The current housing downturn has caused a lot of problems to all members of the supply chain on many levels, and its effect goes deeper than one might think. We are all aware of the obvious: wide spread layoffs, branch closings, bankruptcies, etc. But there have been more subtle and “disguised” changes in the structure and thinking of some of the members of the supply chain. Here are just a few examples. • Many manufacturers and trade contractors have deemphasized their home builder strategies and programs and have re-focused on the remodeling market segment.
Two years ago, at the height of the global financial crisis, investor Warren Buffett pulled out this gem of a quote to describe the situation. “It’s only when the tide goes out that you learn who’s been swimming naked.” And while this is an accurate expression of what happens to weak businesses when there is a downturn in the business cycle, it seems particularly apt as a description of the builder market before and after the housing market bubble burst.
Remodelers are more optimistic than they've been about the remodeling market since 2005 according to our latest survey. For our upcoming issue, we surveyed our readers on their outlook for next year and 64 percent said they expect business to increase in 2011, and only 15 percent expect it to decrease. We haven't seen numbers that good since the height of the housing boom.
These days any job is a blessing. In the rush to take advantage of the moment often opportunities are lost because we take the owner’s perception of what he wants over providing the service of delivering what is needed. All too often this opportunity only comes once while the owners are living in the home. For example:
While conducting research on a builder for a recent issue of Professional Builder, I did what most people do first when they want to learn more about a company, or any subject for that matter. I went to Google.
It’s hard to say who has taken the “a la carte” mentality to the most absurd level, the airlines or the rental car companies. Pay for food, pay for sodas, pay for bags, and one of the discount airlines is now charging for both checked bags and overhead storage. This is beyond the pale. If you show up at the gate with your briefcase or backpack and a roll-a-board, you are paying $45 to take it on with you, but “only” $40 if you check it. Add that $80 - $90 round trip to the cheaper fare and the deal becomes no deal.
I had the chance today to spend some time talking with Manfred Seitz, chairman, president and CEO of Bosch Power Tools, during a visit to the company's U.S. headquarters. We talked about several topics, including the company's outlook for the housing market. He said the company is being very cautious, projecting small growth for 2011 in new construction and remodeling, and slightly better growth for 2012.
The residential market's "shadow inventory" is up more than 10 percent from a year ago, according to real-estate research firm CoreLogic. That puts overall inventory at more than 6.3 million unsold homes on the market, nearly a third of which are "pending supply" -- those homes that are seriously delinquent, in foreclosure or being held off the market by banks or other investors.
QE-2 Qualitative Easing implemented and explained. These are the best definitions of Quantitative Easing. This is Clearly written by some smart people and worth the 6 minutes of your time, and a Great use of smart humour to explain complexity. Did you know that Goldman Sachs can front run the Fed? http://thebankwatch.com/2010/11/18/so-you-mean-the-goldman-sachs-can-front-run-the-fed-qe-explained/
Standard & Poor is predicting more home price pain for 2011. Analysts from the financial market intelligence firm are calling for a drop of between 7 and 10 percent through the end of next year. HousingWire has more on the story:
I know from personal experience buying a home a few years ago, it was nearly impossible in 2006 to find a builder that would build something less than 3,000 sq. ft. with any sort of quality. Well, things have changed and people are finally starting to pay attention to what people like Sarah Susanka have been saying for years. She continues to gain popularity as people realize her ideas make a lot of sense, especially in this market.
Marketing and generating leads continues to be challenge No. 1 for many remodelers. If you're in that group, here's a chance to polish your skills. Marketing consultant TMR Direct is offering a free webinar: "Effective Marketing for Builders and Remodelers." For more information, visit TMR's website.
Another positive prediction for the housing market this week, as the National Association of Realtors released their latest forecast for 2011 during the group's annual conference in New Orleans. Unfortunately, it is the NAR, so we have to take it with a grain of salt. (Although in all fairness, the group has gotten a lot better since the days of David Lereah's Baghdad Bob-esque pronouncements as the market collapsed.)
While making sales presentations to three of our four most recent prospective clients, we were hired on the spot – three times! On the first two occasions, we did not have our start-up paperwork and consulting agreements on hand and ready to go. We had become conditioned over the past three years to home builders requesting a proposal, mulling it over ad nausea, requesting more information, etc. Even proven, time-tested, high return investments were being delayed for ‘safety sake.’ Many older-school builders were totally focused on reactive, ‘
Let’s face it, time are tough, and many home builders are doing all they can to keep their doors open amid the brutal economic conditions. But, while the housing market outlook may look bleak on a national level, there are countless success stories of builders that are succeeding in the toughest conditions. I’ve asked two such builders — Michael Maples, co-founder of Trumark Homes, Danville, Calif., and Brett Whitehouse, president of Brandywine Homes, Irvine, Calif. — to share some of their leadership advice. Here are some techniques that have worked for them.
The media has been talking about how the Fed has to be careful not to let inflation get "out of control" in the coming months and years. In fact, just last week, there was a headline talking about how another round of Quantitative Easing (QE2) bringing the risk of "unleashing 1970s inflation genie." Mortgage Bonds are trading lower on what appears to be a changing sentiment towards the risk of deflation.
Big move by NARI last week: the trade association has hired a lobbyist to represent remodelers' interests in Washington, D.C. This is all part of a great transformation at NARI as the group really works to become a bigger force not only inthe industry but forthe industry. Sure, NAHB has a very significant presence in D.C., but representing builders takes up a lot of their attention. It's great to see NARI get in the game. And the more people out there advocating for housing the better!
The entire market of private debt and equity financing is playing a much larger role in the development and homebuilding space than ever before, and with the banks on hiatus, (for the most part) private financing and equity Joint Ventures are likely to the New Normal.
“I hear and I forget. I see and I remember. I do and I understand.” — Confucius
Demographics locally have always figured into a builder’s planning. Nationally, demographics do something different. They help paint a picture of a housing market in the aggregate. Major trends and themes emerge from these national statistics. Over the last 15 to 20 years, legal immigration and the massive shift toward western and southern states have substantially impacted home building, while a third trend, the high home-owning progression of the Baby Boom generation has thoroughly dominated the industry.