January 2015

Do you recall that scene in the movie “Animal House” where the marching band is led by the Drum Major into a blind alley and row after row of plumed musicians plow into a brick wall, crumbling to the ground in an unceremonious heap?

I sometimes wonder if our homebuilding businesses aren’t susceptible to the same outcome.

A number of homebuilders have shared with me throughout the years that they tend to go to the realtor community for much of the market intelligence that determines what buyers are looking for or the health of the market(s) in which they build. Although I have great confidence in the chief economists of the Natl. Assn. of Realtors and the Natl. Assn. of Home Builders, I believe there is “more to the iceberg” than what we see/hear.

For example, the “shadow market” real-estate properties that are either in foreclosure and have not yet been sold or homes that owners are delaying putting on the market until prices improve. These do affect our local market and our construction forecast. There is a “shadow inventory” value of $254 billion (according to CoreLogic) which is lower than a year ago, but still can cause problems.

When I speak with Brokers across the country, they admit that many of their realtors aren’t on top of the precarious impact that current legislation could have on the market. On Dec. 31, 2013, the Mortgage Forgiveness Debt Relief Act expired. Unless Congress extends it, housing debt that has been forgiven or written off after 2013—through short sales, foreclosures, or loan modifications that include principal forgiveness—will generally be treated as taxable income. By the time you are reading this article, as a result of this legislative outcome, a wave of homes could be hitting the market, hitting neighborhood “comparables” hard, and in some cases, flooding the market with resales.

That’s why it is more important than ever for homebuilders to have a BI (business intelligence) model that looks at local, regional, and national issues that affect your future. Having a local realtor as your primary source of market data could be akin to the marching band led into a blind alley. Most recall the market meltdown of a few years back where even major tract homebuilders found themselves in the position of liquidating all of their property portfolios that took decades to assemble.

I’ll bet your organization has data, lots of data, and today probably stores that data in a variety of formats, such as databases, email messages, and spreadsheet files. If you were to create a Business intelligence Center with tools to help you organize that data in a useful way and present that data as meaningful information, you’d have another set of information to help you plan your future moves. Creating a Business Intelligence Center is easier than ever, using “off the shelf” tools (like Sharepoint) that can provide a template to get you started, optimized to help you manage the working elements of business-intelligence reporting: scorecards, dashboards, data connections, status lists, status indicators, and so on.

Is this new?  Hardly!  You’re probably doing some of it already.  Using CRM (customer-relationship management) today?  I’ll bet you took this step to  “learn” more about your relationship with your customers.  And from this you’ve probably noticed more clearly what your customers are doing, and what you and your customers have done over time.  You’ve learned from what you’ve “remembered”, and that’s enabled you to act on what you’ve learned to make customers more profitable.

Or, you could continue to rely on the data that you’ve always gotten and run your business with that.

How much confidence do you have in the Drum Major you’re following?

Jim Kissane is a retired construction industry veteran, having served the design/construction industry for more than three decades. He can be reached at jim.kissane.tampa@gmail.com

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