The coronavirus pandemic is a national emergency no builder could have prepared for, but CohnReznick Director Steve Friedman advises that builders prepare themselves for the bumpy months ahead as the country rebuilds. Besides tightening up daily expenses, some tips he offers is to sell unsold properties and lease the models back to keep cash on hand, apply for loans, and not renew lots that builders do not plan to use in the near future. Once companies gain stability, they can start thinking forward about how their buyer demographics may change and the features those buyers will want in a new home.
After nearly a decade of sluggish growth, the homebuilding market was finally looking up. The last quarter of 2019 was strong for homebuilders, as new household formations poked upward and contracts began flowing in for new homes. The first two months of 2020 were encouraging, and the industry was feeling confident that it could carry this momentum through the rest of the year. That optimism didn't last long.
With household formation and purchases both at a standstill, the coronavirus has shattered faith in the homebuilding market. A monthly confidence index of builder expectations compiled by the National Association of Home Builders fell from 72 down to 30, the largest monthly drop in the index’s 30-year history. Construction is ongoing in most markets, but once homebuilders exhaust the backlog of houses they have under contract, they could be waiting a long time for new business, according to CohnReznick Director Steve Friedman.