A Consultant’s input is valuable- before, during and after a Real Estate Cycle occurs. Consultants earn their keep by minimizing a firm’s overhead during typical Real Estate cycles. In the end Consultants are less expensive than typical employee overhead. But, consultants keep giving long after they first associate with their clients.

Beginning of a Cycle

Now (at the beginning of a Cycle) is the time when different ideas and new approaches are needed to set the stage for the successful long run ahead. Latest stories from around our industry are fairly predictable when it comes to builders and developer’s positioning themselves at the beginning of a new housing cycle. While many of the usual strategies are applied, there are a few twists emerging in this cycle that we are seeing nationally as builders/developers unveil the next generation of housing.

Many of the giant national builders and not so large building firms are introducing downsized new models while maintaining the same standard of interior luxuries as before. In addition, developers are minting smaller home sites. No surprises there. However different strategies are afoot to make homes “Green” and Energy efficient as never before. There is also the appearance that these new strategies as well as the tried and true strategies that worked in the past will last much further into the coming cycle. With more oversight ahead a noticeable change will be the consultant’s corporate role. They will provide better research, objective and creative marketing strategies, proforma realities and lender required oversight.

Because this has been such an evasive and deep recession touching so many sectors (financial, auto, housing, finance, travel, etc.) Americans are re-thinking their lives and their spending habits. Today’s Wall Street Journal (4-16-09) noted that for the first time since 1955 Consumer Prices on average are down. Even in past recessions this has never occurred. Or in other words, this statistic points to a rabidly consuming nation going on a crash spending diet that will last well beyond the duration of this deep recession. This recession will be a lasting memory point for our country.

We see the following trends emerging for the foreseeable future in all walks of housing:

1. More smaller model homes with great architecture.
2. More energy efficient homes with use of re-cycled products and new construction procedures.
3. Reasonable land opportunities that come from this cycle’s pricing pressures.
4. Look for more panelization to speed home production. Builders want it sold and closed faster to contain costs and improve productivity.
5. Smaller home sites in single family and more density in multifamily sites. Cities, now realize that increased density is more efficient for services charged by them and it incentivizes builders to re-think vacant sites not earning tax dollars.
6. Reduced expectations among the 75 million people in the USA that are currently over 50. In some of the expensive locales empty nesters and seniors will rent instead of owning. Home price appreciation is not worth the exposure to higher taxes, insurance and higher costing city services. This is especially true of coastal cities.
7. Better designed rentals and their amenities to capture the over 50/empty nester that is a discriminating buyer and renter.
8. Look for ownership of homes to still dominate the marketplace.

We see this as just a few of the trends in the coming months as a new cycle begins to emerge. It is imperative that any planning for the next cycle be exact and detailed. Longer planning time frames will occur. THIS IS WHEN YOUR REAL ESTATE PROFESSIONALS ARE MOST IMPORTANT TO BUILDERS, DEVELOPERS, BANKS, INVESTORS AND MUNICIPALITIES. Next month’s blog will address the Consultants role during the stable part of a cycle.
Call your Real Estate Consultant and give yourself the “EDGE.”