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Today's building and development environment is one of the toughest in decades. That's why you need Market Strategy Advisors– authentic experience in running a business in a downturn, repositioning and creating new products in an changing market, creating sales and marketing strategies that get results, improving processes to minimize risk and maximize opportunities, and designing data collection and research methodologies to get the answers needed.
Article #82
The BIA’s Development Trends Conference presented some very diversified opinions from the “experts” about where we are in the cycle and what changes are expected as opportunities return. Here is a summary of topics and their interpretation, both positively and negatively.
Obama Stimulus packages |
Infusion of capital into the market, saves financial institutions, saves owners |
Delays natural process, government more involved, union labor costs, inflation most likely, taxpayer burden |
U.S. housing starts lowest since 1945 |
Faster burn off rate of inventory = recover faster |
Driver for economic recovery (construction is) missing |
Housing prices have fallen to affordable price levels. |
Affordability is high, interest rates are low, and mortgages make sense relative to income and rental alternatives |
Falling prices =no equity; owners can’t move up or keep their home. Builders and banks have legacy development challenges |
1993 trough market in Southern Calif. was long and slow vs. hard and fast like now |
Recovery could be faster because of faster adjustment |
Fewer survivors because fast adjustment is harder for businesses to withstand; longer recovery b/c of damage |
Buy land now |
Builder need to “reload”. Investor had flipped first deal with double profits. |
Banks/FDIC haven’t processed distressed properties yet; More value declines to come |
Buy in-fill, affordable, near transit with green building principles |
Long term solutions will be addressed with higher density, better work, live, shop balance. Development will evolve. |
Difficult to build higher density due to cost and legacy single family values. Will have to burn through old product first |
While there are still a lot of uncertainties and challenges, MSA is optimistic that is now is the time to be positioned for opportunities. Land deals will present themselves in the immediate future. Many of the proposed land uses will need to be revisited in light of a changing economy and buyer attitude. MSA has a mix of expertise in strategy, local market knowledge and product development to help investors, lenders and homebuilders make informed decision.
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