Specialist
Senior executive at American Properties Realty Inc
Agenda
- US homebuilding industry overview
- Industry trends, challenges and opportunities for large homebuilders
- Factors contributing to increased homebuilding demand
- 6-12-month demand outlook
Questions
1.
Could you start with an overview of the homebuilding industry, highlighting any challenges, opportunities, trends or themes?
2.
Where are we in the overall homebuilding and housing cycle? You said the sales trajectory suggests a levelling off. Does that account for seasonality? What is your outlook for aspects such as pricing?
3.
Various macro factors created the positive environment for home buying and homebuilders but the pandemic and aspects such as work-from-home were key drivers of the exodus from metropolitan areas. How much do you think coronavirus will continue to have a major impact, considering the Delta variant and other unknowns?
4.
There are discussions around a plateau but few indicators of a housing bubble. Do you expect any major pricing decreases? You said there aren’t any signs of overly inflated prices.
5.
Could you quantify the volume or home shortage? I’ve heard 5.5 million units.
6.
Previous Forum Interviews have noted that labour is incredibly tight, while you said it has been hard to stay on schedule and get things done due to labour-related challenges. Were there major exits from the homebuilding market in recent years? Has it never recovered since the 2008 financial crisis? What’s different today vs pre-pandemic?
7.
Do you think the challenges around contractors and the labour force will exacerbate or continue over the next 6-12 months? Are there signs that labour is becoming less of a constraint?
8.
Are lead times continuing to expand? Are they shortening or plateauing? Do you think materials and the supply chain will continue to be a challenge or is that alleviating in certain market segments?
9.
How flexible have homebuilders been in reaction to the challenges you’ve outlined? As you said, projects are taking longer and flexibility is required when ordering ahead and storing items.
10.
Weekly pricing increases are a non-traditional dynamic for homebuilders, as you mentioned. Did that significantly impact margins over the past 1.5 years or were prices appreciating at a rate that made it acceptable?
11.
Do you expect prices to revert or for weekly pricing negotiations to continue? Is that a new norm that homebuilders will accept?
12.
Do you expect any materials categories that have been highly inflated to remain elevated? Are you noticing a new normal in any particular materials cost categories?
13.
What’s the biggest risk around lumber price inflation? What would cause lumber prices to increase to a similar level to early pandemic?
14.
It seems that former primary markets have shifted to become secondary markets, while certain secondary markets are now primary markets. How should homebuilders react to that? Does this expansion of desirable markets create a once-in-a-decade opportunity for homebuilders?
15.
What used to be secondary markets could now be considered primary markets and there’s been a migration from metropolitan areas to more rural areas, where land acquisition is probably less expensive and easier to develop. Is that a big opportunity for large homebuilders who can identify those secondary markets and get pricing early on that seems attractive for what could become a primary market?
16.
Have you noticed any homebuyer demographics that have significantly outpaced others? What about starter homes vs more luxury homes? Has the rising tide lifted all boats, regardless of the buyer demographic?
17.
Has the relative attractiveness or profitability of multi-family vs single-family homes changed for homebuilders? It seems demand is strong across the board, as you said.
18.
Is there anything we’ve touched on that you want to revisit? What else should we consider about the future of homebuilding?
19.
How would you say the regulatory environment has changed with the Biden administration?
20.
Do you think the shortage or positive environment more broadly could catalyse a trend towards more M&A activity? Do you expect the rate of consolidation to stay the same or is this a prime time for larger homebuilders to start acquiring regional players?
21.
Are there any larger homebuilders that you would highlight as running an incredibly tight ship? Is anybody pulling ahead from competitors? How do you assess the competitive landscape for the larger national homebuilders that you’re familiar with?
22.
We’ve established that there are positive signs for large homebuilders, but how should they manage risks around aspects such as optioning land? Cautious optimism is obviously the best strategy moving forward, so what KPIs should they track to ensure they’re well-positioned if and when the market turns?
