Home building is ripe for disruption
It’s time home builders explored some innovation, Lovallo told MarketWatch. “Fewer homes were built over the past 14 years” since the 2008 recession, he said, “and the ones that were built were built at higher price points, because that’s where the demand was.”
“The home-building industry is still building homes today the same way they did 100 years ago. They’re stick framing homes on site, lumber is being tossed around,” Lovallo said. “It’s probably the only industry that has not seen technology infused over the past 100 years.”
Constraints on labor, along with bureaucratic red tape related to land and permits, all bog down the process of building homes, he added.
“There has to be some kind of change that’s brought to this industry,” Lovallo said. “But I would argue that 10 years from now, we’re going to be building homes very differently than we are today.”
Even though builders are seeing cancellations rise, buyers shouldn’t expect home prices to drop significantly, Lovallo advised.
Unlike the global financial crisis of 2008, when home prices fell 30%, Lovallo expects prices to remain relatively stable. Other analysts, though, are predicting big peak-to-trough declines.
Because people will likely continue to work from home “over the foreseeable future,” Lovallo wrote in an Oct. 28 note, home-price appreciation may not decline significantly, barring an external economic shock.