Architecture

Where Deja Vu Meets Catch-22: How Housing Cuts Down On SKU

Housing's future is simpler and familiar. The pathway there, though, is more difficult and not well charted.

Architecture

Where Deja Vu Meets Catch-22: How Housing Cuts Down On SKU

Housing's future is simpler and familiar. The pathway there, though, is more difficult and not well charted.

December 8th, 2021
Where Deja Vu Meets Catch-22: How Housing Cuts Down On SKU
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No joke, how many SKUs does it take to build a house?

Forget the actual number for a moment. When has the answer to that question been more important than it is now?

I'll tell you the answer to the first question. It comes from the work John McLinden and his team at Digibilt have done to create precise pre-construction digital twins of new homes for building information modeling on steroids, down to piece-level detail of every item that needs to be purchased to build a new home. For a recent model home of around about 2,100 square feet, it's about 450 SKUs that account for upwards of 20,000 separate pieces, and about 700 lines of detail in a bill of materials account of the home as entirely separate parts.

Ask any purchasing or strategic sourcing director how hard it is to source, manage, deliver, and properly install 450 SKUs or thereabouts – each of them with its separate supply chains of subcomponent material- and atomic-level provenance – and, BAM!, like that, you're entering homebuilding's deja vu all-over-again land.

Reportedly, deja vu happens most frequently in people ages 15 to 25.

But, looking hard for macro trends in market-rate housing's future for 2022 and beyond, count 66-year-old me among those who experience being vaguely tumbled around in a housing and homebuilding's own brand of time-loop, not unlike the story of this 23-year-old British fellow.

The powerful sense of reliving – a deja vu of a deja vu – occurred this morning as I read over these words from SLC Advisors principal Scott Cox, who writes TBD's Land Planning Master Class, in his latest "Contrarian" essay.

Before us stretches a long-run future of tighter land markets due to growing entitlement constraints and long-term skilled worker shortages. Land shortages in our active housing markets will likely lead to higher-priced, and at the same time, more standardized products.  
Fewer communities to choose from for the buyer will mean less direct competition. In turn that probably means less need for highly-customized options if the overall value proposition is fair. Maybe like car dealers, we will have some very simple option packages and color schemes, and more often than not you’ll buy what is available “on the lot” (no pun intended). We already see more builders adopt this lower-variability model.

I couldn't help but feel tumbled in that time loop.

Yes, we do see that lower-variability model playing out, and the reasons for it are crystal clear – value vs cost, supply chain and labor streamlining, schedule elongation, bulging demand, not only from would-be owner-occupiers, but from full-retail-price-paying bulk buyers who are developing build-to-rent tracts like there's no going out of style.

And the deja vu of the deja vu warped time and circled back, first through the past few years, reliving conversations with PulteGroup executives about their "plan simplification" strategy, and with LGI strategists about the rigor around their floor plan and elevation portfolios, and with DR Horton's team on their Express Homes platform, and Lennar's longtime Everything's Included model, and Century Communities Century Complete models, and Ashton Woods's Starlight brand line.

And, of course, there are many more of the value-engineered, streamlined and simplified design platform builders have pivoted heavily into, both to calibrate their per unit balance sheets and to appeal to rental refugees, family-forming Millennials, right-sizing 55-plusers, and what have you.

The deja vu of the deja vu of the deja vu then shot me back several more years to a conversation I'd had in 2009, with Shea Homes ceo Bert Selva, who at the time was preoccupied with vast tracts of land Shea owned that Bert had to figure out how to monetize before it metastasized into a carrying-cost financial nightmare.

What Team Shea – with the help of lauded architect Michael Woodley – brewed up as rocket fuel of the moment to get that lot inventory to begin to turn was its Spaces model. Spaces, too, was a deja vu of a deja vu.

Here's what I wrote at the time:

By and large, from the time of post-World War II Bill Levitt homes to today's KB Home Open Series—which trades off variability and square footage in exchange for getting its buyers into homeownership—it seems that economic necessity has been the mother of production home building's greatest inventions, and that they're almost invariably that blend of one part inspiration and two parts perspiration.

What Michael Woodley told me about the charrette process that led to the development of Spaces reminded me of an apocryphal quote attributed to Michelangelo about one of his most famous marble sculptures.

I chipped away all the stone that was not David."

Another "relived" moment, and now the future that we envision coming back to in 2022 and beyond – apropos of Shea Spaces' genesis story – in the deja vu of the deja vu of the deja vu traces to one of the homes Bert Selva grew up in as a boy in the Bay Area.

It's one of housing's truly iconic moments, and there's reason that it should set a standard of a future homebuilding can come back to again, and again, and again, in a time loop.

It's one of the few homes – 11,000 or so of which were built in Northern and Southern California starting in the 1950s – that got a name: Eichler.

It's one of the few homes that debunked the belief that tract homes needed to be soulless, cookie-cutter, or worse, ugly.

It's one of the few homes – at the time – that could both democratize homeownership attainability, introduce "unheard-of features like hot water-heated floors and huge expanses of glass," and at the same time, elevate surrounding land values.

It's one of the few homes its developers insisted – against considerable opposition – on making as available and attainable to people of color as to any other race or ethnicity.

It's one of the few homes almost any one of us would recognize today as instantaneously as a Frank Lloyd Wright structure.

Eichler, like so many homebuilders we know and have listened to again and again and again in an ongoing time-loop, spoke about a goal:

Well-designed houses with a sense of moral purpose."

In Dwell, correspondent Jennifer Baum Lagdameo writes:

Born in 1900 in New York City to German Jewish immigrants, Eichler founded the eponymous Eichler Homes, which built more than 11,000 residences concentrated in Northern and Southern California. He worked with leading architects of the day—Anshen & Allen, Oakland & Associates, Jones & Emmons, A. Quincy Jones, and Raphael Soriano—to design the distinctive dwellings that are now simply known as Eichlers and still coveted today.

The deja vus all come down to a single common denominator: Simplicity.

You don't get simplicity very easily when there are 450 SKUs, 700 lines of code, and 20,000 piece-level parts, each with a pathway freighted with innumerable hand-offs, complete with lawyers, insurance fees, agents, brokers, shippers, coordinators, handlers, and installers.

And you don't get simplicity when engineering, design, and construction say one thing and the local planning board or zoning official doesn't like the slope of the roof or the lack of similarity in exterior materials.

This is where deja vu solutions and Catch-22 challenges converge. Which is where we are as we look into the 2022-and-beyond crystal ball.

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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.

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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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