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Planning for Economic Uncertainty

Buckle up! Looks like the housing industry is on its way to an interesting year. Here are some key factors that are influencing the outlook.

Tailwinds that may continue to support industry growth:

  • Employment rate is high
  • Bulging millennial demographic is continuing to move into the housing market, driving demand
  • Housing affordability and keen consumer interest in home transformation programs (HGTV) will continue to fuel the remodel market

Headwinds that may slow momentum:

  • Interest rates are increasing
  • Tariffs have added cost to construction
  • Housing affordability is declining as wages have not kept pace with home prices

Many of us learned during the great recession that in times of uncertainty, a little advance planning can go a long way to softening the blow of unfavorable economic changes. When the inevitable downturn hits, you’ll lose time as well as sales and profits if you are not already prepared. As President Kennedy said, “The time to repair the roof is when the sun is shining.” So, here are a few tips to consider as we head into more uncertainty in the housing cycle:

  • Stay flexible: reduce long term commitments to give yourself the ability to be nimble in response to market changes
  • Be realistic with revenue and cost expectations. Maybe it’s smarter to build fewer homes with your core team and avoid hiring more staff to build additional homes that might wind up unsold for a period of time.
  • Build some cash reserves. Most of us in the industry have been pretty busy for the last few years. With good cash flow it’s easy to spend a bit more freely. Now’s the time to sharpen the pencil and put some money away.
  • Partner with reliable suppliers that will be there to stand behind their products. (A little brazen self-promotion…we’ve been here for our customers for 80 years.)

At this point, no one is making dire predictions, but there are clearly some factors that may slow momentum over the coming year or two. Be prepared!