The wrap on 2017 is this. It's the best year for single-family housing since 2007, and the good news is, 2018 looks as if it's going to be every bit as good, if not better.
Starts fell off in December, but leading into the Spring Selling Season of 2018, the focus is on pretty great expectations for what happens to payroll numbers among U.S.-based companies in the months ahead.
Trulia chief economist Ralph McLaughlin summed up the past 12 months--and a peek ahead at the next 12--this way:
When it comes to new home building activity, 2017 turned out to be the best year for permits, starts, and completions in a decade. The continued climb was led by single-family homes, which was exactly the type of new inventory frustrated homebuyers yearned for last year. Elevated levels of homebuilders’ confidence combined with persistent low inventory should make 2018 a ripe year for single-family construction to grow.
While few economists and observers would suggest the housing market will retrace it way back up to irrational 2004 and 2005 peaks, McLaughlin does point out that current levels have reasonable headroom for growth:
To put the past year into perspective, permits, starts, and completions relative to the US population was just 64.9%, 58.8%, and 57.9% of the 50-year average.
Can residential development and construction investors, architects, engineers, builders, and their ecosystem of partner manufacturers, materials suppliers, and trade crews take housing back up to historical norms?
That's a question 2018 may begin to clarify the answer to.
Recovery to date has been good for the plus-700 credit ratings set, with cash at hand and time on their side.
For others, not so much, yet.
More pay showing up in each paycheck due to lower tax obligations and more highly publicized easier mortgage lending qualifications criteria may begin to move the needle into expanded territory for would-be homeowners, and this year will go far toward taking a measure of what home building operators have learned during leaner times about doing more with less.
But, truth be told, is housing--with its upfront capital intensive, time intensive, local politics intensive, manufacturing supply-chain intensive, and labor intensive resource flows--set up today to do the more part (expanding the customer universe and raising the value offered to each customer) with the less part (risk-averse capital, shrunken labor forces, greater regulatory barriers, and the prospect of new tarrifs on globally-sourced materials and products)?
Conceptually, doing more with less is understood by many of us middle manager types as a reality of today's business and consumer economics. But both terms--more and less--are vague by nature, and ominous by circumstance.
It's when both quantities--the more and the less--are moving targets that our colleagues and associates begin to wonder when enough is enough and start to question their individual and collective efficacy. After all, how much more do we have to do? With how much less?
Wouldn't it be nice to know that?
It puts us--as leaders, managers, supervisors, general contractors, and teammates--into an odd moment, especially as we can project forward and almost feel a measurable quantum leap wave of demand just beyond the visible horizon, and we don't really know how to prepare for it to come.
That's why I find it particularly timely to hear from BlackRock ceo Larry Fink, in his annual letter to ceos. He's speaking specifically to the kinds of public companies he wants his institutional investment enterprise to continue to do business with, but his words resonate among companies large and small. And they're particularly meaningful for firms in the residential development, design, and home building space, where it's more critical than ever to ask--and answer--the questions, "who are we?" and "who do we want to be?"
Fink writes:
Society increasingly is turning to the private sector and asking that companies respond to broader societal challenges. Indeed, the public expectations of your company have never been greater. Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.
Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders. It will succumb to short-term pressures to distribute earnings, and, in the process, sacrifice investments in employee development, innovation, and capital expenditures that are necessary for long-term growth. It will remain exposed to activist campaigns that articulate a clearer goal, even if that goal serves only the shortest and narrowest of objectives. And ultimately, that company will provide subpar returns to the investors who depend on it to finance their retirement, home purchases, or higher education.
Now, purpose can either be a theoretical word management consultants throw around for a few years until the next hot jargon comes in to replace it, or it can mean something to you and your associates, and make their efforts matter more, and, yes, produce outcomes and performance. What better arena than housing, community-building, homes ... to find and give people and offer this measure of meaning and mattering: purpose?
Maybe, it's not all about doing more with less, but leveraging a greater practical sense of purpose--for which there are no resource constraints--to produce greater value with less of what is scarce.
The "results" we'd like to see occur and report on at this time next year would be ones that evidence your capacity to expand your customer universe by lowering cost, time, and qualifications barriers to their entry into your communities, and to expand your team member universe in ways that will connect your success in 2018 to your ability to thrive through 2020 and beyond.
