A survey we conducted this summer of more than 3,000 Americans showed that a large majority of homeowners, 72 percent, think it’s a good time to buy. Yet they’re not buying, largely because their “current home is fine” and they have “no urgency to buy.”
The results of our “Housing 360: Insights into Homeownership” study that we’ll report in full next month raise an obvious, though important question: What can builders do to turn these shoppers into buyers? Builders throughout the country say that traffic is pretty good, yet people aren’t pulling the trigger for a variety of reasons, many of them financial.
Could it be that they aren’t impressed with what they see? You don’t see people putting off buying things they really want, like an Audi A8 or an iPhone 4S. These items have so much appeal that people part with perfectly fine cars and phones just to get the latest model. Sure, moving isn’t as easy as buying a new smartphone or car. But many of the new homes on the market today don’t exactly light a fire in people’s hearts. The focus for the last several years has been on value-engineering design to lower costs and compete with resales, particularly short sales. Now it’s time for the industry to turn its attention to introducing exciting new features that create a must-have mystique.
One of the most interesting outcomes of the housing recession is that unique products tend to outperform the market. When shoppers stumble onto something that they can’t find anywhere else—a super-small loft apartment downtown or an affordable contemporary production home—they find a way to buy it before the opportunity disappears. A small percentage of the total population may want this type of house. But they often can’t find it anywhere else.
The issue for builders now is how to create design urgency. How do you unleash latent desire in people to own your latest model? How do you create a mystique around your latest home design and technology that makes even last year’s models look out of date?
When we asked people in the same survey why they liked new homes, the typical responses finished high: less maintenance (56 percent), more energy efficient (47 percent), customization (48 percent), and an up-to-date floor plan (40 percent). But the top reason, and this was mildly surprising, was that “everything is new.” That was cited by 82 percent.
There’s a cohort of American consumers who prefer new homes—29 percent according to our survey—and what they like best about them is the simple fact that they are new. The carpeting is new, the appliances are new, everything is new. Why not make your homes really new, by regularly ratcheting up their design and technology.
That’s what car makers do. They come out with new models every few years that are substantial upgrades over what they’ve produced before. They perform better. They look better. And they often don’t cost much more.
Too many builders find a home they are comfortable building and build it over and over again. They don’t have an internal process for continually upgrading their base model. They don’t regularly look for ways to save on construction details to improve energy performance or reduce the home’s carbon footprint. They don’t continually tweak design details to produce better-looking houses with each new series.
Right now just about the only people buying homes are ones who have gone through a life change—a divorce, a job transfer, a new child—and really need one. But when the housing recovery finally arrives, discretionary buyers will return to the market looking for a great deal on a new generation of home designs. Will you be ready?
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