By Madelaine Braggs | Rose Law Group Reporter
The Arizona homebuilding market, characterized by fierce competition and dynamic market forces, was explored in-depth during AZ Dealmakers Executive Power Panel. The discussion moderated by Jordan Rose, Rose Law Group Founder and President, lent insight to how companies are watching the competition and creating incentives to get buyers through to closing.
Panelists:
- Heather Cammiso, Division President, Landsea Homes
- Michael “Frenchy” Iles Cremieux, Regional President, Richmond American Homes
- Carl Perrone, Senior Vice President, Brookfield Properties Development
Understanding the Competitive Terrain:
Frenchy’s Strategic Approach: Michael “Frenchy” Iles Cremieux, Regional President at Richmond American Homes, highlighted the importance of thorough competitive analysis. “In ‘05 we did 3,000 units and it was easy. We did 1,600 this year and I got a hernia.” He said the first thing he does every morning is evaluate local homebuilders’ statistics and specifications to stay informed about the strategies and discounts offered by competitors. In a spec-driven market, understanding what competitors are discounting, especially on specs, can provide a crucial edge.
Heather Cammiso’s Market Insight: Heather Cammiso, Division President at Landsea Homes, emphasized the significance of interest rates in competitive market analysis. In a spec-driven market like Arizona, some builders resort to discounting their specs to boost sales. Heather stressed the need to monitor interest rates and be aggressive with rate buy downs, a strategy she noted as unusual but effective in staying competitive. “It just takes one incentive that gives the competition an advantage.”
Carl Perrone’s Focus on Net Price: Carl Perrone, Senior Vice President at Brookfield Properties Development, provided a broader perspective. While base home pricing may remain stable, he highlighted that the net price is pivotal. Carl pointed out that the net price is contingent on the Federal Reserve’s interest rates. Admitting the challenge that poses for buyers, he said at Brookfield, they constantly evaluate what needs to be sacrificed to secure a sale in a highly competitive market.
Strategies to Stay Ahead:
Frenchy’s Macro and Micro-Level Competition: Frenchy shared his experience of competing both at the macro and micro levels. Managing local teams while striving to be among the top builders at a broader level, he discussed the importance of securing capital. He emphasized the need for agility and responsiveness to macro-level trends while competing fiercely at the local level.
Carl’s Response to Market Irrationality: Carl Perrone said, “We in the land business react to the irrational behavior in the homebuilding community.” He acknowledged the erosion of profit margins due to rate buy downs, but despite the challenges, Carl expressed the importance of capitalizing on the positive market conditions. “There’s going to be a point in time we’re going to look back at 2018-2019 and think those are the good ol’ days. It’s highly competitive it’s a challenge it’s a knife fight but the market is good. We have to take advantage of the tailwinds that all of us have in residential.”
Affordability and Market Realities:
Frenchy’s Take on Affordability: The panelists tackled the complex issue of affordability in the Arizona housing market. Frenchy questioned the practicality of the term, stating that it often carries political undertones. He emphasized the shift towards more price-friendly markets like Casa Grande, Maricopa, and Coolidge. The challenge, he noted, lies in the trade-off between affordability and the labor market, with builders needing to compete for market share in these outskirts. “That’s a great buzzword and when you drill down on that word, it’s a very political word, no one understands it. When people say affordable, what people mean perhaps is any working collar job person couldn’t afford their metro. Instead they had to drive to qualify. Casa Grande, Maricopa, Coolidge, those are the growing markets, those are the affordable markets.”
Carl’s Perspective on Employment Growth and Affordability: Carl weighed in bringing more capital to Arizona, acknowledging and The competitive landscape extending beyond state borders.
The Arizona homebuilding market presents a challenging yet evolving landscape, as industry leaders navigate through the nuanced concept of affordability. According to the panelists, staying agile, strategically using incentives, and capitalizing on favorable market conditions are essential strategies for success in this competitive arena.
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