Building Better Home-builders
Updated: Feb 3, 2019
2019 is shaping up to be a year of growth in the world of home building. Sales were strong in 2018, add in some awful weather for home building (wettest year on record in many states) and you have the recipe for bigger builder backlogs.
As we approach the spring building season, these backlogs are going to put a strain on the already thin trade pool. This means this year builders will be having to face this labor shortage head-on and find solutions.
While builder trades and vendors have already had the upper hand in the price negotiations for the past few years, I imagine they will continue to be able to name their own price this year too. With builders’ margins already squeezed by increasing material costs, a solution may exist in their backlog volume. Instead of haggling over prices for each job, Builders will be dangling the number of jobs they have available in hopes of getting priority with vendors. For example, framers are already getting a premium for their work and builder’s may not be able to pay any higher, but if builder A can offer them 20 jobs to come frame and builder B only has 6 jobs ready, guess which one the framer is willing to work for? That’s right go for 20 jobs that keeps their employees busy and provides more certainty for the next season to come.
That sounds great for those builders who have large backlogs, but what if you’re builder B and only have a few jobs? You can’t afford to wait for others, how can you compete? Solution: Building Better Home-builders!
This is a great opportunity for the smaller builders to start merging and growing into larger builders again! We saw this happen in the late 1990’s and early 2000’s, yet this time builders are leaner. They are carrying less debt and with today’s technology and systems, they’re better able to scale their business without increasing overhead at a level which was a challenge faced, during the 2000’s boom.
With less debt these builders will be able to structure themselves in ways to increase volume, expand their market and compete in the industry where labor is still at a shortage. While this will help give them an immediate advantage, it can continue to help in the future if they leverage their enlarged power towards building their trade base, and possibly investing in partnership opportunities with these trade companies.
This year is prime time for the builders who have survived and restructured themselves over the last decade to come out swinging. If they’ve done the work and built themselves into stronger organizations with improved processes, this is their time to shine and show off what they’ve really built!