The Housing Chronicles Blog: Lessons from the housing bust

Tuesday, May 5, 2009

Lessons from the housing bust

For better or for worse, the depth and length of this housing bust is sure to change the way in which many builders do business. Although this blog has been regularly tracking these changes, Builder magazine's John Caulfield has written an article that summarizes just what types of changes we may see in the future.

Even still, given the highly politicized environments at most large building companies, just because someone has a good idea doesn't mean it will make it past the egos potentially in the way. In fact, I know of one senior executive from a top public builder who was shown the door when he was trying to throw up red flags that the market was starting to slow and they should get rid of their land positions -- and this was back in 2004! From the article:

For more detailed information on the six recommendations visit here.

Many builders would argue that recessions come and go, and this one, too, will pass, so why make dramatic changes? But many of these same builders have called this recession the absolute nastiest they’ve experienced, and no one wants to go through this again. So, to help readers who want to avoid such scenarios in the future, BUILDER has assembled six “lessons learned” from the housing bust, based on our reporting since last fall, when the economy took a severe turn for the worse.

Some of these strategies would require simple changes. Others are more complicated to achieve. All of them, though, do ask builders to muster the guts and the vision to look beyond the status quo, and be flexible and open to new ideas for operating a home building business for the long term, through the booms and the busts...

1. Build Smarter

2. Limit Your Land Holdings

3. Find New Cash Streams

4. Respond Quicker to Market Conditions

5. Value Your Workers and Trades

6. Diversify Beyond New-Home Construction

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