Housing Giants - September 24, 2008 - (Page 22)

f e at u r e “There’s going to be a flood of buyers someday, but nobody knows when or what the right product will be.” — Martin Freedland “We’ve now reached a time when the old appeal to customers — to drive 10 miles farther out of town, to get more house and a bigger yard for less money — won’t work anymore,” says Freedland. “But it won’t be the largest builders who find the new products that will work when the market comes back.” Large home building companies are usually not nimble enough to be leaders in product design and marketing innovation. They try to find products that are proven winners and build them over and over to hone the high-production economies of scale that produce cost and price advantages. Investors and lenders want to fund developments with product lines that have proven track records of success. Pioneers are the guys with arrows in their backs. However, too much of this conventional wisdom eventually leads large numbers of builders into the same products and market niches. When the merry-go-round stops, everybody falls off. “Mid-rise has the potential for overbuilding,” says Mark Hodges, who recently took over as South Florida division president for public giant Hovnanian Enterprises. “If you don’t believe it, come to Florida.” Hodges says it’s not just public builders who flock into the same market niches, but all production builders. There are now thousands of unsold condos flooding the South Florida market. IS ReSeARcH THe ANSweR? How do you avoid overbuilding? The obvious answer is to build something else. And consumer research — to find new housing products that customers will buy — seems the obvious answer. But not everyone agrees. “I don’t think research will necessarily lead you to the right product,” says Martin Freedland. “Research says we have great demographics right now, and interest rates are still low. But housing demand is 22 HOUSING GIANTS.9.24.08 www.HOUSINGGIANTS.cOm http://www.khov.com http://www.housinggiants.com

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Housing Giants - September 24, 2008 Contents Viewpoint News & Moves Process Bandwagon Effect

Housing Giants - September 24, 2008

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