The Housing Chronicles Blog: Boyce Thompson asks crowd of builders "A Good Time to Buy?"

Sunday, April 6, 2008

Boyce Thompson asks crowd of builders "A Good Time to Buy?"

While I routinely check out Boyce Thompson's blog, I actually found the latest entry courtesy of Boyce Thompson is the longtime Editorial Director for Hanley Wood titles such as Builder and Big Builder. What struck me was the headline: "A Good Time To Buy?" in which Boyce describes a speaker at a recent Hanley Wood conference:

A speaker at the conference Builder magazine is putting on this week had the audacity to say that he didn't think now was a good time to buy. He said that prices for new and existing homes are likely to continue falling this year, given that foreclosures are on the rise and the number of homes for sale is going to continue climbing...

It's a good thing tomatoes weren't served for breakfast, because the contrarian speaker would have been littered with them. Builders, it's abundantly clear, are sick and tired of hearing any negative takes on current market conditions. After all, they are fighting a life-and-death battle to keep their companies afloat. And one of their major leadership objectives is to prop up morale within their companies, especially among salespeople.

Spoiler alert: that speaker to whom Boyce was referring was himself.

Now Boyce is a smart guy who definitely knows about homebuilding from a macro-economic perspective, and I used to share the podium with him regularly when I was with the Market Intelligence division of Hanley Wood (he discussed national trends, and Market Intelligence consultants discussed local conditions).

But Boyce has also never been a homebuilder, he's always been a writer & editor, and I'm sure that's partly why his audience of builders didn't like what he had to say (plus they probably didn't expect the publishers of a trade journal to pile on, but their advertisers are manufacturers and suppliers, not homebuilders).

Still, that doesn't mean Boyce's speech was off point, but builders are an extremely sensitive group these days (and who wouldn't be considering the avalanche of bad news over the past 18 months), so he was certainly taking a risk in forcing some bad medicine on some unwilling ears.

I can certainly sympathize with Boyce -- every time I talk to a reporter I wonder if I've said something that will anger a potential client (it's certainly happened before), but if I'm seen as just another talking head for the industry then reporters won't call me -- in other words, a Catch-22.

More from his blog about this speech:

Later in the program the usual shots were taken at newspaper articles that contribute to negative consumer psychology. Private builders got their digs in about public builders that ruined the market by pursuing 20 percent annual growth at the behest of the public capital markets. Some speakers criticized cash-strapped builders desperate to sell homes by offering six-figure discounts that condition every buyer in the market to ask for concessions...

It's important that builders not "smoke their own," so to speak, that they not confuse what they are telling potential buyers and their employees with what they really believe. Most housing organizations, including the NAHB, are calling for a decline in housing sales and starts this year. Mortgage rates may be historically low, and recent moves to liberalize FHA credit and allow Fannie Mae and Freddie Mac to buy more high-priced mortgages may help. But probably not until later in the year...

At the same time, builders need to reach out to more potential new home buyers, even people who may have cancelled a previous new home contract. A far more sophisticated approach to demographics is required; we need to reach submarkets that aren't served by the existing home market. Rest assured, there are buyers out there who still need to move, who still need to buy a new home. We need to find them and convince them that our communities are ideal places to live.

The boldface above was mine: in my own experience, builder largely ignored detailed demographic supply/demand analyses in their market studies during the boom (at least in terms of what they asked from us; perhaps they did more detailed analyses in-house or had them produced from another source, although I doubt it). That's also why I blogged last week about Jonathan Smoke and his work at -- because he's ready and willing to delve much deeper in the demographics & psychographics of demand than most builders, lenders and investors have seen. Such detailed analysis could probably prevent another boom-and-bust cycle that was based not on actual demand but other ancillary reasons and pressures.

Finally, a closing note from Boyce:

It's important for builders as business managers to separate what they want customers to believe from what they know to be true. Everyone today needs to be planning for the worst and hoping for the best...Go ahead, throw tomatoes.

No comments: