2 minute readBuilders may have a helluva time building these days, but that’s not stopping more than four out of five of them from believing things are improving these days when it comes to selling what they can build.
Sellers of any place one could call home are, by and large, giddy. Partly because they’re so few and far between; partly because of millennial biological clock-ticking, personal-identity-statement, fear-of-missing-out demographic absolute numbers; partly because of the Uncle Sam punchbowl; and partly because, now, inflation risk – piggy-backing pandemic panic — makes real estate owner a safe, sound bet in a world of price-wackiness.
And, importantly, partly because “buyers” of homes includes scores of capital flush investment giants who’re betting on burgeoning build-to-rent empires as silver bullets in a need-for-yield investment environment.
Essentially, what builders, sellers, even build-to-rent gold-rushers are wagering is a massively tilted playing field, a landslide of consumers with money in their pockets and just a few options open on getting to the destination – sanctuary, peace-of-mind, safety, privacy, space – they want to be in as a dicey world outside sputters and pops toward balance.
The data makes these bets – including a wager the tilted-playing field effect will continue – evident.
Mathematically, if standing inventory has bottomed it means that directionally more inventory in the market is expected. This can impact pricing, time on the market, and margins for builders.
The strategic and management issue for homebuilding enterprises is recognizing and solving for prospective buyers’ means and behaviors in a homesales environment whose dynamics and complexion evolves in the months ahead.
Listening for signals, not noise, will be a critical differentiator for winners versus losers in a timeframe where builders don’t want to blow their once-in-a-generation opportunity to turn a rising tide of would-be homebuyers into residents in their new-home communities for a decade to come.
Here’s timely sage advice from “Thinking Fast And Slow” author Daniel Kahneman on consumer market signals versus all the noise.
Once you become aware of noise, you can look for ways to reduce it. For instance, independent judgments from a number of people can be averaged (a frequent practice in forecasting). Guidelines, such as those often used in medicine, can help professionals reach better and more uniform decisions. As studies of hiring practices have consistently shown, imposing structure and discipline in interviews and other forms of assessment tends to improve judgments of job candidates.
No noise-reduction techniques will be deployed, however, if we do not first recognize the existence of noise. Noise is too often neglected. But it is a serious issue that results in frequent error and rampant injustice. Organizations and institutions, public and private, will make better decisions if they take noise seriously.
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