Cost is a daily battle. Battlelines move this way or that depending on where markets mark selling prices versus payment power.

Value, though, is a triumph over cost.

Assuming that what’s unsustainable has to give, in the back half of 2022 and probably all the way through 2023 into the first half of 2024, the big challenge for market-rate, residential builders and developers will be seizing advantage over peers. Winners and losers.

Winners will move from a less-is-less environment, to a less-is-more one – at least while the bumpy period ahead plays out.

Less-is-more – word on the ground in residential real estate and construction tells us – could play out in two arenas.

  • Geographically – where builders have pivot-ability to open up or expand as big-fish-in-a-small-pond in secondary or tertiary markets where they can pencil $50-million in current homebuilding revenues doubling or tripling within a 24 to 36 month period, owing to smart land intel and lower local regulatory, zoning, and permitting hurdles to clear.
  • Demographically – favoring builders with the product design and positioning skills to skew new home and community offerings to a more price-resilient, discretionary buyer, one who’s looking at the next “right” home as both an inflation hedge and a pandemic-era haven for health, security, privacy, and well-being.

A few deepest-pocketed builders can put velocity on their side by leveraging capability advantages – construction schedules, volume discounts, local vendor commitments, access to real-time vacant-developed-permitted lot take-downs, and clout on the manufacturer-distributor front. Those few can continue to make a run, particularly in

Source: Pew Research

As people are living longer and many young adults are struggling to gain financial independence, about a quarter of U.S. adults (23%) are now part of the so-called “sandwich generation,” according to a Pew Research Center survey conducted in October 2021. These are adults who have a parent age 65 or older and are either raising at least one child younger than 18 or providing financial support to an adult child.

Finding the discretionary, buyer whose wherewithal and near-term financial outlook can withstand inflation, interest rate, and economic uncertainty shocks and stresses will land a builder at the doorstep of value.

That’s a different kind of “needs-based” buyer; one with greater elasticity and more time to get the new home and community they really want.

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