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Is Today's Building Boom Sustainable?
This question seems to filter into most conversations I have with builders throughout the country. We build homes at a near record pace, while watching the home prices rise, affected by increases in material, labor, permit fees, marketing costs and the pressures from Wall Street. I have the opportunity to travel extensively and meet builders in most major cities. I have witnessed the growth of housing in both the single family and multi-family markets. Though the obvious issues of land availability; proximity to attractions like water and views; and access to transportation centers or good weather are all part of the equation, the real issue seems to be whether the market for homes in the higher price ranges is sustainable. The real challenge will come in maintaining the revenue projections and margins that the current market is enjoying.
Predictions for growth in population over the next twenty years should leave little doubt that the need for housing will be strong, stable and sustainable…in terms of numbers of units. With cities struggling to provide housing that falls under the sector most often called “affordable housing,” how do we meet this growing demand and still satisfy the profit structure we have become accustomed to? What do the customers in the near future really want? How can we deliver this with all the above-mentioned pressures? Can we satisfy a market of consumers interested in the features of $250,000 homes that sell for $120,000?
My answer is both obvious and complicated. The population growth models indicate that we can meet the demands listed above, but is complicated because it requires fundamental changes in how we build homes. To sincerely understand what people want we will need to listen better, learn more and understand what it takes to build homes that can satisfy this market segment. I can comfortably say that a majority of tomorrow’s buyers will not be able to afford a $275,000 home. I would like to share my view of the opportunities that lie ahead and outline a few of the key changes that need to take place. Remember that all the information and facts needed to support this vision are currently available for the asking.
First, re-engineer your homes! They are too full of lumber, have oversized HVAC systems, use complicated foundations, have poorly laid out floor plans and overly complicated facades. Until we realize what it will take to meet these demands we will continually struggle with antiquated processes. We cannot keep on believing that what we have done in the past will keep working in the future. Start with a clean sheet of paper and learn what buyers expect in terms of usable square footage. Utilize every inch of floor space and reduce the 18-foot ceilings and double stair cases that add nothing to the house but cost and complexity.
Read Sarah Susanka’s remarkably successful Not So Big House series and realize that this is the future - not an unrealistic view from the outside. Sarah speaks nationwide to standing-room-only crowds of 300 to 500 builders, architects and industry insiders waiting to hear where we are going. The problem is we don’t react to this movement and change direction. You must believe that innovative builders nationwide are listening and they will be the success stories of the future.
Next, stop arguing with physics! You can build homes that reduce your exposure to liability, but you have to understand the stresses our homes have to confront. We build outside in weather that varies by the hour. We use building materials without understanding their installed performance characteristics. We install mechanical systems that are sized by rule-of-thumb. We install combustion appliances that cannot draft properly under even slight negative pressures. We have occupants that do not understand the basics of home maintenance. The list goes on and on.
Understand that your client’s expectations are changing. The internet has opened their eyes to an unprecedented array of needs, wants and information. The old adage goes “when the client knows more than the sales person, things do not go well.” Determine your buyer’s expectations for comfort, affordable fuel bills and good indoor air quality and design for those features. Market your vision and build on the model of affordable homes that exceed buyer’s expectations.
I share this with twenty years of experience and respect for the business of home construction. I want to see us succeed with strong margins, reduced callbacks and customers satisfied to the level all of us strive to achieve. This is an attainable business model and our only obstacle to finding this is our ability to say, “Yes - I can and make it happen.” There is nothing complicated here but a desire to plan for the future and a belief that change is fundamental to our industry. Optimism is what has made this country great and the belief in where you must go will be what makes your company great. Thank you for your foresight in making a difference. My optimism for this industry makes me confident in your future.
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