This report points to a three-year low for the percentage of Americans with an intent to purchase a home in the next year. A third of our way through what will be the scariest calendar quarter in any of our lives–we can only hope–the National Association of Home Builders Housing Trends Report begins to capture how profoundly sentiment has collapsed.
Never mind the fact that, were it so that one-in-10 U.S. households actually not only “considered” buying a house, but had the wherewithal to do so and acted on their intentions, it would be a record-breaking, bumper crop year–north of 10 million home sales–for both existing and new homes.
There are a few important nuggets to unpack here, and for leaders in residential real estate development, construction, and manufacturing, several critical take-aways.
One of the nuggets to highlight here relates to the timing of the NAHB survey–March 17 to March 28. Immediately after this data finished being collected, upwards of 20 million people sought unemployment benefits after being idled, furloughed, laid off, or put out of business as shelter-in-place and locally mandated business closures shut down a third of the economy. NAHB assistant VP for survey research Rose Quint notes:
“For this reason, we assess that responses in this quarter’s report mostly reflect people’s views prior to the full impact of stay-at-home orders and social distancing restrictions imposed by local and state governments.”
As cities, counties, regions, states, and the nation each become test-cases on when and how to try to reboot economic activity, all the big questions orbit around when second-derivative destruction–of health, jobs, dreams, and GDP–hits bottom, levels, and begins an inevitable period of reconstruction and recovery. One in three Americans, Gallup reports, have experienced a temporary layoff, permanent job loss, reduction in hours, or reduction of income.
Anxiety–which some people call “freaking out” and some people regard more scientifically–plays an important role in our societal pivot from fear to determined refusal to be defeated by it. COVID-19 testing, contact tracing, and hopefully, eventually, a vaccination will mark the necessary milestones, versus more arbitrary less meaningful time-lines, to a reset and recovery period.
Nobel Prize winning economist Robert Shiller explains how and why a new scary, killer virus and a scary economic pandemic wind themselves together more so than in the past, and make recovery from both more complicated. He writes:
“This time, of course, is different. We see buyers’ panics at local grocery stores, in contrast to 1918, when wartime shortages were regular occurrences. With the Great Recession just behind us, we certainly are well aware of the possibility of major drops in asset prices. Instead of a tragic world war, this time the US is preoccupied with its own political polarization, and there are many angry narratives about the federal government’s mishandling of the crisis.
“Predicting the stock market at a time like this is hard. To do so well, we would have to predict the direct effects on the economy of the COVID-19 pandemic, as well as all the real and psychological effects of the pandemic of financial anxiety. The two are different, but inseparable.”
Shiller also makes a point of an important distinction between now and other historic periods of big economic disruption and social or health turbulence. The degree to which Main Street and Wall Street are interwoven thanks to how pervasively households–employed workers–are invested in stocks via retirement and pension plans amps up the stress levels.
So, as the NAHB commentary on its Housing Trends Report indicates, the low-point in its data may not be in Q1 2020, but rather Q2. We’ll stay tuned to this time in July, when the Q2 data may be due for release, to understand–given the state then of jobs, emergency financial stabilization programs, and what Bill Gates refers to as “true normal” versus “new normal” COVID-19 curve trajectories–whether the falling knife has hit the ground.
Meanwhile, home building’s leaders need to reach yet further into their well of resolve for a pivot to a entirely new playbook that elevates housing and real estate development as an engine of economic, social, and cultural re-balancing and eventual healing for the hard months ahead.
Here’s how three contributors to the Harvard Business Review characterize the leadership challenge:
“While this is far from the best of times, it is worth asking what this time is actually best for. When business as usual is impossible, it’s the perfect time to ask: What might business possible, business next, business better look like? What might business with purpose accomplish? The challenge for leaders now is to steer colleagues and associates from business panic to brand purpose.”
The writers, strategic consultancy advisors Scott Goodson and Ali Demos, and Temple University professor Charles Dhanaraj make a suggestion for business leaders, to reframe capabilities in their business models to pivot toward a “crisis-worthy” purpose.
Home builders, as part of their DNA and essential business and operations model, do work that is “crisis-worthy.” They produce homes and communities, places whose meaning is well-being, health, sanctuary, a shot at prospering.
The pivot for home building’s leaders is–in my view–to shift from working downstream of policy and economic activity to moving to a forefront position. Home building–healthy, attainable, sustainable, and accessible–is the essential “crisis-worthy” calling, a regenerative jobs creation engine as well as an economic breeder-reactor of consumer spending, savings, and value creation.
The pivot challenge for home building enterprise leaders comes down to their ability to:
- Inspire … not simply to spark ambition, but to kindle real belief in dreams realized.
- Motivate … not simply to spur action, but to ignite resolve to achieving goals against odds.
- Engage … not simply to connect, but to unify effort around shared goals.
- Transform … not simply to change, but to blend experience with learning to forge a better future.
Each imperative here shares three common denominators: purpose, service, and trust. Inspiration, motivation, engagement, and transformation together establish guardrails that clarify mission, solidify relationship, and seal promises with action, honesty, and reliability.
What will set home builder peers apart from one another during the bumpy, choppy, spotty, and iffy second-, third-, and fourth-quarter stretches ahead will be the ability of some to activate purchase power among buyers who come through the disruption relatively intact by tapping purpose power.
Purpose power will stand out–among home builders and their partners as well–as society and the economy move from abnormal to “true normal” in the 12 to 18 months ahead.
