What happened to Spring?

No, really? Where did it go? Haven't seen it in the weather, and certainly there's been no sign of it in the housing market. Even the usually dependable, "we were counting on you" remodeling market has sort of stayed in hibernation. Still, the calendar marches on, and so must we all.

For building products manufacturers, finding spots of warmth and sunshine might mean taking a much more detailed look at your own data and matching it up with the market opportunities. Because there *are* markets where people are building, remodeling, and spending money on your products - or would if they knew about them.

We often help our clients spot those glimpses of Spring with Opportunity Maps™.  We'll take the data you may already have, or that might be available, or recommend some original research, and then really take a hard look at how to make sense of it and turn it into a real action plan, focused on getting real results.

A recent study by Unica found that most marketers say they value data, but struggle with how to make it meaningful and actionable. We can help.

Number Crunching

So here we are, at the end of March – and the first quarter is over. Now it begins in earnest. I’m talking about the regular “adjustment” of housing starts forecasts…where every month, we see a revised – downward – assessment from economists backing off their bold predictions for the year. Don’t get me wrong, I wouldn’t want that job. But the number-crunching hasn’t been adding up because the market’s just not behaving as we expect it to.

700,000 starts? I suppose it didn’t really sound that unreasonably optimistic late last year. Because all the numbers say we are heading for a housing shortage. The demographics  and household formations all point to the need for housing (but not necessarily “new” houses). Interest rates are still hovering near record lows. Inventory of new homes varies by market, of course, but is still dropping  - now just over 76,000 completed new homes are available nationwide (but many markets have plenty of “used” houses for sale). Prices are depressed, and may continue their decline, according to Case-Schiller. Fortune Magazine proclaims, “It’s time to buy again.”

So why aren’t Americans building – or even buying? Because even if they can, they aren’t sure they should. There are too many unknowns. They don’t know if they’ll have a job two or three years from now. If they get a new job, where will it be located? Will they be able to sell their house if they need to move? Will it be worth even as much as they paid for it? What if they get stuck?

Sales of new homes hit an all-time low in February. Personally, I think we’ll be lucky if we build as many new homes this year as we did last year. My prediction is it might take an entire generation – including a re-invention of the fundamentals of our economy, the future of jobs and where they’ll be located – before building a new home becomes part of the fulfillment of a dream for the next generation of homeowners, and new home construction once again begins to track with household formation.

Now, there’s talk of re-instituting the 20% minimum down payment and reducing or eliminating the home mortgage interest deduction. Who knows what impact that will have? In the meantime, developers and investors have found something to do with all that cash they’ve been accumulating: according to the National Association of Realtors, a third of existing-home sales in February were made to cash buyers. And that’s not counting foreclosure auctions. 

My guess is, those investors will be renting out those properties for quite a while before selling them, giving all those new households a low-commitment option for “housing” in major markets. And who knows what the impact on “the numbers” will be.

I'm sure all this will be fascinating to economics students of the future. In the meantime, those of us who make our living in this industry are faced with the challenges the numbers present. Let us know what you think. What are the implications for builders and remodelers? For building products manufacturers? How is your business responding?

Dive into your data

I recently read an article about how drug marketers are employing micro strategies to very specifically target certain combinations of demographics, geographic areas, disease states, and so on. It got me thinking about how building products manufacturers could use a similar approach to segmenting their audiences and understanding the nuances among them.

Micro strategies may be needed, and to develop these segmented approaches, your organization can begin by taking a closer look at the data you may already have. Look beyond the "averages" to understand which of your customer segments - trade and consumer - drive sales, and more importantly, profits. Most research studies report the numbers in the middle, giving you a snapshot of a moment in time. There's often a more insightful story when you dive in. Spend some quality time with your data. Roll around in it. Look at it differently. Map it. Ok, maybe that's just what geeks like me like to do. But you may be surprised what your data can tell you about where to put your efforts.

Have you ever taken a "deep dive" into your data? What did you learn?