From interest rates to remodeling trends, there’s no shortage of takeaways from an event such as Zonda’s Builder 100 conference. Here are my 14 biggest takeaways from the event, which brought together more than 400 home building professionals at the Ritz-Carlton Laguna Niguel in Dana Point, California.
1. The market continues to be plagued by inflation, but there are bright spots. There’s no resale competition. Sixty percent of builders are increasing prices right now, and the spring selling season is alive.
2. Three of the most active buyer segments: Move-up, entry-level, and relocation. But notice active adult was at the low end of the new for-sale side, but really active in the resale side. What does that mean? What are we building for the active adult? And what should we be building? I think there's a major opportunity there.
3. The banking crisis was caused by the Fed jacking up interest rates. It's not over until it backs off, period. We heard we could get to a 3.5% federal funds rate this year, but we didn’t hear when. Perhaps by the fall.
4. There was a conversation about the missing middle and how rental can fit that, so the missing middle doesn't have to be for-sale—it could be rental. And it doesn't have to be single-family, it could be townhomes and it could also be horizontal apartments.
5. We talked about how the rental and for-sale strategies match each other. They're complementary. And then the secret sauce: asset management. We heard that people don't buy goods and services, they buy relationships. What does it take to own the customer? It sounds easier than it is. Master the little things and deliver exquisite service, find the digital, physical, or hybrid way to connect with them, and then do it.
6. We heard Zonda’s Todd Tomalak share 10 things you should be thinking about. But really, it was three tranches of focus. It was 40 years of decline in risk taking, mobility, and change. There was evidence of change afoot, so that’s the second tranche that’s really mobility probably returning. The big takeaway if you were a building product manufacturer is that Tomalak is calling the next six years the golden age of remodeling. There are major opportunities because of of the age of the housing that’s out there.
7. The capital markets conversation was fascinating. One panelist said he expected a rebound of the financing side by fall, and he was talking about how millennials and boomers are looking for the same thing. If that’s so, how do we speak to both of them? Because you’re not going to say the same thing to a 36-year-old as you are a 66-year-old. That’s an interesting challenge.
8. We were reminded that private equity is still looking at builders and M&A opportunities, and they're focused on multiples.
9. There was conversation about organic or acquisition strategy. Builders take different approaches. Ashton Woods is going to organic, but Tri Pointe is doing organic and acquisition. Ultimately, they both use data.
10. We looked at pivoting product to meet tomorrow's consumer. Keep in mind, the differentiators come down to the little details. It’s the square footage. It's the size of the yard. It’s the bathroom. It's the number of garages.
11. We talked about tech and artificial intelligence. We heard that if we're looking for talent, zero in on the segments of our economy that are contracting and even focused in on the gig economy. That was an interesting element of a place to look for people.
12. Our privately held builders talked about growth. They started with scattered lots and moved to subdivisions. Now they're even looking at diversification into different products. But the key message was land, land, land.
13. Modular is not necessarily the solution. It’s the construction process, embracing lean, improving all aspects of that. I think we should look at all of our companies and think that way.
14. And here’s the wrap-up of all wrap-ups: It’s a math equation. What did we learn the past three days? Data TIMES friction DIVIDED BY consumer insights EQUALS solutions.