To Wall Street and many home builders, their business is moving units, turning inventory, generating margins of return on invested capital. To a strong, deep, and seemingly enduring stream of buyers, those teeming transactions are something else: home, livability, well-being, a place to prosper.
New home buyers are ante-ing up in droves to solve a three-part life riddle right now. Pandemic, economic, social, and political turmoil continue to wreak unrelenting havoc on the zeitgeist, spread fear, and dim the horizon. The problem buyers are so keen to solve draws off three classic coordinates: Price. Product. Location. Maybe or maybe not in that order. New home builders, as it turns out, do price, product, and location like it’s nobody else’s business. It’s their stock and trade, and they’re doing it at capacity and velocity levels they’ve hardly even tried to achieve in 15 years.
The best news for builders selling their new home offerings as fast as they can produce them is that—in admirably quick response to the onset of pandemic shut-downs and safety protocols—they deftly got out of their own way in the “buyer’s journey’s” leg, from serious interest to the [mostly virtual] settlement table. Technology, user-experience, data-channeling, mortgage qualification and approval, and process re-engineering removed—in a flash—pain, time, and confusion from home buying, adding personalization and a meaningful sense of care to the experience. When they had to get better at selling, they did in a jiffy, and they’re reaping big rewards.
“It’s like we’re driving a Ferrari 130 miles per hour, trying to keep pace with market demand,” expressed a strategic executive at one of the nation’s top home building enterprises. “Problem is, there’s no fuel gauge to see what’s left in the tank.”
A menace scarcely noted in builder talk-tracks these heady, full-speed-ahead weeks and months, is the matter of what could be speeding towards them from around a blind corner. That collision is in the form of a pandemic economy recession whose impact on households and wages, industry sectors, geographies, and customer segments, largely believed to be contained (i.e. remember, the same term, contained, was used to take comfort in subprime mortgage loans in 2007 and 2008). Still, until the “concentric circles” of economic, financial, and social damage play fully out in the coming months, guessing whether they will or will not infect households, incomes, investors, and businesses that, as yet, have bounced back or remain unscathed after initial shocks is just that, guessing.
One of the biggest worries they do eat, sleep, and breathe these days is feeling a magnetically unconquerable tug among their input costs—for materials, land, and skilled labor—uncontrollably higher. In fact, without much advance notice, the Ferrari could either run out of fuel or lose traction with the road altogether, soaring beyond all tolerance points of household wherewithal.
They dread an Icarus bounce, flying too high for their own good, and then melting down. Even should fear-of-missing-out, dirt-cheap borrowing rates, and contagion continue to pull both pent-up demand and future-demand into its teeming funnel, a real-world worry growing among builders has to do with the elasticity—or rigidity—in their product pricing versus would-be buyers’ buying power. If they stray beyond household means tolerance points—and who really knows where those tolerances will stress and burst?—they’re likely risking a disinflationary, or deflationary swath of damage to follow.
Real estate experts and analysts couch prognostications in such times of bewildering uncertainty and volatility—and in the face of loudening warnings of wide, deep, and long economic duress to come—in four mantra-like terms, whose range allows them wild and wide variation and usage: Bumpy, lumpy, choppy, and iffy. Those terms come into play in housing when big swings are possible, and when people want to be right, those swings go in the direction they’re suggesting or its opposite.
What’s clear is this. Builders advanced light-years in a few weeks’ time this past Spring, removing pain and adding value in the process of matching a product, price, location—and importantly, an add-to-cart, click-to-pay ease to the buying dimension—with people set on new-home ownership.
Those buyers, however, no sooner will solve for that price, product, and location model, and take possession of their new digital keys to their IoT entryways than they’ll be looking for their new home’s livability virtues to kick into play, living up to their promise of well-being. Is the indoor air pure? How does it exchange with outdoor oxygen, and filter out particulates or other toxicants? Is room air comfort engineered well? How about the water purity? What about light? Is it healthy and natural, or artificial? Are building materials—and their breakdown or off-gassing—healthy? Does vapor get trapped in the wrong places? Too, noise levels—do they promote comfort, peace-of-mind, or are they disturbing? Livability may include values homeowners place in privacy, in security, durability and resiliency, in wildfire proofing, in safety, in connectedness with natural beauty or culture or food or friendship.
Starchitect of early last century Le Corbusier coined the phrase, “a house is a machine for living in,” 93 years ago, but, how well it has aged! It never misses a beat in relevance. Never has it meant nor mattered as much, nor packed quite the punch it does in these strangest of times.
Offering an array of IoT sensor-enabled technologies and advanced-science building materials, American home builders’ new smart homes, new sustainable homes, new resilient homes, and new healthy homes are all selling like hot cakes.
Is it because people want “machines for living in” to be smart, sustainable, resilient, or healthy? Or is it because—in pandemic times—they want nothing so much as for them to be new, and solving the price, product, location life riddle? What’s more, given the almost instantaneous pivot this whole new class of new-home buyers are making, from solving for that life riddle, to demanding squishy, fuzzy livability solutions that matter to them in their “machines for living in,” builders face an immediate new challenge. Are their home designs, construction, engineering, and home management systems going to perform and live the way their owners need them to? That’s a new home value proposition for the 2020s.