Expectant moms and dads (or those of us who once were) can relate to a particular spasm of anxiety. Pre-natal care? Check. Periodic exams and tests? All normal and healthy. Still, the gnawing angst. Ten fingers and toes? A healthy body? A normally-functioning brain? It's hard to tamp down the worry, right up until the moment.
An expert on the phenomenon told me once that such worry could be viewed as a visceral kind of prayer ... that our beloved unborn offspring would come into the world with whatever it takes to thrive. To imagine and fret over things that could go wrong was a kind of invocation that all would go well.
In the past 12 weeks or so, and in the coming 12 months or so, hundreds of new new-home neighborhoods will have grand-opened, started selling, and created--hopefully lengthy--contact lists of interested prospects who'll provide a healthy jumpstart in lift for all those fragile newborn communities. Community managers and division executives and company headquarters officials alike are well-aware of the high stakes--the disproportionately large upfront investment of capital, time, and focus it takes to get a new "store" up and running before the first trickle of deposit money comes in and well before the first stream of revenue hits the books as settlements complete. They, too, are fretful and hand-wringing about the future well-being of their communities-to-be.
Some of these new communities position themselves--by dint of what's been selling well for the past 36 months--against a now well-served higher-end and active adult buyer segment. These move-up and second-time move-up communities will act as a depth test of a buyer universe that has almost single-handedly driven the recovery as we know it so far. This group includes, depending on the geography, a healthy global buyer contingent from Asia, South America, Europe, and Canada, as well as professional, tech, and energy industry executives whose motivations couple up with discretionary, non-contingency means.
It's now that the composition and mix of buyers begins to shift. Prices have begun to stabilize; the "credit box" has begun, albeit for entirely self-serving reasons, to open wider; student debt, for the leading edge of young adults, has begun to recede as a monthly budget factor; biological clocks are ticking, etc.
An interesting analysis comes this morning from Zillow senior economist Aaron Terrazas, on the "Double Lucky 3 Percent" of young homeowners who'd gotten help on both college finance and initial payments to buy a house.
The important point that Terrazas's piece makes is essentially about market-sizing. To try to get a grip on "the who" of our business challenges--our customer base--it's common practice to try to "size" the universe of potential buyers to understand what portion of that universe one would need to capture in order to have a successful business.
Brilliantly, Terrazas creates the image of a funnel, in this case showing how the total population of 23 to 34 year-olds, known as Millennials, funnels, in narrower and narrower groupings, toward homeownership.
The conclusion might be that, among Millennials, three out of one hundred would be one of the ones who'd both been supported financially through college (and don't carry debt), and will get support with down payments or other initial payments to own a house.
Here's the picture of that:
Still, the "funnel" may be helpful with a ballpark about how big a customer universe is, but it won't sell houses. To do that, I believe another image, a black box, might be more helpful to conjure for most home builders, partly because demographics tend to look back rather than to look forward in their helpfulness.
Demographics by themselves would tell us that resources would better focus on a baby boom contingent of the buyer universe that has yet to activate, vs. the Millennials contingent. Why? It's likely that the size and wherewithal of the older grouping is more substantial right now than that of the younger group.
The issue is demographics, and demographics filtered through financial screens, get you only just so far as regards finding your customers. Forget, for a second, the funneling of demographics, and think of a black box.
Imagine your job as a home building company marketer, sales associate, designer, or land buyer is to extract buyers from a black box. Inside the black box are your buyers and a lot of other people--some of whom don't have any plans to buy, and some of whom can't buy, and some of whom will buy if circumstances and desire kindle and catch fire.
The black box is full of the "what-can-go-wrongs" and the "what-can-go-rights" that add up to sales or no sales. Your decisions, your fretful preparations and plan, your worry about whether you've got the right homes for the right price points in the right neighborhoods in the right locations with respect to job centers and convenience points, are all part of how you get living breathing decision-makers out of that black box.
Homeownership, we find, is a series of compromises and trade-offs, values for preferences, money for time, stability for flexibility, and predictability for spontaneity.
All in all, we'd probably be pleased with 10 fingers and 10 toes and a hint of a smile at the sound of our voices, involuntary as it may be.
Happy Mid-Year, all.