The nation's housing numbers remind me of the scene in the movie Das Boot in which the captain of a German submarine escapes certain death by ordering the boat to sink far below its rated depth limit. Rivets pop, systems falter, and the crew nearly drowns, but the U-boat and its sailors survive.
You may recognize yourself in that sub's skipper. Like him, you have ordered drastic maneuvers and now find your operation tested by market forces that have crushed colleagues. How much longer, you may ask, must you withstand a new-home market submerged at these depths?
At least another year, it now appears. June's annual rate for housing starts, 549,000, trails even the paltry starts number for all of 2009. The economy remains unable to deliver the robust job growth that stimulates new-home construction, and there's still a huge overhang of foreclosed, barely lived-in houses clogging the for-sale market; in the first half of this year, Hanley Wood Market Intelligence says, twice as many of the houses sold were places repossessed by banks than were new homes just put up by builders.
The retrenching you have done these past few years, combined with a battle-tested resolve, should help you get through these harrowing times. Conditions will improve eventually. But as you rise, know also this: The horizon you'll encounter once you resurface won't resemble what you last saw.
The big difference, in essence, is that home ownership isn't going to be valued as highly in the future as it was a decade ago. Now that President Obama has signed financial reform legislation into law, his administration plans to examine decades of federal policies and programs that promoted home ownership, from Fannie Mae and Freddie Mac to perhaps even the tax deduction for mortgage interest. Underscoring that investigation will be the search for the answer to an even more basic question: Should owning a home remain part of everyone's American Dream?
If the answer to that question ultimately is no, then dealers need to prepare themselves for an increase in rental and multifamily housing. But even if the answer is yes, you can't expect a return to the old days. The frenzy of home building a decade ago often was propelled not by the American Dream of homeownership but rather by the lust for getting rich through property development. All that lumber sold to put up condos in Las Vegas and Miami and homes in Arizona and California wasn't due solely to homesteaders. Flip-crazed investors saw in those areas a potential gold mine, but now many will tell you that mine has been played out. Once again, for most Americans a house is just a home to live in and, hopefully, pay off before retirement.
Keep this sea change in mind as you read this issue. Our theme is management, and while many of our articles focus on tactics you can employ to get extra productivity and profit from current operations, we also raise strategic issues that could affect your future course–topics examining your training, your company's image, and whether to expand into new productsydusvvzf.
It's scary enough to lie at the bottom of the ocean or the bottom of a market, but with pluck and luck, you'll survive. Just don't expect tranquil seas when you resurface.