Market Update- May 2010

Tell the Troops: The Battle's Not Over

Had an interesting discussion with a Division President of a high volume, national builder. One of his employees recently requested a raise and the Division President was trying to determine market rates for her position. In the course of our discussion one thing was clear: his team had been selling, building and closing lots of homes this year, due in part to the (now expired) homebuyer tax credits. Increased sales and a return to profitability– no wonder employees are thinking it's time to ask for a raise. However, no one should be misled into thinking things are "back to normal". Potential challenges remain, lurking like a storm on the horizon. No one knows for sure whether the storm will pass by or head straight down Main Street.

Therefore, this Division President continues to manage his overhead judiciously which doesn't leave much room for pay raises. However, he can't assume his employees are tracking the economic forecasts like he is. The take-away: Now that the home buyer tax credit window has closed, it's a good time to remind your team that our industry is a long way from being out of the woods. As much as raises might be deserved, survival is still the name of the game and that rumbling in the distance might be thunder. Managing overhead and expenses today might well fund shelter from the storm tomorrow.

Upbeat Attitudes at Spring ULI

Wow! Talk about turning a 180– the energy and attitudes at Spring ULI in Boston were a dramatic improvement from six months ago. With a nod to the conservative forecast above, no one dared claim victory over the recession. However, it was clear that deals were being done, people were busy and there was plenty of forward looking discussion. The one which caught my attention more than any others was given by James Chung of the consumer research firm, Reach Advisors. Some highlights:

Asian American, Hispanic and Mixed Race families will experience significant growth in income, home ownership and as a percent of overall U.S. population. In terms of income earners, Asian Americans will pass White families as leaders of the pack.

Gen X buyers place far more value on community attributes than premium home features. However, they were not afforded the same income opportunities early in their careers as their Boomer parents. Therefore, builder must adapt their product and communities if they hope to tap this segment.

Today, women with equal education earn 79% of what their male peers earn. However, within the next ten years women will earn 1.5 times more than their male work peers. Women are already earning 100-120% of what their male counterparts earn in certain cities. The residual effect is that many of these women will continue down career paths for longer periods of time meaning longer time before marriage and starting families.

White (non Hispanic) families will decline as percentage of population growth and income leadership. In terms of income alone, Asian American families will become top earners yet their percent of homeownership is (today) far lower than their White counterparts. Hispanic families will also see a notable increase in home ownership potential.

To see the complete presentation, drop me an email or visit the website of Reach Advisors.