risk plays havoc with mood indicators and monthly indices.
There's an expression, apocryphally attributed as "the Chinese curse," that sounds like a positive wish for another and is actually a veiled hex: "may you live in interesting times." Chatting with one of housing's strategic leaders a couple of days ago, he said, "boring times were always better days for us, but exciting times seem like they're here to stay for a while."
I also caught up with Woodside Homes ceo Joel Shine for a few minutes, who had some good news to share about operating results for a company he guided out of bankruptcy in 2009.
Woodside Homes commented on its results of operations for the last quarter ended and certain recent developments, including closing its offering of $220 million aggregate principal amount of 6 ¾ percent senior unsecured notes.
“For the quarter recently ended, Woodside’s revenue increased by 25 percent compared to the prior year period and during this quarter, Woodside experienced positive growth in each of our markets,” said Joel Shine, Chief Executive Officer of Woodside Homes. The company's home closings increased by 44 percent in 2012 as compared to 2011 and have grown by over 25 percent in the first half of 2013 versus the same period in 2012. Additionally, net sales have improved year-over-year in each of the last eight quarters.
The joint bookrunners of the unsecured notes offering were Credit Suisse Securities (USA), Moelis & Company, Citigroup and Wells Fargo Securities. “Despite being a private company, Woodside was able to access the debt capital markets for its financing. We are pleased that the offering provides Woodside with additional capital to pursue growth opportunities" noted Shine.
Approximately $140 million of the net proceeds from the issuance and sale of unsecured notes were used to refinance the company's existing senior secured notes and pay fees and expenses relating to the offering and refinancing and the remainder will be used for general corporate purposes. The notes are due 2021.
Importantly, these days Shine can focus his team on boring "block and tackling," like customer care, like sales management, like house-by-house profitability. It was a thrill-a-minute back in 2009 and 2010, dealing with scores of creditors, parsing through nanobytes of bad news numbers, and trying to keep focus in the field. It made the days go like a blur, but it was no way to run a business.
"Our operating numbers are nice testimony to having done the work on our plan, rescaled our business, chosen our markets, and executed well," Shine says.
This gets me to thinking. You're strategists, but mostly, you and your teams are operators. The Fall of 2013 is about operating excellence. What the next few months, leading into an all-important Spring 2014 selling season, need to be about are internalized triggers, assumptions and behaviors--in other words the boring details--that give rise to results that bear results.
I have a boss who came in to our company about 18 months ago, and has been able to look afresh at the legacy practices and hidebound assumptions that we were making as a company and as content generators. Each of us had a sense of what was not right with our respective worlds, and in most cases, each of us believed that if we were not so resource-deprived, all would be better. We each had high-falutin' ideas about what we'd do differently to hit it out of the park in our businesses.
My boss used an expression that chiseled away at the hit-it-out-of-the-park mindset. "Don't try to boil the ocean," with your ideas, he'd say. Experiment. Make small changes. Little bets. Have an idea you can do now, and hack it into action today.
Gradually, this attitude has begun to pervade our culture, and we don't have such an obsessive, covetous focus on adding to nor even maintaining our level of resources.
For this reason, I'd say that, if I'm correct that the sea change in housing is less about macro data and sentiment readings, and more about what happens when large-scale investors give way to one-by-one home buyers who plan to reside in their homes for a sustained period of time it suggests that excellence in operations, and process improvement are where to look right now, not at the media's coverage of the rats' nest of data points.
* end every meeting with action items and accountability
* build fearlessness into your culture so that sound, honest information flows through it
* mentor somebody in the business and get them to love it
* listen in an adversarial partner negotiation--with a land seller, materials supplier, manufacturer, trade, or investor--don't have the answers; have questions that let them know you're listening
* streamline your product line for flexibility
* buy land for 2015, not for early 2014, or you'll overpay
* if you have to buy land for 2014, counter punch, and look to create a program for locations others aren't bidding on
* create a program to know, prospect, and benchmark a goal around the number of home buyers in their early '30s you want to achieve by Spring 2014
* sell and then care properly for those who show an interest, and care more for those who buy
* condos (more on condos tomorrow)