Sub-prime O’Leary cow

Those of us in the homebuilding business have plenty to worry about these days. The Commerce Department reported last week that sales of new homes fell last year by 26 percent, the steepest drop since records began in 1963. Unfortunately, the worst is probably yet to come: the final dismal accounting may not be known for at least two more years. Between now and then, there’s much more economic havoc and many more personal tragedies to endure. At the end of the long tunnel, there will also be a very slimmed-down, reconfigured homebuilding industry.

Compared to the upended financial markets and devastated lives, the fact that there also won’t be very many homes to build may seem rather trivial, but it’s not. When some idiot-creative came up with the idea of the sub-prime swindle, it was the nuclear equivalent of the legend of Mrs. O’Leary’s cow kicking over the lantern and starting the great Chicago fire of 1871.

Although the cow’s guilt is myth, the fire was real, leaving almost 100,000 people homeless and destroying 18,000 buildings in a mere two days. The rebuilding began immediately and proceeded rapidly. Very quickly and by necessity, stick framing, a faster and less skill-intensive method of building, became the dominant form of wood frame construction. It started in Chicago, but spread throughout the quickly growing country. The concept of stick framing (initially the balloon form, but now evolved to platform) had been developed
earlier, but the massive building effort after the Chicago fire was the seminal event that caused it to displace timberframing as the dominant construction method for residential building. It remains so today.

In comparison, the housing bust today is playing out slowly, but the transformative impact on the homebuilding industry of the future is likely to be similar. By the time the embers cool at the end of the current recession, there will be a big need for new homes, but the
industry will have less capacity to deliver them. As Mark Zandi of Moody’s Economy.com said, it is “going to be a shadow of its former self…” Already, numerous big homebuilding companies have filed for bankruptcy and many more are teetering on the brink, leaving many homebuyers with unfinished homes in unfinished communities. And nobody is stepping out from the umbrella of their legal protection to bear responsibility.

As the housing giants topple and consumers get battered, it’s pretty clear that the future of homebuilding will be different. With the conventional attitudes and assumptions so violently disrupted, there will be a ripe opportunity to establish what I am calling “New House Rules,” that will facilitate the making of better buildings, happier homebuyers, and a healthier industry.

The previous sentence sums up the theme of this blog. I’ll be using this space to write about the past, present, and future of the homebuilding industry. My bias is an opinion that nearly everything about the homebuilding process and product ought to be improved. I’m convinced we can do much better. As a physical demonstration of that opinion, I’ll report about our OPEN Prototype Initiative and the Open-Built® ideas and systems we’re using on these building projects. I’ll also give occasional reports from my company, Bensonwood, where we strive every day to do things better than the day before.

I invite and welcome your comments and ideas. We can’t do this alone.

Leave a Reply

Your email address will not be published. Required fields are marked *