As I understand blogging etiquette, posts are supposed to be more personal in nature rather than focusing on the business. I hope you will indulge me.
During the first week of May, we held one of our quarterly Board meetings. Among the topics covered was assessing the composition of our business or, said another way, the percentage of homes we sell to our different buyer groups: first time, move up and active adult. For those of you not familiar with the numbers, 29% of the homes we sold in 2016 were to first time buyers, 43% to move up, and 28% to active adults. Over the past few years, we…you…have done an awesome job expanding our share of the move-up market, as the business has grown from roughly one-third of our closings in 2011 to the 43% we realized last year. I know what you are thinking…”If we are so awesome, Ryan, why are we talking about changing?” Great question.
Sometimes you can have too much of a good thing. On our current path, we could end up with almost half our business targeted to serving move-up and luxury buyers. This may not be a bad thing given the financial health and high home-ownership rates among these buyers. The questions to ask, however, include, are we missing opportunities to grow or are we running a riskier business than we need to because we are concentrated with one buyer group.
Every market is different, so arbitrarily setting a one-size-fits-all market share goal would be dangerous, but I believe that having a meaningful presence across the buyer categories can offer advantages. Buyer groups grow at different rates and, broadly speaking, behave differently depending upon the stage of the housing cycle. For example, after being relatively quiet for the first 5 years of the current housing recovery, first-time buyers are now driving new home sales higher, while we see increasing activity among Baby Boomers looking to retire.
Any changes we want to make to the composition of our closings will begin with changes in the land positions we buy. Given the amount of time it takes to acquire new land and turn it into an active community, altering the composition of our business, should we choose to, will be a gradual process that happens over a months and years. My purpose in raising the topic with the Board is to make sure we are always open to potential opportunities and that we are working together to overcome any barriers that may be in our way.
Are there opportunities you see for us to pursue among our primary buyer segments or others we may not have considered in the past?