As industry consolidation continues to the point where the top 10 builders will command 40 percent or more of all annual housing starts by 2013 (according to NAHB Economics predictions, among others), twice their current share, they’ll be looking to leverage brand names to attract buyers and investors.
It’s already happening, of course. “Look at how some builders play up their ranking by J.D. Power & Associates,” says Sandra Kulli, president of Kulli Marketing, a housing-focused firm in Malibu, Calif., referring to the annual customer satisfaction survey conducted by the global marketing and information firm. Attaching the J.D. Power brand, she says, “is more recognizable than the [building] company itself.”
Another boost to builder brands, albeit a byproduct if not a primary objective, has been the recent popularity and proliferation of home-makeover television shows, led by Extreme Makeover: Home Edition and its estimated 17 million weekly viewers. “They’ve had an enormous and positive impact on the housing industry,” says Kulli, as such shows expose a mass audience to both goodwill efforts and brand-name products used by builders, thus helping nurture strong national reputations.
Dealers are in the same boat as builders, experiencing consolidation that creates ever-larger “national” companies, yet maintaining a dependence on local reputations to compete with independent, homegrown operations. As the future unfolds, dealers can certainly help themselves by stocking and servicing the brands that their big-builder customers (and presumably consumers) recognize and want.
Scarcity and Technology Lack of on-site construction labor and traditional sources of raw materials will continue to push engineered products and factory-made housing into the mainstream.
Ask most builders about their main concern for the future and you’ll likely hear some variation of land availability in the most-populated markets. While dealers can’t do much about that issue, they can prepare for its side effects. “The [land] entitlement process has become so lengthy and expensive that builders need to build faster,” to recoup their investment, says Kermit Baker, senior research fellow at the Joint Center for Housing Studies (JCHS) at Harvard University in Cambridge, Mass., who is among a group of JCHS researchers studying the building products supply channel.
That pressure to build is heightened by the decreasing capacity and burgeoning cost of traditional construction labor and materials, as the former loses out to more exciting and financially rewarding industries and the latter suffers under efforts to conserve natural resources.
Add to the mix a changing global economy in which commodities such as gypsum, cement, and steel are in higher demand worldwide (thus causing shortages stateside), and it’s the “perfect storm” of circumstances for which Dickens has been watching for 20 years, one that eventually will leave a mainstream reliance on engineered materials and factory-built systems in its wake. “We’ve been saying, ‘We can’t keep building like we do,’ but we do,” says Dickens of the industry’s plodding acceptance of alternative building materials and methods.
Instead of a coup, however, he predicts an invisible revolution. “You’re not really going to see it,” he says. “It’ll be a continuation of what’s going on already, if perhaps at a faster pace.”
The key, he says, is a trend to modernization and, more specifically, a growing dependence on technology more so than timber to meet demand. Despite its size and the array of disparate parts, from foundations to faceplates, he says, “A house is not necessarily a complex product,” and is thus ripe for composite and multifunctional materials and products (think fiber-cement siding and insulated concrete forms) and factory assemblies that go up faster with less on-site labor and a more efficient use of materials—and resulting in better-quality homes, to boot.
