If you have nothing but resales on your showing schedule, you might want to add a stop by a new homes sales office, just in case. I have the proof.
According to a recent market study commissioned by BHI Inc., homebuyers can be divided into three groups: those who insist on a resale; those who insist on a new home; and those who are indifferent — those who will buy a resale or a new home.
Our qualifying approach to this "indifferent" segment must be anything but indifferent. From our perspective, the indifferent prospect might be the one who, after spending weeks with you looking at resales, decided to wait — then shops new homes without you. Or, he buys a resale and then cancels.
BHI, a consortium of 32 of the largest production homebuilders in America, recently commissioned a marketing study to determine consumer preferences regarding new homes versus existing homes.
In active new-home markets, sales of new homes represent 12 to 15 percent of all residential sales in any given month, when compared to MLS sales for the same period.
According to industry consultants, 60 to 70 percent of all new homes are sold through general real estate agents or co-brokers. Usually the higher priced the home, the greater the percentage of co-broker sales.
BHI is committed to increasing its members’ market share, and is about to roll out a multimillion-dollar campaign to do so, according to CEO Tim Costello.
The study sample structure included 984 completed surveys of prospective homebuyers committed to purchasing a home within the next 12 months, across 25 major markets. Shoppers were at least 25 years old, with a household income of $50,000 or more.
Sixty percent of this group were actively looking for a home and had:
- Met, spoken to or hired a Realtor.
- Sought preapproval for a home loan.
- Visited a model home in a new homes community.
- Attended a homebuying seminar or had placed their home on the market.
Forty percent had taken the above actions, or had:
- Regularly looked at home listings online or in the paper.
- Visited a Realtor and/or homebuilder website.
- Calculated living costs as a result of a new-home purchase.
- Attended an open house.
- Watched a TV show about local homes and real estate for sale.
- Driven around the neighborhoods looking for homes for sale.
- We are "considering."
Here are some highlights from the study:
- People buy homes for a variety of reasons. However, amenities and features that enhance daily life, increase privacy, and address needs of family and children are at the top of the list.
- People are citing market conditions, rather than events, as triggers to start looking. Favorable home prices and interest rates are notably more likely to trigger consideration among first-time homebuyers as compared to repeat purchasers.
- Shoppers are prepared to take their time and most expect to spend between $150,000 and $500,000. Almost two-thirds are unsure about when they will purchase or expect to take at least nine months to make a buying decision.
When people actively search for homes, they go online and they find these two resources most trustworthy:
- Local real estate listing websites: 34 percent.
- National real estate listing websites: 27 percent.
When it comes to where they want to buy, most want their homes in the suburbs
- Suburban area-closer to urban: 54 percent.
- Outlying suburban area: 20 percent.
- Heavily populated urban area: 13 percent.
- Small-town rural: 5 percent.
- Small town: 5 percent.
People generally prefer existing homes, but many will consider a new home offered by a builder in their search.
When looking for your new home, how strongly will you consider each of the following home choices?
- Will consider existing home: 75 percent.
- Will consider new (indifferent): 20 percent.
- Will not consider existing home: 5 percent.
(Comment: If 1 out of 5 of your resale prospects will consider a new home, do you see a need to qualify for "new" as well as "existing"?)
Brand-new home offered by builder
- Will consider: 49 percent.
- Will consider resale: 30 percent.
- Will not consider new home: 21 percent.
Which type of community do you prefer?
- Established neighborhood of older homes: 33 percent.
- Existing subdivision of newer homes: 42 percent.
- New-home communities: 25 percent.
Why do you prefer established neighborhoods/existing subdivisions over new homes?
- "The neighborhoods have a warmer inviting feel."
- "Better constructed."
- "Better privacy, homes are not on top of each other and cookie cutter."
- "Better pricing."
- "Good variety. Established neighborhoods. Good value."
- "Prices are more negotiable."
- "Houses are still new and may be under warranty, but the neighborhoods will be somewhat established along with landscaping."
Why do you prefer new-home communities over existing ones?
- "Ability to make changes to home during construction to suit my needs and desires."
- "I like newer home. They are generally more energy efficient and require less upkeep and have lower maintenance costs."
- "More modern. More amenities."
- "No need for repairs. Less hassle. Able to customize."
According to the study, "new homes and existing homes are neck and neck on the most important attributes. The majority (69 percent) of shoppers believes there is no difference between the two with regards to safety, and almost half (44 percent) say there is no difference in construction quality."
Other top concerns regardless of new or existing homes, include floor plans, maintenance expenses, cost per square foot, living space, energy efficiency, architecture/overall design, and larger lot size, in that order.
Existing homes lead for mature landscaping, lot size and sense of community.
BHI asked for beliefs and attitudes that might constrain a visit to a new-home community. Here are some of the comments made by those preferring new-home communities.
- "You don’t have any existing experience with the community. It’s brand-new to everyone, so any issues that arise you will discover together."
- "General not built as well as older homes were." "Construction may be ongoing, newer communities tend to be more expensive."
- "Neighborhood associations are likely to come with newer homes and can restrict individual freedom and impose silly rules."
- "No mature landscaping — usually has smaller lots."
Regardless of segment, new homes dominate for energy efficiency, customization and maintenance costs. There is agreement that new homes offer more living space, but at the expense of yard/lot size.
While less important than other considerations, convenience to work, friends/family and good schools is more important to those who prefer existing homes.
According to the study, those who prefer new homes are more likely to have visited model homes and met with a builder, while those preferring existing homes are more likely to visit an existing home, hire a Realtor, or bid on a property.
There are no differences among the segments for more general behaviors, such as:
- Visited a Realtor and/or homebuilder website.
- Calculated living cost.
- Watched a TV show on local homes and real estate for sale.
In my next column, look for the psychographic results of this compelling study and why new-home buyers tend to be more spiritual and controlling.