Beneath January

Image Source: New Home Star

We were fortunate this past week to get time with New Home Star Market Analyst Dan White to explore the key insights of the 2024 State Of Housing Report.

You can check out our conversation on TBD Player here:

Here are a handful of Dan White’s high-level remarks in excerpt form so that you can get a feeling for the robust strategic and tactical insights in the 2024 State Of Housing Report from New Home Star.

State Of Housing Report Overview

Dan White

Typical questions from our strategic and business client leaders helped craft the shape of this report. Without oversimplifying, it really all comes down to supply and demand. There are multiple metrics and elements we looked at within each of those two buckets. We looked at the supply side from the builder perspective: Their ability and desire to continue to build homes. From the consumer demand angle, it is their ability and desire to move forward with the purchase. That was the framework that we used for this, and the creation of some of the specific KPIs helped to drill down into those sub-buckets that make up that framework. Now, a builder or sales leader can take these metrics we’ve outlined and basically grade their own market – their own immediate environment – against these. One can pull the data, look at each of these items, and ask one simple question about each one: ‘Based on what we know, what we feel, what we’ve been told, and the resources that we have available to us, do we think that this metric is going to improve or get worse?’ Quickly, you’re able to create a scorecard for your market.”

The Consumer Lens

Dan White

We looked at home price trends across the country, and as we looked at the impact of affordability, we checked a couple of different affordability indexes that reflect buyers’ ability to purchase a home. We looked at wage growth, though, as it ties into their ability to participate as buyers, and job creation. We looked at all the factors that play into inflation data. That’s the centerpiece of a lot of the conversations right now. Then, we look at consumer confidence. That’s our last bullet point: On the demand side, it’s consumer confidence. On the supply side, it’s builder competence. That goes to the heart of regardless of what the data says. Are consumers confident in their job security? Are they confident their wages will continue to increase? That they’ll be able to afford this home that they’re moving into? Or is this confidence merely about the overall economy and market?”

Action And Alignment

Dan White

There’s a reason ‘alignment with your target audience’ comes first among the six recommendations. We focus a lot on TCP: Target consumer profile. Having a customer segmentation model to work with is paramount moving forward. Gone are the days of buying a piece of land because it has a great price, putting a product on it, and then hoping to find buyers for it because the numbers make sense on our paper. It’s kind of reverse engineering idea of putting a bit of a square peg in a round hole, really within these constraints in environments where affordability is the core of the factor. If you don’t start every conversation about a community with, ‘Who is my customer, and how can I tailor their entire experience from when they first interact with my website to when they’re in the field working with my team members? To when they’re building the home to win the closing, or furnishing their warranty?’ builders are certainly missing the mark. Other builders place more emphasis on the customer. And there’s a difference between just focusing on the customer and then knowing who they are intimately and tailoring the entire environment experience to them. That’s why this is our very first consideration for builders moving into this year.”

The Spec Dilemma: How Much Or Too Much?

Dan White

Well priced, well-positioned spec homes are selling very well right now. With all the uncertainties of the moment, the idea of signing a contract and locking into a home, a lifestyle, etc. that’s under construction and going to be many months down the road, with so much chatter from the media etc., can be a daunting task. Builders that have been able to push their levels of risk and have been able to appropriate the levels of capital nicely to build additional spec homes have been selling really well. Builders who elevated that risk tolerance towards the end of last year are going to have spec homes available for the spring selling season. They’re going crush it. The spec home is, as it’s been said, a proxy for the existing home market right now.”

Competition: It’s Not Just Homebuilder Rivals

Dan White

In an inventory-constrained environment, where affordability is the crux of the conversation, your competitive sphere gets very large. Customers – when they look themselves in the mirror and differentiate between wants and needs – see their backs against the wall. We’re seeing folks who would normally be a great prospective buyer for a builder say, ‘It just makes more sense to rent.’ Maybe that builder hadn’t even considered that the alternative to their product would be a rental product, or a resale down the road where typically they don’t have to worry about them as perceived competition. Those black-and-white landscapes of who are and who aren’t your competition blur into one another in an environment like this. So a builder who wants to stay on top of that needs to expand that mindset, and needs to consider what potential customers regard as competitors. Put yourself in the customer’s shoes. ‘Oh, this really is competition right now. This is an attractive alternative.’ Builders need to make sure marketing collateral and operations for the sales side are all dialed in to make sure that they’re building the value appropriately.”

Catch the TBD Player videocast with Dan. And download the New Home Star report here.