Record-setting mortgage rates, high material costs, and slowing demand have made for an uneasy environment as builders and developers approach 2023. To prepare for the new year, companies like Beazer Homes are acting quickly to respond to the lowered demand while focusing on affordability and availability.
“Entering fiscal 2023, Beazer isn’t waiting on a recovery—we are proactively addressing the weak demand environment. Like other builders, we are adjusting prices, incentives, and specification levels to enhance buyer affordability. At the same time, we are focused on reducing construction costs and shortening cycle times to increase profitability,” says Allan Merrill, CEO at Beazer Homes.
As pricing and availability are key elements, builders are also turning their attention to location, energy efficiency, and financing options. “From a market perspective, it’s a great opportunity to reset and streamline,” says Mark Wolf, founder and CEO at AHV Communities.
Here are six ways home builders are gearing up for the new year’s unknowns.
1. Taking care of the small problems early. Instead of waiting to address the possibilities of material shortages, understaffing, and timeline discrepancies, builders are getting ahead of concerns and focusing on ways to fix them. Clayton Garrett, founding partner at Meristem Communities, says, “We have oriented to eliminating what we call ‘headaches,’ those small problems that can hang around. These issues have a way of snowballing into bigger problems or can feel outsized in the moment, when under pressure.”
2. Narrowing in on top locations. No matter if it’s for sale or for rent, a single-family home’s location can ensure its value. Builders are paying close attention to strong and growing markets as home prices adjust. “From AHV Communities’ perspective specifically, the new year is an opportunity to continue focusing on great locations as well as superb quality and service, which, regardless of economic conditions, will always represent a recipe for success,” says Wolf. “In housing, you can weather storms and emerge stronger if you follow these three core tenets: Class A locations, high-quality product, and strong customer service. Because these are the backbone of AHV Communities’ business model, future-proofing for us means to keep doing what we always have, but additionally to leverage the opportunity to do it even better.”
3. Advancing energy efficiency. With eyes on climate change and decreasing energy usage, building homes for the future requires more energy-efficient products and materials. Beazer Homes, for example, is helping its future homeowners save money by installing the necessary products now. “Our energy-efficiency standards exceed current energy codes for new construction, so our homes cost less to operate and are more likely to retain value against the energy-efficient homes that will be built in the future,” Merrill says.
4. Taking "health" seriously. Increased attention to health and wellness of both companies and their employees has been a result of the pandemic. Builders are better preparing for the future by encouraging wellness and adding additional health benefits. Garrett shares, “By focusing on health, both personal and in business, we build resilience in both physical and financial stress that will be heightened through the coming months.”
5. Securing financing options for projects and for buyers. While navigating the expenses of inflation and high mortgage rates, builders are looking for ways to help buyers reach their dreams. Beazer Homes offers Mortgage Choice, in which a carefully selected group of lenders compete for buyers’ financing. Other builders are also catching on as this method can help customers access better buydowns, rate locks, and loan programs. From a builder's financing perspective, securing capital for future projects is also on the forefront. Alex Pollack, director of partnerships at Mosaic, says, “We believe developers should aggressively seek firm commitments from lenders for project-related capital. Many banks are choosing not to increase their exposure to the residential market at this time, which means having a strong relationship with your capital partner will ensure your project moves forward on time.”
Wolf echoes, “We are looking at the entire ecosystem, assessing all aspects including capital, trade partners, internal capabilities, existing and target markets, and more. Essentially, we are drilling down to identify focal points that will benefit the company’s long-term viability and success.”
6. Delivering quality product on time. Because of slowing demand, builders want to make sure they’re delivering quality homes that are both appealing and available for buyers and renters. By getting ahead of material shortages and taking advantage of schedule openings, Mosaic has seen this as an opportunity to build homes efficiently and predictably, according to Pollack. In the for-sale environment, continued focus on energy efficiency, flexible spaces, and on-time deliveries are common future-proofing notes. “While affordability and availability are crucial elements in selling homes in this challenging environment, they aren’t the only things that matter. The experience we provide and the home we build also matter,” Merrill concludes.