Alex Nabaum

The best consumer-focused companies use consumer segmentation models to estimate demand for their products and services. Some companies have built proprietary models, but many rely on syndicated segmentation models such as PRIZM NE from Nielsen Claritas, one that works for builders, too.

The PRIZM model consists of 66 segments that describe demographic, psychographic, and behavioral similarities in households. Nielsen then works with providers of household information data to assign each household to one of the 66 segments.

Working with Nielsen, Hanley Wood Market Intelligence (HWMI) has produced a housing overlay that simplifies the PRIZM model for builders. Based on household segments, ownership rates by geographic area, and forecasts for household formation, HWMI produces demand forecasts for every market in the country down to the county and submarket level. Comparing the demand estimates with prior year absorptions by price point or by consumer group can reveal shifts in the market as well as pockets of opportunity. 

Breaking Down Demand By Consumer Group 

Thanks to $8,000 tax credits and many distressed properties for sale, younger households, such as the Feature & Location group, bought more houses in 2009–2010 than expected. Many households in this group, largely made up of Millennials, or Gen Y, households, would have waited several years to buy a home. In the future, new-home demand should be stronger from Family Life, Elite, and Active Adult households.