LET’S NOT MAKE THIS “THE WINTER OF OUR DISCONTENT” FOR THE HOMEBUILDING INDUSTRY

Please forgive me for borrowing my title from the opening lines of Richard III, widely considered to be one of Shakespeare’s greatest plays.  I certainly would not dream to suggest that the quality of my writings is even in the same universe as those of the Bard.  And in all honesty, I have mixed feelings about that play as it is impossible for me to remember that monologue without thinking of Richard Dreyfuss’ portrayal of the title character as an exaggerated stereotypical effete in the movie, The Goodbye Girl.

Winter will soon be upon us, a typically lethargic period for the homebuilding industry.  This year portends an even more challenging selling season than usual with the continuing economic conditions, the still present foreclosure overhang, rising mortgage rates and the renewed and now real possibility of the removal of the homeowner’s mortgage interest deduction.

Instead of concerning ourselves with things beyond our control, however, I would suggest that we, as residential developers and homebuilders, adopt a proactive posture and fix our sights on what we can do to improve our sales and profitability.  My belief is that life is journey in which the goal is to learn and the key to a successful journey is education.  Knowledge is power. When we learn, new horizons open that enable us to learn even more and thereby obtain the tools that will increase our sales and our profits.

The first task toward gaining the essential knowledge in the homebuilding industry is to educate ourselves.  We must perform a Strategic Marketing Audit, an examination of our development’s and our company’s total marketing environments, both internal and external.  This analysis of the recent and likely continuing changes in the economy, the competitive marketplace and the target markets and their impact on us as homebuilders and developers will provide the knowledge to allow us to create realistic strategies to optimize our performance and profitability.  Continue reading

CRY “HAVOC!” AND LET SLIP THE DOGS OF WAR

Coming from a Midwestern middle-class background, my family did not deem it appropriate nor could they afford to send me to prep school so I did not have the benefits of a “classical” education, failing to learn Latin or to read Homer in the original Greek.  But apparently the Chicago public schools provided a fairly decent education, especially compared to what is provided today in public schools around the country, as I was taught biology, chemistry and physics, algebra, geometry, trigonometry and calculus, world and American history. I learned to parse a sentence and write somewhat intelligibly, I was exposed to both opera and classical music, and I read and read and read, including works by Austen, Bronte, Bunyan, Chaucer, Conrad, Dickens, Dumas, Golding, Hardy, Hawthorne, Hemingway, Huxley, London, Melville, Salinger, Shakespeare and Twain, to name just a few.

I am afraid that I have forgotten most of the science and mathematics but the appreciation for classical music that I first learned in fourth grade has stuck with me to this day.  Perhaps most importantly I learned to love reading.  The classical authors opened my mind to both the world around me and to the power and beauty of the written word.  And although I found both Conrad and Hardy to be somewhat overly excessive in their uses of the written word, I did appreciate their prose and imagery.  shakespeare 1We spent an entire semester reading Shakespeare.  I never was a great fan of the British history series but I must admit to being amused by Richard Dreyfuss’ portrayal of a flamboyant Richard III in The Goodbye Girl (1977). Although I enjoyed Shakespeare’s comedies, my favorites remain his tragedies, especially Hamlet, King Lear and Macbeth. Julius Caesar provokes mixed feelings as I had to translate a large passage into Spanish in high school, a painful experience, but my favorite quote from the Bard is from that play and is the headline of this blog.

I actually researched that phrase when I first heard it as I found it intriguing.  The military order “Havoc!” was a command given to English military forces in the Middle Ages to direct the soldiers (in Shakespeare’s words ‘the dogs of war’) to pillage and create chaos. And the quote serendipitously popped up in 1991 in a favorite movie, Star Trek VI: The Undiscovered Country when spoken by the Klingon General Chang.   And I find that phrase exceptionally appropriate to the homebuilding industry today.

There is much to be respected and admired among the larger members of the homebuilding industry and smaller sized builders should consider emulating many of these attributes.  The larger builders regularly produce quality housing products at affordable pricing, having refined their designs through cost optimization and secured a network of efficient subcontractors and suppliers who provide very competitive pricing.  They also are experts in scheduling the construction process and have refined their building cycles to the minimum thereby saving substantial additional dollars. 

The national builders are quite adept at general business practices, having secured advantageous access to the capital markets and, while they misjudged by overly aggressive land acquisition during the boom markets, they managed to successfully lobby Congress to amend the tax code and create extended loss carry-back provisions that will yield an estimated $2.5 billion in tax refunds.  This has helped many to turn a profit for the first time in years and create a war chest of more than $1 billion in cash now being used to snap up tracts of land at bargain prices to be ready for the coming homebuilding resurgence.

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