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The residential building industry in the United States is embroiled in its most challenging business environment in decades. No sector of the market has been left unaffected. Homeowners have watched in horror as their most important asset lost 20% or more of its value. Land developers are faced with much longer holding periods and the need to re-evaluate the capital structures of their deals.
Multi-family developers, builders, and owners (even though experiencing pent up demand for rental housing, have been forced to defer projects because of the disruption in the capital markets stemming from the mortgage meltdown. Large homebuilders have been forced to dramatically reduce their land inventories while scaling down their operations. Trade contractors across the country are facing restructuring and bankruptcy. Professional dealers are looking for ways to diversify their market risk while downsizing their operations. Building product manufacturers are reducing their output, downsizing and attempting to move into new markets.
We believe that the housing boom of the early 2000’s and the subsequent downturn have fundamentally changed the nature of the residential building industry. Access to land will remain a critical need for developers and builders but the volatility in land value and the cycle time for development will drive the public builders away from taking significant long-term land positions and towards contracting with developers for finished lots. This factor along with on going cost pressures and constrained access to capital will increase the pressure on builders and developers in both single and multifamily sectors to know their market and hit that market with the right products in the right places, designed, procured and built with higher efficiency, quality, safety and lower cost.
For more information on FMI's Leadership Institute, please contact Clark Ellis at 919.785.9376
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