Comeback Marketing: The Right Strategy for the Next Wave

Tammy Leroy

"And this, too, shall pass away," the oft-repeated quote goes. It isn't an overstatement to say that Texas homebuilders have been in the depths of affliction in 2008, but as sure as triple-digit temperatures will follow this lovely winter weather, the current market conditions, too, will pass. Although it may feel like a never-ending slump, the buyers will be back before we know it; in fact, the U.S. Commerce Department reported a 22.7 percent gain in the West for new-home sales activity in September.

Nevertheless, the prospective buyers we meet going forward will be unlike those of a few years ago in many respects. When the new homes market makes its grand re-entry, it will bring with it a new wave of buyers with new priorities and new preferences-and homebuilders must reach out to them with a new message.

The investment buyers who muddied the waters for traditional buyers a few years ago will be, for the most part, out of the picture. And the buyers who remain are much more concerned with lifestyle and value, and they are more discriminating than ever. The next wave of buyers will include the traditional buyers of the past along with new demographic groups who are becoming homeowners as well. Sharp homebuilders will know their characteristics and will be ready with the methods and messages that will appeal to them.

The New Wave

Tracy Lucas, director of marketing for T.W. Lewis, says families will likely make up the biggest segment of the next buyer pool. "They've been waiting on the sidelines to upgrade, especially those families who purchased their homes in the past three years," she says. What's stopping these buyers now is that they are waiting until the price of their homes adjust to exceed or at least meet what they owe on their current homes.

"They'd like to move-for reasons that include better schools, shorter commute times or closer proximity to loved ones and/or amenities," Lucas says. "And as the market recovers, we will see them out in force searching for their dream homes."

Pierrette Tierney, vice president of sales and marking for Taylor Morrison's Phoenix division, notes that the next wave of buyers will have to be more financially secure than those purchasing in the last few years. "We will likely see a return of true homeowners who want to buy a home for a long-term commitment-as a place to raise their families and live out the American Dream" she says. Tierney also expects a significant number of first-time homebuyers taking advantage of FHA and VA programs. These buyers don't have a home to sell and can take advantage of attractive government financing.

Who else will be buying? "We will also continue to see move-up and move-down buyers in the market-although in smaller numbers-because there are always life-changing circumstances that require people to relocate or increase/decrease the size of their homes," Tierney says. She adds that in recent months, the local industry has continued to see an influx of out-of-country buyers looking to invest in a second home or future retirement home in an attractive climate.

Cathy French, vice president of sales and marketing for Standard Pacific Homes, notes that those born in the early Generation Y cycle (beginning with those born in 1982) will be entering the home buying market in full force in the next few years. In addition to tech-savvy Gen Y buyers, the National Association of Realtors also reports that minorities are expected to account for an even larger share of household growth over the next 10 years-a record 71 percent.

These minority buyers are bolstering the market for entry-level housing. "Builders must be ready to market to this group as they look for the American Dream of homeownership," says French, "and homebuilders must determine what cultural items are important to them and what their requirements are for a new-home neighborhood."

Less purchasing power will be another characteristic of many home buyers entering the market. Higher down payments, tighter family budgets and tougher lending requirements will have a strong impact on the price ranges of homes offered in new communities. "The easy financing of a few years ago is gone," says Jonathan L. Baer, vice president of sales and marketing for Montalbano Homes of Arizona. "They are going to have to save for a down payment to buy a new home, which means they won't be able to afford as much."

And lower-priced homes is only one of the needs successful builders must fulfill to attract the new wave of home buyers. Each demographic will have its own requirements, and both new homes and new-home communities are already beginning to reflect those needs.

Meeting Their Needs

We have seen significant adjustments in buyer wants that are likely to persist, even as the youngest homeowner group makes its debut. "While generation Y will be the new major consumer of homes in the market, they will have some of the same needs generation "X" had before them," says Baer. These needs, he says, include flexible floor plans that allow space to be used for more than one function, for example, a study/hobby room/family room.

Baer adds that floor plans will be smaller and more efficiently designed because the consumer of tomorrow will want to live closer to work and shopping. Lots must be smaller in these areas, and many homebuilders believe buyers will be willing to sacrifice space for convenience, with energy costs helping to drive the trend. The desire will be for communities with shopping, schools, parks and workplaces within walking distance.

The common thought among homebuilders in recent times is that although home buyers like the idea of green homes, they aren't willing to pay for the most environmentally friendly features. But it's becoming ever more apparent that the Green Movement has taken off. "They will want homes with basic elements of being environmentally conscious," says Baer, citing energy efficiency in appliances, lighting, and heating and cooling. But he believes they will eventually look for solar energy and other highly effective green features, including smart-scaped landscaping with low water usage.

Security is also a growing concern. "The world is an unstable place right now, and they will want homes and communities that make them feel safe and stable," Baer says. "Gated communities, neighborhood watch groups, home security and active homeowner associations will be key." In addition, he believes community amenities will become increasingly important as smaller lot sizes eliminate the potential for backyard pools.

Equally important as providing the features new buyers want, homebuilders will need to provide affordability to many of these demographic groups. "We will need to focus on value, location, and most importantly, financing options," says Tierney. "People need to realize that they can still purchase a home, and that there are mortgage products in the market that can help them find an affordable payment and benefit from the tax advantages of home ownership."

Marketing Approach

But providing precisely what buyers want will be irrelevant if they never hear that you have it. "The market slowdown has forced builders to re-evaluate how they are luring buyers, and already this has had a positive impact on the industry," says Lucas. She predicts that the industry will see a back-to-basics approach in terms of marketing messages, which will emphasize home buyers' hot buttons. Lucas lists these as home quality and workmanship, warranty service, location and amenities, and overall value. "As an industry, we need to steer away from the emphasis on price," she says.

Homebuilders are scrutinizing more closely than ever where their marketing dollars are going so they can ensure getting the biggest bang for the buck. While newspaper was a primary outlet in the last wave and prior, many are rethinking the value of this once-essential medium in light of the changing habits of consumers. And it isn't just the viability of newspaper advertising that is causing builders to look in other directions. Many in the homebuilding industry credit newspaper and television media with a great deal of culpability for the mass negative groupthink that led to rapid decline in the housing market.

"Throughout the real estate industry, there is a general consensus that the media has had a hand in perpetuating the lack of consumer confidence," says Lucas. "Most homebuilders have eliminated their newspaper advertising and, as a result, have been forced to experiment with new vehicles to reach their prospects. In the future, we will see newspaper advertising dollars re-allocated to other mediums." T.W. Lewis, she says, is moving toward more online marketing, which can allow one-on-one dialogues with prospects.

The popularity of online home shopping is growing at faster rates than even the most forward-thinking homebuilders could have predicted, largely due to the influence of Generation Y consumers. "Far more tech-savvy than the Baby Boomers or even the Generation X groups, they grew up emailing and texting," French says, adding that 97 percent of the Gen Y group own computers and like to do their shopping and research on the Web. Just having a website, however, will not suffice. "These buyers demand immediate service and will eliminate those homebuilders who cannot supply it," she says.

The change has been rapid. French notes that only a few years ago, Realtors reported the best method of advertising a home for sale was to put a sign in the front yard, but this method has been outdone by online marketing. "The National Association of Realtors' latest report concerning marketing information sources by homebuyers shows yard signs listed 59 percent of the time and the internet used 84 percent of the time," French says. "Although the internet has been used by homebuilders for well over a decade, the trend of incorporating a full-time internet sales staff will become more important as the next demographic group becomes homebuyers."

It isn't effective, however, to send out just any message online. The message is as important as the medium. "We will be dealing with a smaller pool of prospective homebuyers," Tierney says. "We need to find out what is important to those who still have the ability to purchase and cater our message to them." She also believes marketing will need to become more localized. "We will need to drill down to the community level," she says, "and ask what matters most to the people who live in this neighborhood and how we can deliver on those needs and wants."

Tammy Leroy is Editor in Chief of HB Magazine

Reprinted with permission of LPI Multimedia Inc.
Article appeared in issues of AZ and TX editions of HB Magazine

 

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