Episode Summary:
Overview of Episode 62
Danny Hirschberg discusses significant shifts in the home building sector. Initially, his company focused on selling homes to institutional buyers. Over time, the business model evolved to cater more to retail buyers.
Transition from Institutional to Retail Home Building
Initially, the company thrived on institutional sales, benefiting from a booming build-to-rent market. As a result, they learned to streamline operations without a dedicated sales team. Subsequently, as market conditions changed, they pivoted to selling homes one at a time.
Understanding the Home Building Market Dynamics
In 2022, Hirschberg noted a gap between institutional and retail home buyers. Institutional buyers adjusted pricing strategies due to rising interest rates, which created a disconnect. Consequently, retail buyers continued to pay similar prices despite the market changes.
Staffing Changes in Home Building Operations
The company has now established a dedicated in-house sales team. Furthermore, they hired additional project managers and office staff to support operations. This staffing adjustment enables flexibility in their approach.
Current Market Activity and Home Building Trends
Recently, the home building market experienced fluctuations in showings and contracts. For example, a recent drop in contracts surprised the team despite decreased interest rates. Overall, Hirschberg acknowledges the unpredictable nature of the current market.
Inventory Levels in Home Building
Hirschberg observes that inventory levels have increased, particularly in specific states. However, they still believe that supply remains insufficient in their local market. As a result, they are prepared to adjust prices to keep homes moving.
Downside Protection in Home Building Strategies
The company considers its homes as potential rentals, providing a safety net during downturns. This strategy ensures that they have options if home prices decline. Consequently, their approach remains adaptable and resilient.
Conclusion and Future Outlook
Hirschberg expresses optimism about the future of home building. He believes that adaptability will be crucial as market conditions evolve. Furthermore, the next episode will explore multifamily investment opportunities and their growing lending business.
