Three years ago, when Pulte merged with Centex Homes to become PulteGroup, executives knew they wanted to build an entry-level brand under the Centex name. Three years later it has unrolled a plan and products it hopes will make it happen.
“We knew we had a hole in our portfolio,” said Fred Ehle, PulteGroup’s vice president of marketing. So about two years ago the company began brainstorming to figure out what Gen. Y, the largest age demographic in the country's history, wants in a home and how to get them to buy.
“These folks don’t have a home to sell [that would slow down a purchase] and the demand is only going to grow.” Ehle said.
Pulte started the research by pulling in people in the age group who were renting to figure out what they wanted and what kind of monthly payment it would take to move them away from renting and into buying.
One of the first discoveries, and something PulteGroup didn’t take for granted, was that these buyers still aspire to buying a home, despite what they’ve seen happen to the value of their parents’ homes during the housing recession. Eighty-eight percent said they still want to be homeowners. The problem is that they don’t think they can.
“The biggest challenge for this buyer is that they don’t believe they can afford to buy a home, and they certainly don’t think they can afford to buy a new home. They think it’s out of reach for them,” says Ehle.
So Pulte set about creating a line of homes from scratch that they can build and sell at a price that leaves owners' monthly costs close to local rents, and that can be built quickly since, with no home to sell first and a possible lease expiring, these buyers often need to move in fast.
A second discovery PulteGroup made in its focus group research was that these buyers want to customize their homes, and they are willing to sacrifice one feature for another as long as they have control of the decision.
What they would be willing to give up was surprising as well, Ehle said. Many were willing to accept single-car garages, for instance, to use that space for something they wanted inside the home. Some were willing to give up a bathroom to have granite in the kitchen.
Out of the research, PulteGroup created the Independence Series of five homes that it is unveiling in San Antonio, Texas, Chicago, and St. Louis, Mo.—three very different markets to see how the models play in disparate communities.
The models, between 1,100 and 2,300 square feet, with two to four bedrooms, are built in a modular manner so one feature can be easily removed and replaced with a different option. To keep construction costs down and cut build time, there are fewer interior walls, Ehle said.
As a result, in the San Antonio market, buyers can get a home for an all-inclusive monthly payment of about $775 a month for a house that starts in the $105,000 price range. “And these build very quickly, much more quickly than anything else we have in our portfolio,” he said. The company is hoping to get down to a 30-day build-time as sales ramp up.
The move toward customizing floor plans is new for PulteGroup, which in the past has not been willing to customize much about their offerings.
PulteGroup’s Gen. Y research also revealed that technology was even more important to the group than company executives realized. That has led to making sure that there’s wall space to hang a flat screen television in the floor plans and outlets where they can easily charge their smart phone.
The realization about how important technology is to this group of buyers also informed the sales process. Home shoppers are given iPads that allow them to customize the floor plans and immediately see how their choices impact the bottom line cost. After leaving the sales center, agents e-mail the shoppers all the floor plans they custom configured along with the price of each so they can continue to contemplate the purchase. They also made it easy for shoppers to upload the information onto Facebook so they can share it with their friends.
Having a product that Gen Y wants is one thing, but getting these buyers qualified in the tight mortgage lending environment is quite another. So Pulte has begun assigning a mortgage advisor to home shoppers, even before they say they want to be buyers. The advisors can pull the shopper’s credit score and, if needed, suggest ways the buyer could clean up credit issues.
“It’s real important to get people comfortable before they commit to buying a home,” Ehle said.
He concedes that some Gen Y buyers will not qualify to buy a home and some sales will be lost. But tapping into the demographic that is moving into the home-buying age will be worth the effort because it’s so huge.
“Even with the damped down household formation that we have had in the last few years” the demographic will eventually bring new household levels up to what they were from 1995 to 2002, between 1 million and 1.2 million a year, he said.
Teresa Burney is a senior editor for Builder magazine.