It's human nature that we get up every morning expecting the day to be very much like the day before, even though we know change is inevitable. When change hits with the force of a tsunami as it has hit the industry recently, it's also natural to look back to figure out what hit us and what we could have done differently to avoid getting swamped. That's a useful exercise, but only up to a point.
Expecting the hot housing market of the last 13 years to continue — uninterrupted — got a lot of builders in trouble this year. But nasty old 2006 is over now. While we should never forget what this housing slump teaches us, it's really time to focus on the future and pay attention to subtle changes in the market we didn't notice during the long housing boom because we were all too busy taking orders and counting money.
Today's home building industry includes a whole generation of young builders, sales managers and salespeople who have never experienced a housing sales slump like the one we're in now. So here's that quick look back from a guy who once saw such things every three or four years:
Lesson 1. The market is not dead. There are still qualified buyers out there yearning for a new home, even if they are not beating a path to your model homes. You can sell houses right now. It just takes good marketing to pull buyers out of their hiding places and excite them with unique attributes of location, product and pricing.
Lesson 2 This housing downturn is different from those of the past. It's not part of an economic recession; it's very much about pricing bubbles created by frenzies of speculative buying. Many local economies are very strong. Jobs are being created. Families are forming. The next housing boom is taking shape. There's even a name for this: pent-up demand.
Lesson 3 When the next boom emerges, it will be different. Smart marketers will identify new housing forms, architecture and location dynamics that excite and bring buyers back into the marketplace. Unique products will outsell "commodity" housing.
That brings us back to the future. Past experience suggests it won't belong to builders who sit around and wait for the market to come back but rather to those who dig for the new dynamics that will drive the next boom.
Gen. William Lyon, the subject of our CEO Spotlight on page 24, believes affordable housing for entry-level buyers will lead the recovery. That's been true in the past, but even if it's the right target market and pricing profile, what will the product be? Infill attached? Suburban high-density detached? Front-loaded or alleys? What will be the hot new architectural style? The future belongs to those who get it right.
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