First-Time Frenzy

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With all the incentives going to first-time home buyers, it's no wonder that on the eve of incentives' expiration there's a feeding frenzy of prospects looking to cash in.

September 01, 2009
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Cardis' Tips

With all the incentives going to first-time home buyers, it's no wonder that on the eve of incentives' expiration there's a feeding frenzy of prospects looking to cash in. After all, no home buyer should waste a good recession!

While I am very pleased with the effect these stimuli have had, I am concerned with the quality of homes being built to fulfill the demand for the first-time buyer. Get ready for the next phase of this rush: demand for quality along with affordability.

Paul Cardis,
 Avid Ratings

Before you rush to join the herd of first-time home buyers, be sure you have a proper plan. Missteps in recasting your product could prove very costly and even determine your company's survival. See what happened to Yugo, Kmart, and Chrysler; each of these companies focused on the affordable buyer and failed to maintain quality and service. The tally from www.builder-implode.com states we lost more than 82 home builders from 2006 to date, and our post-mortem reveals that a lack of quality was common among those builders who didn't make it.

Making the shift

If you're making the switch in your product line toward affordability, here are ways to keep quality.

Determine Design Drivers: Every builder looking to value-engineer its homes needs to put the power of research on its side. This business may have been built on gut instincts, but it will end up with those who make data-driven product decisions. So get a team together and objectively survey prospects in your area.

Calculate the Value Equation: Value is equal to price divided by benefits offered. Take your proposed project and compare it against others in the market using this method. It will help you create the truest value of your project from your customers' perspective. Value is much more than just the lowest price.

Buy New Land: With land prices so much lower than two years ago, it's a great time to acquire a distressed property and place newly engineered affordable product on it. This will literally "blow the doors off" your value equation and result in lots of sold homes at nice profits.


Before you rush to join the herd of first-time home buyers, be sure you have a proper plan.

Provide an Exceptional Home-Buying Experience: Gobble up market-share by offering quality and service that is superior to your competition. You'll protect your brand from being damaged and avoid serious complaints that may stall future projects.

I dedicate this article to our friend and fellow housing consultant Steve Maltzman. While he tirelessly worked to improve the top and bottom lines of his clients, he kept quality as a key component of his practice. His contributions to NAHB's Builder 20 Clubs and his firm, SMA Consulting, influenced hundreds of home builders who have created positive communities for thousands of homeowners throughout North America. Rest in peace.


Author Information
Paul Cardis is CEO of Avid Ratings, a research and consulting firm specializing in customer satisfaction for the home building industry. You can reach him at paul.cardis@avidratings.com.

 

Cardis' Tips

Design It Right

Survey your market to learn what will lead to design success.

Determine the Value Equation

Compare your project to your competition. Value's more than just the lowest price.

Buy New Land

Consider buying distressed property to showcase your value-engineered products. It'll boost your value equation.

Provide a Stellar Home-Buying Experience

Operate superior to your competitors and you're sure to grow market share.

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