IF THE MILLENNIALS ARE RISING, WHY AREN’T HOMEBUILDERS FOLLOWING?

I bank at one of the major money center banks.  This is not by choice but due to my own lethargy as when my bank was acquired I stayed put rather than move my safe deposit box and reprint my checks.  Last month I deposited a check from a new client.  It was not a huge sum of money but as we had not done business together before, I waited the customary two business days to make certain that it had cleared and checked my on-line statement before assuming that the funds were in my account and then forgot about it.  Imagine my surprise two weeks later to receive a letter from my bank informing me that they were enclosing the returned check (actually a facsimile copy), had reversed the deposit and charged me a service fee.

I went to the nearest branch of this bank to see what had occurred and found that the check had been miscoded, an error my bank had also made six months previously when bouncing another of my deposits from a different client.  The assistant branch manager agreed to redeposit this check and asked the teller to place the facsimile check in a special sleeve so that it would be hand-coded and the error would be corrected and she most graciously agreed to waive the fee for the returned check.

bank-of-america

Lo and behold, two days later I checked on-line and found that the re-deposit had also been reversed and another service fee had been charged to my account so this time I called my client and requested that they replace the check with a wire transfer which they were happy to do.  Of course, my bank account was then charged a wire transfer fee.  It turns out that once a check has been miscoded by my bank it cannot be undone; apparently there is a law of “bank infallibility” (I mistakenly thought that power was reserved for the Pope) which comes into effect and states that since the bank can never make a mistake, there is no need for them to create a procedure to correct a problem that cannot occur. 

This bank will not suffer for their failure to change as they far too large for the government to allow them to fail.  And there is no need for them to take any rapid action as they are immune to market conditions.  When other banks fall into difficulty, they will be merged into this goliath and “my” bank will continue to grow and prosper.   

But there is a world of difference between this bank and any homebuilding company.  No homebuilding business, no matter how large, is going to be saved by the federal government. And if they fall into serious trouble they will probably not be saved by anyone else.  If you doubt that, take a look at John Laing Homes which was sold to Dubai-based Emaar Properties in 2006 for $1.05 billion, filed for bankruptcy in February, 2009, then liquidated their assets.  And that is just one of the 84 “major” and 53 smaller homebuilding companies reported to have “imploded” in the past four years (http://builder-implode.com/).

So if there is no white knight out there ready to rescue a homebuilder, why is the industry so slow to adapt?   Our business is in a constant state of flux due to changing external conditions – worldwide financial markets, employment, consumer sentiment, interest rates, government action, household formations and demographics to name just a few.  In the IRM courses we call this “market drift”.  Yet I see inertia continue throughout our industry as we fail to respond appropriately and in a timely manner to these changes.

The larger homebuilders are now strongly targeting the first time buyers and making a concerted effort to attract the “Millennial Generation” which is far from just a younger version of the Baby Boomers. They are perhaps best identified by an increased use and familiarity with communications, media, and digital technologies made possible by the advent of instant communication – email, texting, and IM (instant messaging) and the social media outlets such as YouTube, Facebook, MySpace, and Twitter.  As such, they are a market with entirely different philosophies, expectations and procedures regarding life and, as it relates to the homebuilding business, marketing and purchasing.

I do not wish to turn this post into a commercial for the numerous suppliers in our industry who understand, have the skill and knowledge and the technology to properly service these new buyers but I have to ask the following questions:

  • If purchasers buy individual communities as opposed to a corporate brand when selecting a new home, why have most builders including the “nationals” failed to provide individual Facebook and Twitter pages for each of their communities and why is every new home salesperson not blogging regularly about his or her community? 
  • If this target market believes in instant communication, why is it that only one of the largest homebuilders and almost none of the smaller builders provide web concierge services?
  • If the homebuilding industry now concentrates a substantial portion of its media budgets on web-based marketing, why are homebuilders not constantly updating SEO (search engine optimization) for their websites?  Why are they not tracking and analyzing all web visitors in real time to determine number of visits, page preference, time on site, etc?  Why are they not obtaining real-time analysis of visitor traffic source to optimize cost and placement of click-throughs, banner ads and other purchased space? 

Most other Internet-based industries provide these services and we are now an Internet-based industry if we are to properly service not only the Millennials but all our other target markets as well. 

Crow in tree

A crow was sitting on a tree, doing nothing all day. A small rabbit observed the crow for several days. Getting envious of the easy life of the crow, the rabbit finally asked him, “Can I also sit like you and do nothing all day long?”

The crow answered, “Sure, why not? Help yourself.”

So, the rabbit sat on the ground below the crow and rested. In no time at all, it falls asleep. Suddenly a fox appeared, jumped on the rabbit and ate it.

Moral of the story: To be sitting and doing nothing, you must be sitting very, very high up. 

And in the homebuilding business, even very high up is no guarantee of success and continued profitability.  But that’s just my opinion.

Please visit our company’s website to learn more about our background, qualifications and services to the homebuilding industry at www.levitanassociates.net. And please consider following us on Twitter at http://twitter.com/DanielLevitan.

For other posts please visit http://www.residentialmarketingblog.com/

8 thoughts on “IF THE MILLENNIALS ARE RISING, WHY AREN’T HOMEBUILDERS FOLLOWING?

  1. What a great blog! There is no question that the Internet is a cornerstone of any business going forward and new home construction is certainly no exception!
    Soon enough websites will be actual interactive retail spaces.

  2. Well put Dan. I think the answer to why more homebuilders, large and small are not engaged in online marketing the way they should be is primarily due to fear. We fear what we don’t understand and they simply don’t understand the benefits and perhaps more importantly, who should be charged with engaging in these tactics. As an advertising agency principal I don’t believe a company’s advertising agency should be the primary source for social media. The agency, if qualified, should consult and oversee. However, qualified vendors should be employed to conduct seo and most other online marketing efforts. The sky is the limit for doing this stuff incorrectly. Doing it wrong could prove to be as harmful as doing it right is a benefit.

  3. Anther great post Dan. Speaking from experience, it is uncomfortable to be “out there” in cyberspace trying to keep up with the communications curve our Millennial Market keeps pushing. Jay is right about the risk of getting it wrong. I think many marketing professionals have a horror of becoming that caricature of the 50-something guy doing the “latest” dance to the snickers of the younger generation. And builders mistakenly believe if they wait a little longer, the dust will settle and the “right way” to do social marketing will become obvious. Wish it was going to be that easy to catch up!

  4. Your post is right on target, Dan. The Millennials are rising indeed, but not only as the biggest first-time buyer generation in history. Their preferences will dominate the home buying market for the next four decades as earlier generations embrace a more informal and totally wired marketing and sales process. Those who think the market will come back to 2005 like a bedspring will wait forever for that to happen.

  5. Mr. Levitan,

    Wow – love it! So many companies are trying to “game” the system and are missing the opportunity to really connect with prospects. There is a huge gap between the buyer’s expectations and what most homebuilders do to meet those expectations.

    To your point on “people buy individual communities as opposed to a corporate brand when selecting a new home” you are dead on. Of course branding is important, but buyers shop outside in…area, school district, proximity to work. No matter how good your “brand” is, they won’t buy if it is not the right house at the right price in the right location.

    I think you hit the nail on the head for establishing a social media strategy around communities – that is in fact what social networking is…community building in the digital space.

    Again, love the post! Thanks

    Mike Lyon

  6. Good post, Dan. The integration of social media reminds me of how the industry reacted to Web site development back in the late 90’s and early 00’s. I’m confident that it won’t take as long to adopt strong social media marketing strategies such as creating a community Facebook page, and asking residents to upload their own community YouTube videos. One of the beautiful aspects of social media marketing is that once it gets started, so much of it is done by residents, friends, realtors, etc.

    Looking forward to your participation in our ASK THE EXPERTS Webinar on March 8th.

    -Marie O’Brien, BlueTangerineSolutions.com

  7. Daniel:

    I enjoyed your post. I will get to my answer to the question headlining your post. But first, I would like to focus on a question listed within the text.

    “So if there is no white knight out there ready to rescue a homebuilder, why is the industry so slow to adapt?” Are you suggesting that adapting to new technologies would rescue today’s homebuilders?

    Homebuilders have always been slow to adopt new technologies. I spent four years running technologies companies. Three of those years, we were developing software for the homebuilding industry. Accounting software predominant in the industry had no brand recognition. Homebuilding is a highly fractured industry. Certainly, from 2000 to 2005, the industry experienced explosive growth, capturing the attention of brand name software providers. Together, they represent a significant market. Unfortunately, most homebuilders are small business.

    Key 2006 Metrics:
    Whirlpool $18B revenues
    P&G: $68.2B revenues
    Google: $10.6B revenues
    D.R. Horton: $15B revenues
    Lennar: $16.2B revenues
    Top 5 HBs: $70.9B revenues
    31st Largest Builder: $925M revenues

    That said, social networking applications are affordable for companies of all sizes. The industry should embrace your suggestions: 1) Facebook and Twitter pages for each community; and 2) Web concierge. Most homebuilders have employed SEO.

    The problem in homebuilding is not a failure to adopt new technologies. I dislike hyperbole so I’m not sure what word to use to describe the industry. What is an acceptable word that exceeds “implode?” The industry imploded in 2006. We are well beyond that now.

    The industry suffers from several systemic problems: 1) The disappearance of the secondary mortgage market; 2) Banks are not lending; and 3) Appraisals are unreliable. The bigger issue is the bid-ask gap in real estate asset pricing. Banks are increasingly becoming the asset holder. The disposition price is higher than the opportunists’ asking prices.

    In Chicago, the market feasibility “guru” is predicting a 2013 revival. If that is an accurate prediction, I’m not sure how many builders will be left standing.

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