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There’s one very big difference between then and now, though: Mortgage loans are much harder to get. An index of mortgage credit availability reached almost 870 in June 2006. This March it was just 125. Lenders have raised lending standards even beyond the requirements of the Dodd-Frank Act of 2010, which was passed in response to the financial crisis. Loans are smaller in proportion to house values and borrowers’ income. Borrowers’ average credit scores are higher. And you can’t bluff your way into homeownership with a no-doc or low-doc loan—i.e., one that allows you to attest to your creditworthiness without providing full documentation.
Coy goes on in his “housing-is-bubbly-and-frothy-but-don’t-worry” piece to say that underbuilding, skyrocketing input costs, and a growing group of failed-bid house hunters may cool, but not totally undercut the market.
If house prices flattened or fell, some shoppers would undoubtedly hold off to see if they could get a better deal, exacerbating the downturn. On the other hand, conservative mortgage underwriting limits the risk of cascading defaults. Houses are expensive, all right, but this doesn’t look like a dangerous bubble.
This “soft landing” scenario may feel like a bad-trip flashback to those of us more prone to worry.
Still, the logic makes sense, and its implications for strategists focused on opportunity and solutions at a time most peers are preoccupied with the relative impacts of producer price inflation’s toll may frame out as follow:
- Time’s value is underappreciated today … builders and developers who can cultivate and manage time-released relationships with buyers that – via education, customer nurturance, credit management programs, and holistic customer financial journey-mapping – protract the buying and ownership process through the “bottleneck blip” of the next 6 to 12 months will emerge as market gainers.
- Innovators who succeed in ratcheting down the cost of assembling land, materials, people-power, and financing expense in any way that can re-ignite starter homes will also emerge out of the current fracas as winners. For example, if Phoenix, AZ-based Mosaic‘s ability to increase “throughput in the construction process for its partners by as much as 30%” can drive that 30% gain into savings on asking prices, a market-expansion like no other would be imaginable.
- Trust takes time to earn and care to keep. It’s one of the fuzziest of business pillars, and perhaps one of the most consequential. The Summer of 2021, moving ahead into the rest of the 2020s, could be a brightline, turning point moment with respect to trust.
Harvard Business Review contributor Ron Carucci, co-founder and managing partner at Navalent, dispenses with all corporatese as he sums up an argument to commit focus on matters other than price inflation right now:
There is no currency in organizational life more valuable than trustworthiness. We can no longer presume we have it just because we believe we haven’t done anything to breach it. In times of unprecedented uncertainty, it’s critical to earn and keep the trust of others every day. If you hope to enjoy a career of great influence and impact, start by cultivating a trustworthy reputation. Remember, somewhere in your organization, a colleague is sharing a story about their experience of you at their dinner table. What story do you hope they’re telling?
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