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Flawless Execution Will Divide 2024's Winners From Losers

Six operational imperatives will build flexibility and optionality into homebuilding firms' near- and mid-term capacity to withstand both continued volatility and turbulence regarding demand and ongoing supply constraints.

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SNAP.BUILD

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Technology

Flawless Execution Will Divide 2024's Winners From Losers

Six operational imperatives will build flexibility and optionality into homebuilding firms' near- and mid-term capacity to withstand both continued volatility and turbulence regarding demand and ongoing supply constraints.

Together with
December 22nd, 2023
Flawless Execution Will Divide 2024's Winners From Losers
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First, let's take stock of market-rate real estate and construction's own version of a classic Santa rally.

These tidings – gifts of economic activity, momentum, market sentiment, and behavior – arrive with Swiss-watch precision, to brighten the year-end celebration of what your teams have endured and accomplished, and what they can anticipate in the months ahead. They each fall into a "the-things-we don't-control" bucket that business leaders regard as important only insofar as requiring preparation and resiliency rather than as operational or strategic priorities.

Yes, New Home Sales for November came in lower than expected, a reminder that seasonality and the leftover weight of high 30-year fixed mortgage interest rates can continue to exert a dampening effect.

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Still, 2024 is setting up as a strong year – in broad strokes – for operators that set themselves apart, standing for unflinching customer focused and unwavering obsession with operational excellence and execution.

'Especially when weighed against the high new home starts number released earlier this week, low new home sales in November aren’t particularly significant,' Robert Frick, corporate economist at Navy Federal Credit Union, said in a note. 'The new home market is shaping up to have a good 2024, with already high inventories and more in the pipeline. When rates come down next year, there will be a surge in sales.'”
The outlook for the new-homes market has brightened as 30-year mortgage rates are back below 7% amid expectations the Federal Reserve is poised to cut borrowing costs next year. In addition, builders are taking advantage of lean inventories in the resale market and luring buyers with incentives such as subsidized mortgage rates and price cuts." – Bloomberg [gift link]

The backdrop of the critical "things we do control" bucket – ongoing shivers of volatility, uncertainty, and a lingering, menacing vibe of economic risk and weakening in the job market – puts extra emphasis on surefooted, clockwork execution at the detail and sub-detail level of where homebuilder operators generate and drive value: customer well-being, team-member engagement, trade partner commitment, and stakeholder investment.

That backdrop – due to hangover effects of tighter money supply, higher-for-longer interest rates, and a looming commercial real estate correction expected to further disrupt normal access to bank project and entity-level lending – narrows margin-of-error tolerances and raises operators' performance expectations around velocity, smoothed and steady in- and out-flow of resources, agility, and flexibility around customers' evolving financial and timing needs.

During times of market uncertainty, operational efficiency and the 'little things' become even more important," says Brad David, EVP, Development/Construction for Snap.Build, a supporting partner of The Builder's Daily. "As builders face a myriad of factors such as margin erosion, delays in producing developed lots and the impact that has on planning and forecasting, rate environment headwinds, etc. every penny that a builder can add to the bottom line matters. The reality and ability of using capital reserves and rainy day money will be a differentiator for builders that have been prudent and ready to weather these continued challenges.

Where this matters in 2024 is not in some fuzzy, abstract, theoretical corporate domain, but in the most real-world way, at every single actively-selling and new neighborhood in the portfolio. Knowing that the big national publics have made it known they're going to any length to amass greater market share in all of their operating arenas, local and regional private operators will need to up their game constantly to continue to win access to homebuying customers, land sellers and developers, and construction frontline trade workers as this squeeze plays out.

As builders tighten their belts, our partnerships as a capital solution as well as a back office resource have a significant impact to the good on overall profitability," says David. "These impacts both stem from reducing the overhead required around payables and vendor/sub-contractor management."

Here are six non-negotiable operational imperatives that will build flexibility and optionality into firms' near- and mid-term capacity to withstand both continued volatility and turbulence regarding demand and ongoing supply constraints.

Think of them as a Santa's "naughty or nice" list.

  1. Put customer focus and experience at the beginning, middle, and end of the value-generation thread
  2. Eliminate dead-time
  3. Earn builder-of-choice standing among construction trades
  4. Cultivate land buyer-of-choice relationships among sellers, brokers, and developers for access to off-market sites and other opportunities
  5. Ensure steady and visible cash flow
  6. Cultivate a culture of momentum, resiliency, and growth
Access to capital during a time when traditional lenders are pulling back but more importantly a tech solution that gives them a strategic advantage when negotiating with vendors, subs, and suppliers," Snap.Build's Brad David says. "Not only can our builders continue to execute, but we are giving them a competitive advantage with our best-in-class draw disbursement capabilities. We enable our clients to pay faster than any lender in the marketplace. As we consistently hear, this levels the playing field with the behemoth nationals and gives our builders the ability to attract the best partners available."

ABOUT THE AUTHOR

John McManus

John McManus

President and Founder

John McManus, founder and president of The Builder’s Daily, is an award-winning editorial, programming, and digital content strategist. TBD's purpose is a community capable of constant improvement.

ABOUT

Snap.Build provides builders with funding for residential construction projects. Snap.Build offers a non-recourse loan structure, competitive rates, and efficient loan closing.

Website

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ABOUT THE AUTHOR

John McManus

John McManus

President and Founder

John McManus, founder and president of The Builder’s Daily, is an award-winning editorial, programming, and digital content strategist. TBD's purpose is a community capable of constant improvement.

ABOUT

Snap.Build provides builders with funding for residential construction projects. Snap.Build offers a non-recourse loan structure, competitive rates, and efficient loan closing.

Website

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