How can you know if it is going to storm?
Early indicators, black clouds on the horizon, a change in the wind direction, things you have seen before.
I think we are about to go into a recession in the housing market, I call it the Great Reset. I don’t know how long or how deep, the country is still short of homes, we must build more. But the wind is changing.
While the orders on new homes are deep and massive, most builders are booked for a year, and the quote file is at record levels… things are a miss.
BREAKING TODAY: Consumer prices rose 8.5% in March — the highest since 1981. We are paying 8.5% more for things now. 8.5%! A new house costs over 20% from just last year.
Interest rates are at 5%… with 6% just about guaranteed.
The BIGGEST PROBLEM is the media spin on this (Why do we listen to them?!)
The Federal Reserve is “selling” a fix.. higher interest rates… that they say will help surging prices and a tight labor market. And the media is shaking their head yes, higher interest are good and needed.
Let me translate.
The U.S. Government and supported by the major media (including google)
wants the interest rates to rise sharply.
What will this do to housing?
A 1% increase adds about 300 dollars plus a month to a $350,000 home mortage.
at 4%…. where we were at for a monthly payment on a $350,000:
at 6% (where we are quickly headed)
This will take a lot of people out of the house of their dreams.
A simple Google Search “will higher interest rates help”…shows that yes indeed it helps! It hurts short term, but long term by golly we will be better off.
This will help the labor shortage. Translation, fewer jobs. This will help demand. Meaning no one is buying anything.
Lumber is TANKING. That’s another key indicator. Mills are working 3 days a week to stop the supply. That isn’t working either. Remember mills make lumber every day. It’s a product in the forests that must be used. Tanking lumber means people aren’t buying it. 40% DOWN in a month.
LUMBER SALESMAN: DO NOT EVER USE WEIGHTED AVERAGE OR COST TO SET THE PRICE. USE A TIER THAT WE ESTABLISHED. TRUST ME… YOU DO NOT KNOW THE MARKET!
We are often in a recession LONG before we feel it.
We are there.
What is Drexel doing?
Get ready to acquire more market share (get more builders that are left). We are training new qbs, new cabinetry, and new flooring salespeople. We are driving consistency + stability = clarity. Taking on good business with good business partners for the future.
We do think the building will continue, just slowing.
Our robotic future and offsite construction will help builders that are left!
Over $8 trillion … 800,000,000,000,000 has been printed by the US government, flooding us with “more money, worth less”… the consequences have been brutal, but we are ready.
Our New Berlin yard is offsetting the cost of higher transportation costs.
We are low on new hiring positions, with only 6 full time in our entire supply company (we are growing our manufacturing division.) And really diving into WHY we need a new person in that department.
We have turned products into paid services (residential design, offsite is a process, not a product)…. all to prepare for the great reset.
If new home buyers can’t afford homes, they will rent. We have many fantastic builders that are preparing to build 8-12 units projects and rentable condos. If you can’t afford to buy new.. or think about this… locked into a 3% loan, why would you ever build for a 6% loan?… we do anticipate remodeling will soar…
Remodelers and remodeling projects require KNOWLEDGE, ORGANIZATION, AND INTRICITATE PROCESSES WITH COMPLICATED PRODUCTS… this is why our training is so critical. And in all departments why are sales people are required to have fewer accounts to be poised to help builders remodel.
Could I be wrong?
Of course. I have been in Vilas County, wetting a worm on a lake, and seeing what I believe is a storm brewing. We take in the boat. Put the water toys away. Put the tarp on the boat, and wait for the storm. Sometimes it blows over, misses us, or is very minor. At least we were prepared. No harm done. Sun comes back out.
Prepare now. But keep going.
The fun will be there. Supplying happiness is possible. We just must be prepared.
A HORRIBLE RECESSION IS A TERRIBLE THING TO WASTE.
I’m not scared. I’m excited. I like storms.
Trust the Lord,