The New York Times article in December on housing price statistics caused quite a stir among those who follow industry numbers. The story called attention to the fact that the widely reported OFHEO numbers fail to take into account any mortgages over $417,000 (the cap for Fannie Mae and Freddie Mac) and include not only home sales but also refinancing appraisals. In addition, the data are further skewed by the necessity of counting only homes that have actually sold. Those homes, by definition, were the most appealing homes on the market at that time. And so, it would appear, the government's measure of housing prices is uneven, at best. More likely, the numbers offer a rosier picture of housing values than really exists.
Incentives and discounting add to the ambiguity surrounding the sales prices of new homes, and the concept of average or median sales prices, especially when calculated on a national basis, offers little in the way of useful information to any builder, much less a local one. Other measures of the current state of the housing industry could stand closer scrutiny as well. The lack of data available on cancellations means that new-home sales numbers and the number of homes in inventory could be way off the mark.
These discrepancies and inconsistencies have always existed in the data but take on a larger importance at a time when builders of all sizes are desperate for information they can use to manage their businesses. But where big builders have the option of commissioning research or paying for proprietary information gathered by real estate consulting firms, small builders are more often left to their own devices.
Fortunately, many of them have a few tricks up their sleeves that allow them to, as we say in this month's story “The Local Forecast” (see page 150), “keep tabs on their local markets, project trends, and respond swiftly to them without the benefit of national forecasters getting in their way.” Finding land that's available, knowing who's building where, what kind of product is selling, how much it's going for, and what kinds of concessions are being offered—this is the kind of intel that is both meaningful and critical to being able to stay competitive in a local market, especially at a time when every single home sold counts like never before.
This information often comes from other builders, even competitors on the local scene, who can be amazingly generous with the knowledge they've gained through experience. We know that full well here at BUILDER, because without this generosity, we wouldn't be able to present the kinds of in-depth stories that we do—full of firsthand accounts of trial and error, battles won and lost, and lessons learned.
And because we think the times are such that you need this kind of information more than ever, we're making a concerted effort to bring you more of the wisdom gained by your colleagues—so that you can avoid some of the pitfalls others have already negotiated. Information such as which kinds of products might offer the most bang for the buck in the next few years (see “Keeping Up With the Boomers,” page 158, and “Going Up?” page 186), how to give your buyers the energy efficiency they want (“Performance Art,” page 172), the most current design trends (“The New American Home 2007,” page 118), and how to market more effectively online (“Web Tune-Up,” page 212). In addition, we're premiering a new monthly department that will focus on projects that have been extremely successful against all odds (“Success Stories,” page 59).
We think this is the kind of information you want and need to weather the difficult times ahead. Please tell us if there are other subjects you'd like to see covered. And if you have some hard-earned wisdom you'd like to share, by all means, let us know that, too. Your colleagues will thank you for it.