DR. DAN’S 12 STEP PROGRAM for SUCCESS in HOMEBUILDING and RESIDENTIAL DEVELOPMENT ©2015

Twelve Step programs are well known for their use in treating addictive and dysfunctional behaviors. The first 12 step program began with Alcoholics Anonymous (A.A.) in the 1930s and has since grown to be the most widely used approach of other programs in dealing not only with recovery from alcoholism, but also from drug abuse and various other addictive and dysfunctional behaviors.

12 steps #2I apologize in advance to any of my readers who may personally been or have family or friends in or in need of a 12-Step Program but I believe that the basics of these programs not only provide hope and a foundation for personal self-improvement but also for the structure of success in any business and, specifically, the homebuilding industry.  And please forgive me for this statement but I believe that much of what I see across the country in homebuilding and residential development is often dysfunctional.

So with what I hope will be a little latitude and tolerance on your part, here is “Dr. Dan’s 12-Step program for success in Homebuilding and Residential Development”:    

Step 1. – Admit Powerlessness – we must admit that we are powerless over the market as it is established and managed by forces beyond our control and acts solely of its own volition.  We, as builders and developers, cannot create a market nor the demand for housing, only work to satisfy the needs and desires of the market as it may exist from time to time while recognizing that demand is subject to continual evolution.   And while we may be powerless over the causal factors of the market, we are not powerless over the actions necessary to satisfy the market  

Step 2. – Find Hope – we must believe that a power greater then ourselves can be of assistance and that power is knowledge – knowledge of the market and all of its components.  Only by studying the housing market and all of the underlying factors thereof can we hope to understand the true demand, the competitive factors that exist and the real and viable opportunities that are presented for success.

Step 3. – Never Surrender – we must make a decision to accept reality and take action, not just give up and fall by the wayside.  That action is to create a strategy for success based upon thorough research and analysis of the demographics and psychographics of the market, the economic conditions and factors, the competitive marketplace including both new and resale housing, and area and site specifics.    Continue reading

Perception

Brabara BillingslySitting at breakfast this morning at our local bagel shop I noticed a new couple in the restaurant and, at first glance, the woman appeared to be the spitting image of June Cleaver.  June Evelyn Bronson Cleaver, as played by Barbara Billingsley, was a principal character in the American television sitcom Leave It to Beaver which aired in the early years of broadcast TV over 50 years ago.  June and her husband, Ward, are often invoked as the archetypal suburban parents of the 1950s with two sons, Wally and “The Beaver”, ages twelve and seven (“almost eight”).  The episodes followed the escapades of Wally and Beaver and usually ended with a moral lesson delivered to the boys, but also often included reminders of childhood and minor lessons for the parents through the adventures of their boys – dull subject matter by today’s standards.

In the 1950s when I was ten years old and originally watched the series I recall that June Cleaver’s appearance was pleasant enough for an “older” woman but certainly nothing memorable. What led to an epiphany this morning was that looking at this woman now my thought was that she was very attractive which caused me to reflect on the realization that one’s perception is situational and, in this case, can change significantly with age or time.

Our family was blessed with the recent arrival of a new grandson and of course my wife and I flew up to see him and his parents.  When we returned home our family and friends asked to see pictures and inquired who he resembled and, as my wife was reaching in her purse for her phone, and as I have always been an advocate of honesty, I am afraid that I may have offended or at least greatly surprised several friends when I responded that, at least to me, my new grandson did not resemble another family member and, as with most newborns, he was simply not very attractive. 

This past week a homebuilder client was similarly upset when, in response to his question of what could be improved with his new homes, I replied that more attractive designs would help.

With our grandson, what a difference a few months made as he is turned into a little person and is really very, very cute.  Thanks to smart phones we are updated almost daily with pictures and videos and, being as impartial as possible for a grandfather, I believe that he could probably supplant the Gerber baby on their labels. 

On the other hand and unfortunately for my builder client, weeks, months or years will not make those homes more attractive.  I am not suggesting that these homes were repulsive and relegated to the realm of HomeVestors of America (you’ve probably seen the billboards – big black and yellow signs proclaiming “We Buy Ugly Houses”) but merely that they were simply plain, lacking any distinctive and superior flair or visual appeal.  Continue reading

HOMEBUILDERS – WAKE UP AND SMELL REALITY

Wake-UpI have taken the liberty of modifying the 1980’s adage of “Wake Up and Smell the Roses” which is probably the product of a mixing of metaphors – “Stop and smell the roses” (i.e., appreciate life) and “Wake up and smell the coffee” (i.e., get real).

The smell of roses and even coffee is usually quite enjoyable but what I am smelling lately in the homebuilding industry is something far less pleasant.  And we all need to take a deep breath of that reality and let it sink in so that we fully appreciate the implications if we are to survive and prosper in the future.  And that reality is the possible demise of the smaller, local production homebuilder who may well be forced into a permanent niche as an even smaller custom builder and remodeler. 

When I started in this business the homebuilding industry in this country was totally localized and smaller local builders dominated.  By the 1970s, the larger and more successful local builders expanded regionally and then, both through growth, merger and acquisition, the “nationals” came into being.  In recent times, aided by the downturn of the last decade, these industry giants have grown to the point that within the next couple of years they will account for over 50% of all new single family homes built in the U.S.A. and that is in addition to their overwhelming share of the multi-family for-sale segment. 

My uncle was one of those smaller local builders in the 1950s, 1960s and 1970s operating in the Chicago area and producing 30 to 50 new homes per year on in-fill sites.  He was quite satisfied to continue with that operation as vacant lots were plentiful and construction financing readily available and he made a comfortable living.  

Certainly conditions have changed – improved vacant homesites are scarce or non-existent in most locales and almost all of the choicest sites have been picked up by the nationals. Prices of land suitable for development are rising almost beyond reason and A & D financing often still remains elusive for smaller builders.  Competition is fierce with the “nationals” typically often enjoying price advantages due to economies of scale and national contracts providing cost savings and also from economies of scale in marketing. 

Instead of just rolling over and playing dead, however, I believe that there still substantial opportunities for smaller local builders to prosper in every market if they will make the commitment to properly research and analyze their markets and create a strategy for success!  That strategy will identify realistic opportunities in the market and provide a step by step program for implementation and success.  Continue reading