The Everyday Business

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Gather a group of home builders today, and before too long, someone will ask the inevitable question: “How is your market holding up?” Most often the answer is the same: “It’s still strong, but we’re keeping our fingers crossed.” You can almost feel th...

August 01, 2001
Heather McCune

 

Gather a group of home builders today, and before too long, someone will ask the inevitable question: "How is your market holding up?" Most often the answer is the same: "It’s still strong, but we’re keeping our fingers crossed." You can almost feel the entire residential construction industry holding its breath, hoping our market avoids the current slowdown plaguing the tech and manufacturing sectors.

OK everybody, breathe. Now breathe again, a little deeper this time, for the numbers suggest that the demand for new housing will continue and that the residential construction industry will hold up well in the faltering economy compared with its performance in previous slowdowns. Take a look at numbers from the most recent report by the Joint Center for Housing Studies of Harvard University:

 

 

  •  Aging of the population will continue to push housing production. The oldest of the echo boomers are reaching young adulthood, and this group will drive demand for starter homes. For the next decade the baby boomers will be in their peak earning years and fuel demand for move-up homes.

     

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  • Ongoing immigration should keep household growth during the next decade at or above the 1.15 million annual levels of the 1990s.

    Demographic data isn’t the only reason for optimism. Gyrations in the stock market have many consumers focusing once again on real estate as the surest tool to generate wealth. Home prices appreciated considerably in most areas of the country in 2000, and the increase in housing prices nationally outpaced general inflation rates for the seventh consecutive year. Inflation-adjusted house prices have jumped 16% since 1993, exceeding the 14% uptick from 1984 to 1989.

    The numbers speak for themselves and combined provide a solid foundation for the residential construction industry near- and long-term. With that peace of mind offered, I’d like to suggest that as an industry, it’s time to change the question. Instead of asking, "How is the market holding up?" a more useful question would be, "What have you done to strengthen your company so that it is ready to prosper despite a downturn?"

    No matter what the numbers foretell, we’ve all learned that no one can control the economy. Consumer confidence is measured one person at a time. Job growth happens one company at a time. Homes sell to one buyer at a time, and whether that sale happens isn’t a function only of macroeconomic trends.

    I listened carefully at a recent industry meeting when Ara Hovnanian, CEO of Giant home builder K. Hovnanian Co., was asked the new question. At that instant, those assembled seemed to hold their breath, waiting for his answer as the seconds ticked by. Finally, after what was only a minute but seemed like an hour, Ara looked up and simply said:

    "The only thing we can do, whether in good times or bad, is work every day preparing to become a better company. It’s what we do every day."

    It was the perfect answer to the most obvious yet unasked question in the industry today. The everyday business - in good economic times and in bad - must be to build a better business. Better has a different meaning in every market for every builder. At K. Hovnanian Co., better translates into improved, more efficient processes in the office and in the field, an investment in technology to leverage the same across communities and divisions, and a stronger capital position. What does better mean at your company? How do you define it, plan for it and finally act on it? How do you invest everyone on your team in the mission of building a better company every day? And finally, what is to be gained by asking a new question and formulating its answer? A new market position. Market shifts don’t happen in boom times. Challengers become winners and leaders become losers in times of economic uncertainty. What gets each to its new place? Belief and the planning and the action to back it up.

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