Cunard's flagship Queen Mary 2, more than a fifth of a mile long and weighing upwards of 150,000 gross tons, sports a height, length, and waterline breadth that surpass that of any other passenger ship in the world. Designed by owner Carnival's house architect Stephen Payne, the liner has 15 restaurants, five swimming pools, a planetarium, and the obligatory ballroom, casino, and theater. Counting officers and crew, it carries about 3,900 people at capacity, including more than 2,600 passengers. From keel to funnel, including 17 passenger decks, the QM2 is about an average field goal shy of a football field in height and its smokestacks clear New York's Verrazano-Narrows bridge by a hair under 10 feet.
But if you had to make a sudden 180-degree turn in the QM2's New York Harbor port of call, it would be quite a challenge.
As remarkably equipped for capacity, fast growth, and big-time capital structure management as home building's public powers may be, their heft and their reliance on placating often fractious, volatile, and clamorous Wall Street investors took away one of the most important advantages they had to bear in an about-face market correction. The playing field tipped, at least momentarily, in favor of private home builder competitors.
Say all you want about the ability of the publics to weather a market U-turn differently in the present than they have in the past. Lots controlled through options versus ownership, increasingly professional management, product segmentation, geographical market diversification, and the proliferation of creative financing for home buyers supposedly amounted to a strategic defense system. That litany of post-millennial characteristics was cited again and again during the good years as defining this generation of public companies in contrast to previous generations. Each of these vaunted defense systems succumbed to the force of deteriorating market conditions, and it's just extraordinary to hear from secular thought and practice leaders how unaccountably bad they continue to be.
Thing is, there is one extremely significant difference between home builders' ability to cope with a downturn, and it has less to do with access to capital and product and market diversification than plain, simple market intelligence.
"The one thing that I see today that is different," says Shea Homes vice president of operations Robb Pigg, is that "there is more data integrity around some of the high-level business metrics and there is more integration of that data. We are able to make better decisions, just for the simple fact that things have become more sophisticated from a data-integrity and a systems-integration standpoint."
There's agreement that while there's very little anyone can do to prevent market conditions from worsening or to spur them on to recovery, the ability of organizations to respond quickly to those conditions and act smart about them is what sets them apart from home builders in prior down cycles.
So, while the publics were busy trying to turn their ocean liners around and point them in the opposite direction in New York Harbor, many of the best private operators were doing just that, operating and using technology and data management. The fundamental facts of their make-up from a business model perspective demanded that they scoot into the trenches, learn where the situational opportunities are, and size their cost bases to historical rather than recent bubble sales trends.
As absorption rates, cancellations, mortgage finance hurdles, and psychology continue to tighten and while affordability–or rather unaffordability–remains the secular gorilla-in-the-living room, all eyes turn to a single area of bothpublic and private balance sheets: Cash.
The best privates will continue to leverage nimbleness and competitive tenacity to navigate circles around their huge public rivals. And as the buyer universe shrinks further before it starts to grow again, privates have almost a year head start in setting a successful course for the future.