It was the most turbulent take-off I’ve ever experienced in the last four years of around 220 flights or so. A thunderstorm had just rolled through Charlotte and delayed us by 30 minutes. No big deal. As we taxied to the runway for takeoff, only a light drizzle hung in the air and, as usual, I fell asleep in a few long seconds before we even took off.
I woke up to the woman in front of me shrieking with her companion trying to crack the tension by musing that there was “no need to go to Cedar Point to ride a roller coaster today.” No one found enough humor in his joke to feign a laugh.
I’ve certainly experienced some bumpy rides, but this went on for a pretty solid 10 minutes – up, down, and side to side. A clear 8.0 on the Richter Scale. Mobile devices were disconnecting from corded headphones and propelling through the air…
It stopped as suddenly as it began. We broke through the enormous storm clouds, and beams from the setting sun collided and swirled among them to create a serenely beautiful landscape. The worst of it was behind us. As the plane leveled out, we could finally enjoy the view.
The Storm of The Great Recession
If you were in the new home industry from 2007 – 2009, you likely shared a similar experience to my flight out of Charlotte. Many larger cities across the country saw over 40% of sales volumes decline in the first year alone. The clouds of uncertainty were swirling, and many volunteered to leave for greener pastures. Older marketing tactics stopped working entirely, no one bought without large discounts, and your biggest competition became foreclosures and banks not willing to lend money.
Headcounts were reduced, meaning you may be working with two job titles or more. Developers found themselves needing to create their own home building companies because no one else would buy lots from them. Home builders and developers routinely declared bankruptcy. It was an incredibly difficult time – and I’m glad I experienced it. The skills and grit I gained from that time period have left a lasting positive impact on me.
The Storm Has Passed
You may not be able to tell by looking at every company out there, but the Great Recession has been over for quite a while now. If a builder learned to adapt their processes and products to the new landscape – they often recovered quickly. Many who were number four or five in their market are now in the top two. They leapfrogged the laggards to change.
In fact, the market is now so good that almost everyone is winning in one way or another. Similar to the stunning cloud-filled landscape on my flight after the storm, this is a beautiful time to be in home building. Well-selected inventory sells quickly. Price increases are mostly absorbed without impact on volume. Sure, this isn’t heaven on earth – but it’s pretty darn close. It may not get better for a long, long time.
Very Few Are Happy
I’ve noticed something a bit strange though – the cultures of many companies aren’t feeling the positive vibes. I’m not talking about people that we work with regularly at Do You Convert, I mean the hallway conversations at conferences around the country. The headlines from the major home builder industry magazines and their email updates make it seem like peril is all around us. Individuals are being let go by their organizations despite hitting numbers that, compared to just a few years ago, are pretty darn good.
At many companies, the sales pace is significantly above goal for the year, and yet leaders feel immense anxiety over a week or two of slower performance in July (something that often happens every July or August). What is going on?
I don’t have strong bullet-proof excel files filled with numbers to prove anything, but here is what I think is causing this state of anxiety in a great market:
- Profit percentages per-house are lower despite a sharp increase in volume due to rising costs and regulations.
- Builders are nervous to move further out from metropolitan areas where land is cheaper because they still remember what happened to similar communities in 2007-2009.
- Expectations from consumers about what kind of home they want to live in has shifted faster than builders’ floor plans / inclusions.
- Everyone’s expectations on how easy this is supposed to be are out of control. Home building is an incredibly tough and capital-intensive business for returns that often are lower than the stock market.
- Those who were part of the previous high market in 2004 – 2006 are comparing this current market high and feel like it’s still “not that good.”
- Those who entered the new home industry in 2010 and beyond have felt it get a little bit easier every year – until the current hiccup in the market. They can’t compare it directly to how tough it was in 2007-2009.
Not everything on my list is likely under your direct control, but as a leader (or future leader) at your company, you can impact the last three. They deal with mindset and attitude – yours and that of your teams.
Don’t forget to celebrate the victories, prepare for the tough fights ahead, and encourage everyone that this industry (and your company) has passed a significant test in the storm behind us. There will certainly be new storms ahead, but for right now enjoy the view out of your window from 20,000 feet now and then. It truly is a better time to be in our industry than you may be feeling right now.