Strategic Residential Marketing

When sales do not appear in the numbers anticipated and budgeted in a new home community, the prevailing solution among homebuilders is often to first blame and then change the sales staff.  If sales still do not materialize then it is time to blame and then change sales management.  And if sales still do not appear then it is time to change the advertising and promotion and then change the ad agency.

Many years ago I interviewed for a position as regional sales manager with a national homebuilder.  The position was located in their largest region which had 32 operating communities.  As part of the decision process I was invited to attend one of their regional sales meetings which were held on a quarterly basis and led by the person who would have been my predecessor in that position.  The meeting was an elaborate affair, held in the ballroom of an upscale local hotel as there were over sixty sales people in attendance and a very nice breakfast was served.

The current sales manager opened the meeting by welcoming the attendees and then said “I hope that everyone enjoyed the breakfast as for some of you it may well be your last meal”.  This company had what I believe to be the unique philosophy of terminating the two lowest performing (per budgeted sales) sale people every three months and, in what they apparently believed to be a motivating experience for the remaining sales personnel, did so at these breakfasts.

I declined the sales manager’s position when it was offered to me.  I did not disagree with the belief that there are certainly times when the sales staff should be changed nor that weak sales people should be replaced. In fact, I am an advocate of a “power line” in sales situations where applicable.  And I did not necessarily disagree that a pro-active course of action is usually far more effective than a reactive one.  But I did not (and still do not) believe that terminations should be public affairs, similar to the use of the guillotine in France during the revolution, nor that proper and positive motivation can ever be derived from fear.  More importantly, I did not believe then and continue not to believe today that the sales staff, sales management nor the advertising agency is necessarily responsible for poor sales performance. Read the rest of this entry »

There was an article in Bloomberg Business Week recently with the headline “Foreign Buyers Heat Up Miami’s Condo Market”.  The story went on to describe how rapidly the condominium market in Miami has completely turned around.

The perfect storm of overbuilding by tens of thousands of units combined with the economic and housing downturn produced a housing market in 2008 and 2009 with record numbers of foreclosures and vacant and near-vacant buildings across the skyline. What a difference two years has made as home sales jumped by a record 46 percent last year and median monthly rents are up by 30 percent from 2009, thanks in large part to Latin American buyers who have recognized and enthusiastically responded to phenomenal values.  With average prices of downtown Miami condos now at $400/s.f., down 20% from their peak in 2007 but up one-third from the bottom of $300/s.f. two years ago, that is still a 43% better value than Bogota, 64% better than Sao Paulo and a whopping 71% better than Rio de Janeiro.

Miami is admittedly a special marketplace, the “gateway to Latin America”, and thus enjoys an immense and unique potential target market far greater in numbers than could be generated by primary usage or even domestic demand.  But it took homebuilders and developers who saw the potential to pick up ground at the rock bottom market prices a few years back – they are the ones now smiling all the way to the bank.

I am not suggesting that “Karma”, with which the title of this blog is most commonly associated, is the cause of this reincarnation of the Miami condominium market nor that any other religious principle or intervention is necessarily involved.  While many homebuilders and developers certainly prayed for a return of the market, my belief is that the natural laws of causation or, as more usually referred to in our industry as “cycles”, were responsible.

I have been forecasting a return of the housing market in our country starting in 2012 for the past three years and all evidence now strongly points to the validity of that prediction.  The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury released the February edition of the Obama Administration’s Housing Scorecard on Friday and the report suggests that investors now believe that the Case-Shiller index has bottomed.  I am not a big fan of Case–Shiller as, in my opinion, this index is prejudiced by distressed sales and therefore is neither representative of the housing market as a whole nor reflective of “new” housing values. Nevertheless, investor confidence is a major contributor to a sustained recovery and should help to limit negative media coverage on housing in the future. Read the rest of this entry »

Several years ago I decided not to attend a Bee Gees concert. The event was in Miami Beach on New Year’s Eve and the thought of a long drive home late at night with drunks on the road overcame my desire to see a group that I have always greatly enjoyed. Following Maurice’s death in January 2003, the group disbanded and I realized that I had made an error in judgment, missing an opportunity that would never come again, a decision I have regretted for the past ten years.

Last night I had a second chance as Barry Gibb performed his first ever solo concert and it was absolutely wonderful, coming very, very close to making up for my previous mistake. I was fortunate as life seldom gives us second chances and missed opportunities are normally gone forever.

It seems to me that we are missing opportunities every day in the homebuilding industry and those opportunities, once gone, will not return.

I was in a southwestern housing market recently and shopped some of the competition. The majority of new home properties are multi-builder operations – the developer has abdicated responsibility for the sale of the homes and each builder utilizes his or her own general real estate broker for sales, competing head-to-head in the same property. In one development I saw signs for eleven brokers with several of those representing multiple competing homebuilders. There is no on-site presence except for occasional open houses and homes in these developments are sold as if they were resales.

There were a few new home communities with on-site presence, operated by the larger builders. Although I registered at every such sales office, not a single sales representative has followed-up with an email, a phone call or a letter. The sales presentations that I did experience were far less than optimal, even when presented by the two new home representatives that had apparently received some professional training as evidenced by certificates proudly displayed on their walls.

There were so many opportunities for improvement in the sales operations, not only with the sales personnel but also in sales management and supervision, that I was astounded. I realize that new home sales have been slower than desired for the past few years and that many of the sales people and their managers have been through hard times, but I have to believe that many more sales could have been made in this market, as in most others, even in the worst conditions of the past several years, if the entire sales team had simply been performing their jobs properly.

Certainly the housing markets have been in turmoil across the country for the past several years and many markets have seen serious declines in values that pose challenges on the sales floor. Appraisal values may be lacking, financing may be difficult to obtain. But the homebuilding industry has always faced challenges and while different than what now exists we have always found solutions and managed to sell new homes. Read the rest of this entry »