Strategic Residential Marketing

“When the Going Gets Tough, the Tough Get Going” is a saying attributed to Joan W. Donaldson as well as a popular song originally recorded by Billy Ocean and used as the theme song for the film, The Jewel of the Nile.  I believe that this is now truer than ever for everyone in the homebuilding industry.

Most of the housing markets across the country have reached bottom and are now ready to begin a slow but steady recovery. Household formations are still lagging due to the lack of meaningful employment growth but population growth is continuing at strong levels and will return our industry to health and over 1,500,000 annual housing starts nationally by the end of the decade. 

Things are certainly still tough out there in many places and it may still be as long as three to four years before we see the meaningful signs of a housing recovery in our own markets that will start to “naturally” return our levels of new home sales and our incomes to the levels that we enjoyed just a few years ago. 

Last week a salesperson at a development that I was shopping complained that traffic had slowed considerably since the tax credit ended and she was not selling any homes.  A prospective homebuilder client with whom I have been in contact for several years told me this week that the market was slow and he had decided to “just wait it out”.  And a developer client informed me yesterday that he was not “giving away” his homesites and would just hold on the best that he could until the market returns.

Inaction is simply not a solution; it is a self-fulfilling prophesy for failure. Read the rest of this entry »

The quotation above is attributed to John Heywood, a fifteenth century English writer. It closely resembles several Old and New Testament verses, most notably Jeremiah 5:21 (“Hear now this, O foolish people, and without understanding; which have eyes, and see not; which have ears, and hear not”) and Matthew 13:13 (“Therefore I speak to them in parables: because they seeing see not; and hearing they hear not, neither do they understand”). So this concept has been around for quite some time.

Yet it appears that the message is not being received and I am now well past the point of frustration in advising homebuilders and developers to simply look at the market to determine what will sell and hearing their automatic response of “you do not understand that things are different here and we cannot do that”. The fact is, things are not different here, there or anywhere else as the market is the sole determinant of where our buyers will live, what size and type of home they want and what they will pay. It does not matter what was the cost of the land or improvements, what the architect believed to be an attractive or appropriate design, or even who the builder is or how they do business. While the specifics of the consumers’ decisions will vary somewhat depending on geographic location, the national and local economy, the job market, interest rates and consumer sentiment, the homebuying market will always make their desires quite clear and all we need to do to succeed is look, listen and comply.

When homebuilders and developers fail to see, the only available course of action to sell the homesites or homes is to lower the price (or otherwise enhance the offering) until they have created such a visibly superior value that it overcomes all other concerns. But that typically results in losing money which has an obvious and undesirable long-term result. We can provide a superior sales environment and selling process, better merchandising, advertising and promotion and those efforts will certainly produce benefits and are worth pursuing. But without the underlying correct location, acceptable home design and features, and proper pricing, we are at best merely spinning our wheels while on the inevitable road to failure. Read the rest of this entry »

When my younger son was active in debate he often used the concept of Social Darwinism as a justification for the most outrageous concepts and, while the ideology was disproven decades ago, his opponents were usually unable to defend against the argument and he handily won his rounds.  In fact, although he has not lived at home for fifteen years, we still have several of his debate trophies in his old bedroom, now referred to by us as the “museum”.

For those unfamiliar with the concept, Social Darwinism is a pejorative term used for various late nineteenth century ideologies which piggy-backed on the popularity of Charles Darwin’s new discoveries.  While often contradictory, the philosophy exploited ideas of survival of the fittest as applied to society. It commonly refers to notions of struggle for existence being used to justify social policies which show no sympathy for those unable to support themselves, perhaps similar to some extent to the less well publicized policies currently promoted by the more extremist members of the Tea Party movement. While the most prominent form of such views stressed competition between individuals in free market capitalism, it is also associated with ideas of struggle between social groups and classes. In sociology it has been defined as a theory of social evolution which asserts that there are underlying, and largely irresistible, forces acting in societies which are like the natural forces that operate in animal and plant communities. One can therefore formulate social laws similar to natural ones. These social forces are of such a kind as to produce evolutionary progress through the natural conflicts between social groups. The best-adapted and most successful social groups survive these conflicts, raising the evolutionary level of society generally. 

I was working in a southeastern market last week and, as it had been a few years since I had last visited this area, I was curious to see what changes had transpired.  The community with which I had previously been involved had been successfully completed and sold out but several new developments had opened and I took the time to visit them.

This market is fortunate in that it did not suffer a housing downturn anywhere near as severe as most other areas of the country.  Resale housing prices did not escalate unreasonably and therefore have not fallen substantially.  And new home production was not uncontrolled in the boom years and now is down only about a third from the average of the prior ten years.  There are three homebuilders whose operations I found to be noteworthy, two smaller local builders who are doing relatively well in the market and a large regional builder who is not doing as well.  Read the rest of this entry »