Think home buyers shop on lowest price? Think again.

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Where does price really stand in the psyche of the average home shopper? Not where you would think, according to a recently concluded study of nearly 10,000 consumers by John Burns Real Estate Consulting.

November 07, 2010

It’s pretty safe to say that given the state of the economy, with the national employment rate hovering around the 10 percent mark, foreclosures rampant, and virtually every major housing metric cited by the national media at a historically dreadful level, the new-home building community is dealing with the most price-sensitive consumer base in decades, perhaps since the Great Depression.
Multiple builders have told me about how people walk into their sales center with a nugget of information from the latest national housing news report and expect to get a deal of the century. “They just don’t understand when we tell them that the recession hasn’t hit our market like it has other regions and metropolitan areas,” said one Midwest builder. “We’re priced correctly for our market and product level. But they don’t want to hear it.”
So, where does price really stand in the psyche of the average home shopper?
Not where you would think, according to a recently concluded study of nearly 10,000 consumers (9,694, to be exact) by John Burns Real Estate Consulting, Irvine, Calif. The firm worked with 24 national builder/developers and a national Realtor group to survey potential home buyers from 43 states. Their key finding: Price is not the most important factor among the vast majority of consumers when shopping for a home. In fact, price ranked far down on the list of possibilities — well below factors such as location and home design/style — with only 17 percent of respondents indicating that it was the top factor.
Just like in any consumer-driven industry, there will always be builders that sell on lowest price, and this especially rings true today. But, as consumer research reports like the latest from John Burns show time after time, sustainable business models focus on offering good value (whether real or perceived) at the right price — not necessarily the lowest. The challenge for builders will always be determining the ideal cost-value ratio for their individual markets, product types, target demographics, competitive landscape, and economic situation.
For more findings from the John Burns consumer study, visit: www.HousingZone.com/pb/article/consumer-survey.

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