Homebuilding’s Endangered Species: Margins Of Error

They’ve been around for so long in homebuilding and its fiercely complex and ingrained

With margin-of-error cushions at virtually every intersect and hand-off, the paper trail of operational excellence and financial accountability could go on under the hood as long as an end result stood for itself as success, or a relatively believable promise of it. Ways to hide or at least play down the tracks of inefficiency, of mismanagement, of overspending, or waste of some other sort often traced back to those margins of error.

Now, the Four Horsemen are carrying on a ruthless campaign to search and eliminate each and every remaining one of this slush funds of operational wiggle room.

The margin of error is significantly lower than it has ever been,” says Salman Ahmad, ceo and co-founder of Mosaic. “As costs increase so fast, and supply chains come apart, and labor gets stretched thinner and thinner, and construction cycles elongate longer, the only recourse is to seize on opportunities for visibility and predictability, because managements are beginning to realize those days that they could live and even thrive within those margins of error are never going to come back again.”

Mosaic today has released a second round of survey insight into homebuilding industry-wide adoption and interest in a range of building and management technology and data solutions, with evidence homebuilders are pushing into a “technological tipping point as they look for new ways to work smarter and more efficiently to maintain current production levels.”

In Ahmad’s view, the long elusive business and operational bulwarks of predictability and visibility are accessible, i.e. they’re no longer a pipedream but an essential dimension sustainable profitability in a more resource-constrained future of homebuilding. Rather than hold out and continue to rely for viability and success in the domain of margins of error, Ahmad notes, more builders are committing, investing, implementing, training, and integrating technology and data solutions. What Ahmad finds fascinating is an accelerated embrace among homebuilding operators and strategists, even as The Four Horsemen wreak havoc in what was to be – and many still expect will be – a bang-up, ladder-wrung upward year for homebuilding in 2022.

The adoption and progressive use of technology we’re seeing builders evolving towards as they try to get back in step with homebuyer and single-family rental demand falls into three buckets,” Ahmad notes. “Number 1 is reporting, where clean, holistic, real-time, increasingly automatic data can take the place of anecdotal data, which is often lagging and isolated.  A second dimension is in management tools that can shore up accountability in ways that impact the whole process, inclusive of positive effects with the building trades, because these days, trade networks and trade relationships turn out to be far more important than even capital relationships to get work done. The third area of technological investment and impact, of course, is in product, the construction, factory-based, pre-fab, and integrated assembly capabilities.”

The recently harvested Mosaic insight on technology investment and adoption – when peeled back to its raw data break-outs – reveals a stronger lean-in to technology, logically, where volume and demand for housing activity is highest.

Ahmad notes that particularly where a double-stream of household demand – for both single-family for sale, and single-family built-to-rent homes – is smacking up against capability constraint, the disposition among builders to invest in and operationalize technology solutions has accelerated.

Single-family built to rent has three sources of rocket-fuel unlike other assets in the residential real estate continuum,” says Ahmad. “Consumers definitely want it, either for financial reasons or by choice; investors love it because of its profile investors can own as a cash-flowing, net-present value holding; and builders like it because of a trade base that’s already established and integrated. The gap, now, between potential development and actual building capability can only be closed with technology solutions, because there’s little to no margin for error to fall back on, and there’s such a huge upside if builders can leverage visibility and predictability to get good at it.”

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