Architecture

Today's Edge Goes To Builder Players With Time On Their Side

Despite our confidence in what we know and how certain we are of our predictions coming true, it's always uncannily the case that "time discovers truth."

Architecture

Today's Edge Goes To Builder Players With Time On Their Side

Despite our confidence in what we know and how certain we are of our predictions coming true, it's always uncannily the case that "time discovers truth."

March 27th, 2023
Today's  Edge Goes To Builder Players With Time On Their Side
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Way back in a time people were only pretty smart – for example, in the first century A.D., somebody like statesman and philosopher Lucius Annaeus Seneca might have been considered the smartest one in the room. Seneca was quoted as saying, "time discovers truth."

In the 1,500s, a follow-on plainer language idiom, "only time will tell," made its way into common usage. Right up through the middle part of the last century, you'd hear that phrase as a nod to what you may have thought or believed, but could only guess would happen. The acknowledgment embraces a humbling limit to knowledge of what is not now, what may be unknowable until revealed later, and that in such a case, one might prepare to accept and thrive if actual outcomes or events worked out differently.

We can't be positive, but that phrase seems rarer now than it used to.

Why-this-matters for those in residential market-rate real estate, construction, development, and investment impacts now and tomorrow:

If we forget, neglect, or deny that "only time will tell," two risk factors escalate and two opportunity windows narrow. One of the liabilities negatively impacts the present, in the form of a missed priority focus. The other may add financial exposure in residual value analysis for land investment put in place for future returns.  A lose, lose.

Let's look first through the lens of the present, whose volatility stems from consumer households, businesses, and centralized government and local policymakers each and all coming to grips with a postponed-but-not-canceled Covid macro disruption.

At any point, from Spring three years ago to the present, if we'd characterized any current state of things as a permanently established trend, especially now we'd have to appreciate that the phrase, "but, only time will tell," would have rightfully been added to an assertion about precisely how people would pivot into a post-pandemic future epoch.

We might well addend the phrase as a qualifier to this story as well: A Tale of Two Housing Markets: Prices Fall in the West While the East Booms, by Wall Street Journal staffer Nicole Friedman. Friedman writes:

The United States is a country of two housing markets. In one, home prices are falling from a year ago. In the other, they’re still posting annual gains. That division runs right down the center of the U.S."

The data behind Friedman's story supports her look at the current state of pricing trends, with the mobility and economic patterns underneath those property value changes. As a snapshot of house price dynamics, the perspective may be correct.

It's what that snapshot means, other than as a slice in time artifact, that would make the phrase, "only time will tell" highly relevant.

A key take-away in the story is that while west of the Mississippi markets were frothiest through early 2022, and were due for the bigger correction first, now east of the Mississippi markets in the Southeast and Florida are overvalued and are due for a fall. Still, no one's really expecting a big price correction because one has never occurred in conditions of such a shortage of available home inventory.

Home prices absolutely are going to drop” in many markets, said Matthew Gardner, chief economist at Seattle-based brokerage Windermere Real Estate. But “the only time you see a significant decline in home values is when you see significantly more supply than you do demand, and that is not going to happen.”

If, in your mind, you add the phrase, "but only time will tell," you allow for an "unknown-unknown" to occur without getting shocked or thrown off your plan. In fact, despite our confidence in what we know and how certain we are of our predictions coming true, it's always the case that "time discovers truth."

Here's three separate news analysis themes, each of which reflect a cost-of-living crisis whose consequences could impact available home supply, at least in some markets:

  • Half of U.S. Employees "moonlight" for extra cash – Bloomberg
  • Many households are spending more than they think, overspending their means – Wall Street Journal
  • Layoffs – mostly in tech and finance – will be spreading to other sectors – Fortune

Wall Street Journal staffer Veronica Dagher writes:

Financial advisers say the larger amount of credit-card debt while rates are higher is one indication that some Americans are spending more than they think they are. This type of spending can reduce people’s ability to pay for important items down the road, such as college for a child or even fund their own retirement. More immediately, it will put people in costlier debt."

Spiraling household debt, job destruction, local economic disruptions, changes to remote-work policies, etc. all of these may have impacts on available supply of homes – for sale and for-rent – in any given community.

Still, somewhere along the line, maybe as algorithms triangulated around enough routines and patterns to imitate predictive behaviors, trend lines, and certainty, we started feeling confident in fast-tracks and short-cuts and optimized models for insight into what's next.

However, a rush to conclude that we've modeled and predicted and discounted for all of the potential plus or minus forces and factors that will occur, including the conditions in which "big price drops" are possible or impossible, might be missing an opportunity to learn.

You can learn better what a cost-of-living impacted customer and household needs, wants, desires, prefers, and can pay for better now than in many other time periods in our generation's business history.

You can also learn better that just as we solve and strategize to win – more often than not – the last battle, we do that because of our belief that the last battle will crop back up as the next one we're challenged by.

Instead, when volatility is raging at its worst, it may be in one's best interest to do all of the things that add up to investing in learning, listening, and observing how people are behaving. Square footage, lot-size and density, floor plan design, locations vis a vis job centers, room functionality, etc. all seemed to inflect into a comprehensive post-pandemic, live-work-play-rest configuration as the home of the future.

That may be true, but only time will tell.

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.

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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.

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