The U.S. Housing market has been on a record-breaking streak for the last few years. Now 2022 appears to be no different. The year began with a median home price of more than $350,000—a 15.4% jump from just a year ago. Despite the sharp increase, sales remained strong. Now home inventory sits at an all-time low, down 16.5% from last year. That is just enough supply for a rolling 1.6 months, also a record low.
So far rising mortgage rates have put gasoline on the fire. The threat of significant future increases, which will eventually squeeze out some buyers, have others rushing to find their new home now. As a result, the market appears to be at an inflection point. Big price tags, low inventory, and higher interest rates have want-to-be buyers asking an important question, “Should we reconsider?”
Home builders largely hold the answer.
New construction single-family homes for sale hit their highest share on record to kick off the year. Newly built homes now account for more than one-third of the market. Home builders have been working overtime to ease the inventory challenges plaguing the U.S. for more than a year. So, when it comes to finding the right home at the right price for a buyer, builders are essential.
But that does not mean buyers are willing to accept anything. If they must wait for construction and pay more in the process, they certainly have demands. That’s actually good news for builders. Those willing and able to tailor their products and services can tap into a buyer pool vastly underserved in today’s market.
The key is unlocking what today’s buyers really want.
Location, Location, Location
The first rule of real estate still applies. But the reason changed slightly with the pandemic. Turns out staying inside for a year had people feeling claustrophobic. Now homes with more square footage are important. The average new home size currently sits at 2,338 square feet, up 6.3% from Great Recession lows. Nearly 70% of buyers want a single-family detached home versus a townhome or multi-family condo. The desire to spread out has people migrating to the suburbs in greater numbers.
The remote work revolution let people realize they could work from anywhere. The greatest population shifts show people moving to sunnier states like Texas, Florida, Arizona, North Carolina, and Georgia. Along with more sunshine comes increased buyer demand for homes with green spaces as people feel a strong desire to reconnect with nature.
With resale homes, buyers know exactly what they are getting. That can be less clear with new construction. Buyers often experience sticker shock when realizing what costs remain their responsibility like landscaping, window coverings, or storm doors.
Buyers also struggle when it comes to visualizing their new home. What will it look like if we move the door? Does this paint color work? Will brick or stone look better? Seemingly simple decisions can mean the difference between a buyer loving or hating their new home.
Both problems come down to clarity. Builders able to clearly outline what the home’s price tag includes calibrate buyer expectations from the very beginning. Along the way, helping buyers visualize their home design decisions drives up confidence. Builder efforts to bring clarity to the experience speeds up closing and creates an exceptional customer experience.
Incentives and Upgrades
Buyers love builders who offer incentives. Discounted upgrades, closing cost contributions, energy-efficient features. Growing in popularity are smart home technologies. Builders benefit by getting creative.
People want to know they are getting their money’s worth in today’s hot market. Builders can ease price tag woes that have some potential buyers waffling by touting differentiators that set their properties apart. What buyer doesn’t want to talk about the great deal they received or what the builder threw in? The move makes buyers feel cared for and can be the deciding factor that ultimately makes the sale.
A Trustworthy Reputation
Despite historically low inventory, a builder’s reputation still matters. Consider this:
- 93% of consumers say online reviews influence their buying decisions.
- 97% of millennials—the largest homebuying population in the U.S.—read reviews before selecting a business.
- 4 out of 5 consumers have changed their mind about a purchase after a negative review.
- Customers will pay up to 31% more to a business with great reviews.
When it comes to homebuying, trust is currency. No matter how nice the home, or how great the incentives, a bad builder reputation will make a deal DOA. That is why managing the customer experience is more important than ever. On average, an unhappy buyer will tell at least 15 other people about the problem. Word spreads fast. Builders who manage their reputation as well as they do construction have a natural sales advantage in attracting and converting buyers.
Right Decision Assurances
Purchasing a home is a big decision. Buyers want to know they are making the right one. After all, today’s home prices consume a large portion of life savings for most buyers. Builders can help by protecting their buyer’s investment. The simplest and most effective way to do that: a builder warranty.
The most comprehensive builder warranties cover homes from foundation to fridge and for up to 10 years. That gives buyers peace of mind that structural defects, system failures, electrical problems, and even appliance outages are protected. Most structural defects occur after year four, so buyers benefit from a long-term assurance that their home is high quality—and will stay that way.
PWSC, the industry’s home experts, offers a best-in-class warranty protecting more than 1.7 million homes across the United States. Discover why many of the nation’s largest builders partner with PWSC.