Simple gifts

“Simple Gifts” is a Shaker dance song written and composed in 1848 by Elder Joseph Brackett and one of the better known American folk songs.  It is my favorite portion of Aaron Copeland’s Appalachian Spring and equally enjoyable as performed by Yo-Yo Ma and Alison Krauss (available on YouTube). Many of my readers are probably familiar with the lyrics: 

‘Tis the gift to be simple, ’tis the gift to be free

‘Tis the gift to come down where we ought to be.

And when we find ourselves in the place just right,

‘Twill be in the valley of love and delight.

When true simplicity is gain’d,

To bow and to bend we shan’t be asham’d.

To turn, turn will be our delight,

Till by turning, turning we come ’round right.

It is difficult to disagree with the theme of the song as we all would like to find ourselves in the “place just right” but getting there today is often anything but simple.

To someone outside the industry, the homebuilding business may look simple – build a home and someone will buy it.  The fact is, however, that the industry is far different than simple. To succeed requires a careful blend and balance of art and science:

  • The art of land planning + the science of engineering;
  • The art of architecture and design + the science of construction; 
  • The art of good business + the science of finance;
  • And perhaps uniquely so, a combination of art and science within marketing.

I am certain that we are familiar with many of the successes of the “art” component of marketing – the unique advertising and promotional campaigns that created lines of customers camped out overnight waiting for the sales office to open;  the superstar salesperson who achieved multi-million dollar results even in a weak market;  the gold winners as showcased at “The Nationals”, the annual awards program sponsored by the National Sales and Marketing Council. 

But the science of marketing in homebuilding is often overlooked and equally important to success. I would like to share with you one “scientific” technique (and there are several more) that I use when examining a housing market to quantify demand potential and opportunity.

It is a generally recognized fact that housing demand is created by population growth which spurs household formation subject to consumer confidence which, in primary housing markets (as opposed to resort/retirement/second home locations), is supported by employment growth.  Examining the ratios of housing permits to population growth and to employment growth and establishing the underlying historically sustainable ratios yields a pretty clear analysis of whether a market is over-built, under-built or in-balance and the likely resulting opportunities.  Graphing these results creates a visualization that is extremely useful when comparing and evaluating different alternate market opportunities and deciding where to concentrate efforts and assets.

Following are graphs for two metro areas within the same state, the first of a market that is over-built, the second of a market that is in-balance and it is easy to see which the smart money would choose.

 

It is time for marketing within the homebuilding industry to stop relying solely on “gut” and embrace the tools that maximize success – and science is one major tool that must be used.  But that’s just my opinion!

Please visit our company’s website at www.levitanassociates.net. to learn more about our background, qualifications and services to the homebuilding industry and how we can assist homebuilders, developers, lenders and Realtors© achieve success.

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And if you are planning to attend IBS (the International Builders Show) in Las Vegas, please consider adding an event on Tuesday night, January 22nd and attend The Nationals – the National Sales and Marketing awards that will recognize the best and brightest in the housing industry. 

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