Builders can obtain demographics and other economic data from various government and private sources. However, some builders have their own ideas for getting a better read of their marketplace.
In addition to tracking real estate deals to uncover emerging trends, builders in some markets have shown the local Multiple Listing Service can be a powerful tool for demand analysis.
Ideal Homes of Norman, Okla., uses the MLS to establish monthly inventory and a sales absorption rate for homes alongside prices.
Vern McKown, co-owner and president of Ideal Homes, tracks prices for direct company use.
"From that, we put together a report on each suburban market in the area with the velocity per month, how many homes are for sale, and how many months' supply that equates to."
When a tornado in May of 1999 destroyed 3,000 houses in Ideal Homes' backyard. "All these people were displaced," says McKown, "and within 60 days, when they had all gotten their insurance checks, inventory just dried up to one or two months' supply."
But then, Remodelers-turned-investors fixed and put so many homes up for sale, inventory shot up as high as 18 months. That caused Ideal's sales slow from about 4 a month to 1.6 a month.
How did Ideal Homes recover? By plying its MLS data discipline. McKown and staff identified an opportunity for homes between $60,000 and $80,000, and "really nailed the market" with a new entry-level housing collection, the Medallion line. And helped bring the company to its present, approximate 500 units a year and $60 million in sales.