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January 03, 2022

Preparing for the New Year

Happy New Year!

Normally, at the beginning of the year, we talk about new trends – what’s in and what’s out. But I’d like to start this year off differently. When I think of the last two years – I think of massive change, upheaval, recovery, and challenges. And yet here we are starting a new year. I am reminded of a funny T-shirt my husband once had.

“If you expect the unexpected, doesn’t that make the unexpected, expected?”

I think that should be our motto as we start off a new year. We need to expect change. What exactly will change is widely speculated but largely unknown, which is why we must remain nimble. Let’s learn from the past two years and how many successfully pivoted.

  • From in-person sales to remote sales
  • From in-person meetings to Zoom meetings
  • From working in an office to working from home
  • How important work from home spaces gave new construction an edge.
  • From an in-person builder convention to a virtual one
  • How we adapted to supply chain challenges and worker shortages (maybe still trying)

That’s quite a list for the homebuilding industry by itself. Other challenges this year included a massive power outage in Texas, a major hurricane in Louisiana, and most recently, raging wildfires in Colorado. Throw an ongoing pandemic into the mix and it felt like the ground was constantly shifting under us.

And yet, the people I’ve worked with over the past two years have shown incredible resiliency, grit, and determination. This brings to mind another T-shirt slogan. One that includes a United States Marine Corp emblem with it:

“Improvise, Adapt, and Overcome!”

What are some possible changes coming in 2022 and strategic responses?

Rise in Interest Rates

Rising interest rates seem to be on everyone’s mind these days. This may mean some families won’t be able to qualify to purchase an already increasingly expensive new home. But they may qualify for a single-family rental. One strategy may be to offer both homes for sale and for rent. One builder client is a huge advocate of having both. He says the constant income from rentals helps the normal ebb and flow of for-sale housing.

Another strategy would be to develop an affordable line of houses like DR Horton’s Express or Ashton Woods’ Starlite. We don’t want to lose the entry-level market in the midst of the craziness.

Rise in Land Cost

I guess we should always anticipate land costs going up. One strategy would be to develop higher density product. For single family builders, this may mean developing a paired villa product – the next best thing to single-family.

For townhome builders, this may mean exploring a narrower building envelope – though I shutter at just how narrow townhomes have become!

Rise in land cost could also make infill lots more attractive – particularly in markets where the cost of the land has surpassed the value of the home that sits on it. Several builders have developed an infill division. These opportunities bring unique challenges with trees and neighbors, but the payoff can be enormous.

What lengths will you go to acquire in fill lots? One builder recently bought a perfectly sound house because he wanted to put four houses on the lot. Rather than simply tearing down the house, he donated it to the local fire department for practice. Then once the fire was out, he scraped the rest of the lot. This builder was definitely thinking outside the box!

Rise in Lumber Cost

When lumber costs go up, other forms of construction suddenly become more attractive. Currently, there are interesting developments in 3-D printed houses. There are also some very attractive panel systems that work for both walls and roofs. Check out RSG-3D – a panel system that is fire, flood, hurricane resilient and is energy efficient – which became cost competitive when lumber prices were sky-high.

Electric Cars and Power Failures

With the recent push for electric cars from automakers and the federal government, many are charging into the market (I couldn’t help myself with that pun) by adding electric car charging capabilities into their houses.

Those in Texas and other Hurricane-prone areas know what it is like to be days or weeks without power and fear that relying exclusively on one energy source is putting all your eggs in one basket. It’s bad enough to be without power for your home, but if you can’t charge your car, does that make you trapped? I like the idea of installing back-up generators for houses in the event of a long-term power outage.

These are the things that keep me up at night – and I’m sure there are many other changes coming that I can’t even image. But I am trying my best to be ready and not be frozen by fear or indecision. While some stability would be welcome, we can only play with the cards we are dealt. The home building industry has shown that it is nimbler than we would have thought five years ago.

Which takes me to my last T-shirt slogan of the blog. Actually, it the one and only song on my Pandemic playlist (yes – that is an actual thing). In 2020 I played it at the start of every Teams meeting.

“I get knocked down, but I get up again. You are never gonna keep me down!”

Let’s build on the lessons learned and go into 2022 with renewed vigor!

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This post was written by Housing Design Matters