Among the City of Brotherly Love's graces, old and new, 24th and Bainbridge streets in the city's center ranks near the top as a magnet for visitors, but only if you're a huge U.S. Navy history buff or a big 1820s Greek Revival architecture fan.
Otherwise, it's unlikely that two pedestrians would find themselves in the neighborhood near the Schuylkill River strolling through stone gates, past a guard station, across an old parade grounds, and into the William Strickland–designed former governor's mansion.
However, on a Friday afternoon in mid-August, as the nation's residential real estate market fell even deeper into a worrying stagnation, two drifters—a fellow in his 50s and his 20-something son—wandered into the elegant mansion, which is now the sales center for Toll Brothers' Naval Square urban luxury development on the 20-acre historic site, surprising the young woman stationed inside.
The sales associate beamed as she ever so slightly turned her attention from a professional-looking married couple to accommodate the interests of the father and son who showed up unannounced.
“Traffic,” she must have thought to herself. “How wonderful!” Without a hint of disrespect to her other customers, she sprang like a pro at the opportunity to woo the walk-ins.
The considerable merits of Naval Square for professional couples and down-sizing boomers aside, this woman can sell—and these units are selling. No doubt getting a lift from incentives, discounts, and mortgage buy downs, they're moving—unit by unit, phase by phase, even in today's market.
It's fascinating to get an up-close glimpse of a big builder's strategy playing out even as market conditions grind to somewhere between a slow, slower, and stalling halt. Here is a talented young sales advisor, firing on all cylinders, making quick adjustments to pounce on opportunity to close another deal.
Here is a product and neighborhood that represent unique allure, even in market conditions practically paralyzed as oversupply meets consumer jitters. Add talent and product diversification, toss in a dollop of incentives, and you just may burn through some of that inventory and get through this thing.
All the while, you know there are large home builders who don't have that talent, or product distinctiveness to bring to bear right now.
As you've come to expect of BIG BUILDER, we set out in this issue, using the tools of reporting and analysis, to do three things:
But as you pore through the articles and read between the lines of the statements by some of the industry's leaders, you'll find that the second goal remains a bit of an enigma. Whether it's home prices or oil prices, Middle East turmoil or Midwest industrial stasis, global terror or local panic, consumer psychology's grip on residential real estate makes it impossible to know the answer as to how deep the correction will be and when that will occur.
The cycle will turn positive, but maybe not until the end of 2008 or the beginning of 2009. What will be interesting is whether any new lessons will come out of this downturn.
Past downturns, both soft and hard, have led to many changes in your organizations: smarter and more modest land positions, product and geographical diversification, stronger balance sheets, more professional management, smarter sourcing, and more creative home mortgage lending to name a few. All of these strategies were to buffer the blows of a correction everyone knew would come.
Is there something else needed for future “landings?” Only more time, and an eventual bottom, will tell.
