PRESIDENT'S MESSAGE
I’m not an economist, but... W
e are in the midst of the selling season, and from talking to builders around
By GHBA President
KEVIN FRANKEL, CGP Frankel Building Group
“More than most other industries, the residential building sector seems to be affected by consumer sentiment rather than consumer needs. Consumers are going to use any information at their disposal to form an opinion...”
town, single family seems to have surprisingly stable sales. As a qualifier, I have not taken a huge sample, but the response has been very consistent. Why stable sales? Low inventory. Why would sales be surprising? Low crude prices. Is it that simple? Sure, unless you want to plan any part of your business!
More than most other industries, the residential building sector seems to be affected by con- sumer sentiment rather than consumer needs. Consumers are going to use any information at their disposal to form an opinion—it could be
har.com, daily financial web news, golf course talk, card games, and discussions with their father in-law. Developers, builders, remodelers, and suppliers are in the business of creating rel- evant and sustainable homes that are generally in low supply. We are using fundamental busi- ness practices in a non-fundamental industry.
Starting last October, many consumers told me directly that homes in Houston were no longer in demand at all. The homes that my friends and I were building went from scarce and critical to completely useless overnight! But what about
the grossly depleted inventory, I would ask? “That was yesterday. Everything has changed.” The entire city would be out of a job in a month, a major sell-off would take place, and all home prices would correct 25%. It was no longer a blessing to be in Houston.
We all heard and read this. What’s more, local news was running quotes from major commer- cial land owners and developers. Consumers had no choice but to change their view. I know that our own industry insiders may have felt the same negativity. I have also seen construction and lending take a “wait and see” stance. Was this an overreaction?
In January, Dr. Mark Dotzour explained (and I paraphrase) that the business fundamentals had not truly changed. The oil price crisis was real, but the consumer had reacted strongly. I look forward to the economic forecast in June.
By the time you read this, Dr. Dotzour will have explained further how fundamentals win over bad feelings. (I know this because it is in the event listing on
ghba.org). His informative presentation will certainly continue to inspire us to follow the business basics, and not get too caught up in the buzz.
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www.hiallc.com 12 JUNE 2015 | HOUSTON BUILDER | GREATER HOUSTON BUILDERS ASSOCIATION – BUILDING A BETTER FUTURE
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