Home building's leaders have a message for the public: We'll meet you there, where you can feel confident in a new-home purchase right now. This, of course, means changing.
Company executives met in Chicago in May for the annual Builder 100 Conference. If any of them had spent time in the fetal position during any part of the past two-plus years, you would never have been able to tell. They are a resilient bunch, although one whose ranks are diminished.
A shining, if symbolic, moment of resilience was Pulte CEO Richard Dugas braving a public appearance as BUILDER's Executive of the Year, despite an angry crowd of labor union protesters clamoring on the street outside the conference venue. Dugas stood tall and talked of the determination of his company's people to weather the balance of the economic storm and emerge an even stronger firm.
The mood was realistic; the consensus was that traffic and sales are up, there's more work to do, and opportunities have begun to reveal themselves.
They talked about their message to the public: “We'll meet you a good part of the way there.” They talked about what they want—mostly good headlines—and what they're going to do about it next, give new meaning to the word “value.”
Value has been the missing link in the real economy and the housing economy. Loan-to-value. Cost value. Time value. Never missing a beat, however, has been the value of people. People, leaders refrained, are where you get value. It's the one and only way to get home builders' house offerings a good part of the way there for the public to feel confident about buying right now.
Executives talked about people, about ones they've lost and ones they have fought to keep. People are where smarter processes and better margins and more persuasive selling occur. People are positive cash flow vs. the incessant erosion of hard assets like land and invested capital. People are the only difference between sheer price reductions and value.
Value is practically a euphemism for offering lower-cost products to home buyers who are stuck in a Catch-22 credit environment. The industry's most dramatic gesture to date—the Pulte acquisition of Centex—is a play for value. Pulte's acknowledging, in part, that it needs a value brand in its portfolio.
Pulte's not alone. We're seeing practically every company, from KB Home and Meritage Homes to D.R. Horton and Jagoe Homes, put greater emphasis on value. This means killing frills, figuring out smarter ways to buy materials and manufactured goods, and building faster yet with higher quality.
The third part of the new value proposition home building executives were focused on at Builder 100 is green. Clearly, though, green is as much a business strategy as an altruistic motivation. Most of the bigger home building enterprises and an increasing number of regional and local companies, including Artistic Homes in Albuquerque, N.M., and Hearthstone Homes of Omaha, Neb., are building energy efficiency beyond code into their homes.
There are a couple of reasons for this right now. One is the struggle to find any possible point of difference from competitors in their marketplace, and the other is to strike potential home buyers with a money-saving and emotional reason to buy, and get them to regard the “total cost of homeownership”—mortgage payments plus payments for utilities and other regular maintenance costs—as a new-home benefit.
People, value, and green. We'll keep focusing on these themes. Cracking the code of value—which home builders have begun to do with their new entry-level and other offerings—is how you can be confident in your message to the public: We'll meet you there.