Housing’s recovery is undeniable. It looks like this
Home building’s role in the housing recovery–conspicuous mostly by the absence of new lower-priced homes–has become clear to almost everyone now, as existing single-family home prices nudge back up–nationally–to just 4% shy of their prior peak levels.
2016 may mark the year builders begin to find the up-to-now unapparent sweet spot for younger, more financially challenged would-be buyers fleeing rapidly rising rents and willing to travel an extra 20 to 30 minutes to get to work to do that.
Narrative plot-lines that normally lead to stronger new home sales–existing home price trends and shortages and aggressive revenue-management-fueled rent patterns–are in place, and the Fed has signaled interest rates are headed up.
For builders, the time to kick it up another notch in the $250,000 and below range could hardly be better, especially as banks start gradually to swap out fear for greed and would-be home buyers start to act on fear vs. greed.
Here, Redfin notes that buyer motivations are shifting, with fear of lack of affordability and fear of competing buyers as big drivers of their behavior. Fear of missing out on what is affordable, of sustaining value, of financial and shelter needs that are met on an ongoing basis, can be a positive motivator.
It’s part of the narrative of housing recoveries, natural human nature that projects itself forward in time and sees itself worse off if one doesn’t act now.
For lo these many years now, the Federal Reserve has been making money dirt cheap to borrow, and the likelihood now is that it’s going to be less dirt cheap to borrow. So, people who don’t already have a home to sell–young adult, first-time home buyers–are the most likely ones to act next, providing they’re in that credit box sweet spot, able to qualify and willing mostly to travel, in order to own.
At our Housing Leadership Summit last month, one of the most compelling take-aways from listening to the strategic leadership of more than 50 companies was this. External forces–be they global economic ebbs and flows, energy-economy volatility, political gyrations, even interest rate increases–are less the determinants of success in 2016 than internal execution, leadership, and operational focus.
Home building company leaders take a certain amount of pride in what they and their teams accomplished in the early stages of the recovery. Almost universally, however, they profess that there are improvements, innovations, and opportunities they’re going to have to seize on to keep momentum in their favor. And in almost every case, among larger organizations and smaller enterprises, the mantra common to all of them is this: do more with less … faster.
