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What Was True Then - In 2010 Housing Crisis - Is So True, Again

'We won't get fooled again,' ... well, says SLC Advisors principal Scott Cox, unless we forget what we reminded ourselves of the last time we got fooled.

Land

What Was True Then - In 2010 Housing Crisis - Is So True, Again

'We won't get fooled again,' ... well, says SLC Advisors principal Scott Cox, unless we forget what we reminded ourselves of the last time we got fooled.

Scott Cox
March 21st, 2022
What Was True Then - In 2010 Housing Crisis - Is So True, Again
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Scott Cox
March 21st, 2022

[Editor's note: "Times change ... but not much," our TBD Dream Teamer Scott Cox, writes of a note-to-self set of precepts and principles he jotted down as a full-on housing depression slowly began to relent in 2010. What's propelling the housing market to where it is today is, no doubt, real and fundamental. All that this momentum is not, perhaps, is sustainable. Despite demand's having taking on a life of its own relative to scarce supply, can not ever be regarded as a slam dunk for business or operational success. Too many other factors – as fundamental and real as today's tide of demand – play a role in what inevitably happens. So, we're especially grateful to share Scott's "note-to-self" in 2010, as what was true then still holds. – JM]

New Rules?

"Mean reversion is the strongest force in the universe."
SC: If your home price to income, rent to payment, sales volumes, etc. deviate from the mean substantially get concerned. If it deviates a lot – run. It’s not different this time, there are no new paradigms.

Not Losing It All Has A Price

"Accept the fact that if you remember and stick to number 1, you will have to spend a period of time watching other people make lots of money while you do not."
SC: Next to mean reversion, second-guessing leaving a market that is still making money is the second strongest force in universe. It’s hard enough to understand what is going to happen. Figuring out exactly when it is going to happen is probably impossible. Be happy with getting the first one right.

To Thine Own Self ...

"You’re smarter than you think in some ways."
SC: If you don’t understand something, but it’s working for other people, trust yourself.

Placemaking 101

"Always ask what does the site 'want to be?' – not what it needs to be to work at the basis offered to you or that you have."
SC: Sites have intrinsic characteristics that are not changed by amenity centers, landscaping or marketing materials. A’s are A’s, B’s are B’s, etc.

Margin Protection

"If your new concept does not work – no matter how well researched – what is plan B?"
SC: If plan B will not work on your site, then your margin for plan A has to be that much higher to try it.

Real Measures Of Success

"If you’re making money only because the next guy in the chain (homebuyer, homebuilder, etc) is not making enough, then your position is very fragile."
SC: If you don’t understand the economics of your customer, you do not understand your own business. If you don’t understand your competitors you don’t know your business and if you don’t understand the capital suppliers to your competitors you don’t understand your business.

Bad Company

"There is NO deal good enough to make it worthwhile dealing with the wrong people (they don’t even have to be bad – just not the right people)."
SC: NONE

If It Looks, Smells, And Tastes ...

"There are NO soft landings."
SC: NONE

The Over-Under

"Our industry constantly overvalues optimality and undervalues optionality."
SC: 'Nuff said.

Final Notice

"When your taxi driver (now substitute Uber driver) is flipping homes ..."
SC: Run.

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Land economics housing economics housing economy housing data land acquisition land asset lots Homebuilding homebuilder Homebuilders homebuilder confidence national homebuilder private homebuilder

ABOUT THE AUTHOR

Scott Cox

Scott Cox

Principal, SLC Advisors

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Land economics housing economics housing economy housing data land acquisition land asset lots Homebuilding homebuilder Homebuilders homebuilder confidence national homebuilder private homebuilder

ABOUT THE AUTHOR

Scott Cox

Scott Cox

Principal, SLC Advisors

MORE IN Land

McKinley Homes Expands to Texas with Liberty Acquisition

The deal highlights the growing importance of private-to-private partnerships in reshaping U.S. homebuilding amid rising competition — in places like Houston, especially — and evolving buyer demands.


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How Lennar's transformative spin-off -- now in motion and scheduled to go to market in January -- creates a new blueprint for land-light homebuilding.


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