Industry Strategies for Weathering a Market Correction

For two years, home builders, building product manufacturers (BPMs), and investors have navigated a volatile market characterized by fluctuating prices, a constant ebb and flow of demand and supply, and an unpredictable economy. In order to stay afloat while bracing for more hard changes ahead, market players are implementing new strategies that could determine the trajectory of the next housing cycle.

Home builders are weighing the risks of taking on new construction projects in a market slowdown, and while some are pressing the brakes and slowing their production rates, others are forging ahead and waiting for rates to fall next year, John Burns Real Estate Consulting reports. In response, BPMs are pivoting their channels and materials to accommodate wavering demand from builders and contractors.

• Labor: The builders who keep building will get the best labor and the best terms.
• Materials: The builders who keep building will get the best materials and the best terms.
• Cash flow: The builders who stop buying land and keep selling homes will generate the most cash. Some will build a war chest and will continue buying back their own stock which is trading below book value. Others will need every penny to repay debt.
• Home prices: It only takes 3 homes to be sold in a neighborhood to reset prices. We are looking closely at every neighborhood with our clients to determine where that neighborhood’s future is headed. This is a location-by-location analysis.

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