A herd mentality

I have been building, marketing and selling new homes for 22 years — since June 1984. I have always marveled at patterns of new home buyer presence or absence in the marketplace. It always fascinates me how new home buyers are either out in droves or virtually non-existent. It seems that buyers move in some mystical fashion through cycles of buying frenzy or avoidance. Essentially, buyers move as if part of a herd mentality.

A new home purchase is traditionally the largest single investment most individuals make. Therefore, it makes sense that people instinctively follow the herd when deciding when it's the right time to pull the trigger and make a new home purchase. How people become attuned to the mass movement of other buyers, I do not know. However, I am presently observing in my real estate market that buyers are, at least in the New York metropolitan area, returning to the market. In speaking to realtors in five northeast marketplaces, all have reported the buyers are back, although they are still "just looking." And, showings have picked up dramatically in the past four weeks.

Assuming that lookers will turn into buyers, this is good news for builders who have inventory or are in the process of building new homes on speculation. So do you just sit back and wait for the herd to reappear? I hope not! You should be aggressively seeking prospects at all times, whether the market is hot like it was for the past decade, or it's flat and declining like it was for the past 18 to 24 months.

Knowing about the herd mentality, how do you spend your marketing resources? Should your marketing be Internet/technology-based with emphasis on your website and search engine listings? Or is it the more traditional resources such as newspapers and local signage that need attention? I suggest you examine your marketing plan to ensure you are maximizing the sales opportunities afforded by your knowledge of the consumers' shopping habits. For that information, I suggest you read the results of a survey commissioned in 2005 by the National Association of Home Builders' Institute of Residential Marketing titled The New Home Buyer and Home Builder Survey. To view results, visit homebuilderdev.com/irm/results.asp.

The purpose of the survey was to understand how consumers search for new homes and how builders are spending marketing dollars to attract qualified prospects.

The survey collected 1,001 responses from consumers who purchased a new home in the past year. Also, 186 builders and their marketing directors answered questions as to how they allocate marketing dollars.

Prospects rated the following almost equally: builders' websites (27 percent), signage (27 percent), Internet listing services (26 percent) and newspapers (23 percent) as the media of choice when searching the marketplace for new homes. When asked to identify which source they would go to if they were back in the new home market and could use only one source, prospects identified an Internet listing service, a realtor and a builder's website as the top three responses.

One of the report's conclusions is that most custom builders "are spending only one-fifth of their marketing budget on Internet-based media although prospects spend one-half of their time using online media to research their buying choices." The findings indicate that if you want to boost your sales, then increase your online presence.

Jay Grant is president of Grant Homes (granthomesusa.com), a residential design/build firm in Mendham, N.J. Grant's business focuses on controlling and developing land for construction of luxury custom and speculation quick-delivery homes. His strict attention to weekly cash flow reporting results in industry-leading profit margins. Grant has given numerous seminars across the country and is available for consulting by sending e-mail to granthomes@msn.com. Read his past columns at rdbmagazine.com.