It is no surprise that the burst of the housing bubble has had a dramatic impact on homeowner attitudes and purchasing dynamics. What is interesting however is how the consumer mindset has evolved, especially among those who don’t currently own homes.
Right Brain Domination
Having witnessed the significant erosion of home equity that has occurred over the past 3 years, it might be expected that financial factors would a primary motivator among those seeking to purchase a home. While the rationality of getting a bargain (and therefore the potential to build equity) is a consideration, we are seeing that the primary motivation is much more emotionally driven.
A recent study of 20,000 home shoppers conducted by John Burns Real Estate Consulting confirmed what we have been seeing in our latest research at HY Connect: homeowners are reverting back to the pre-housing-boom days, purchasing homes for personal reasons.
According to the study, the top three very important reasons for desiring home ownership were:
- “Not wanting to rent for the rest of my life”
- “Ownership is what I strive for”
- “Living in a home customized to my personal needs”
Only 14% of the study’s participants expected to receive 2% or more in annual appreciation, and realizing the benefits of deducting mortgage interest fell dead last in terms of importance.
Power of Personalization
With homes now being more affordable, consumers are less concerned about price and more concerned about getting a home that fits their unique needs. They want the home customized to reflect their personal taste and lifestyle, and they want it right now.
This has tremendous implications for how builders, particularly production builders who increasingly strive to reduce consumer variables, build and sell their homes. It also provides insight regarding the need for product manufacturers to accommodate personalization in their product offerings and buying processes.
Today’s homeowners can afford to be choosy and will demand they be treated as individuals. Here are a few thoughts about some of the opportunities this represents.
- Product Personalization—Major home components, such as windows and cabinetry that are built on a home-at-a-time basis, represent the most obvious opportunity. For example, our research shows that consumers strongly desire to customize the functionality of their kitchen. If mainstream manufacturers could develop an efficient way factory-install the specific extras consumers desire, the true power of interactive marketing could be leveraged throughout all stages of the purchase process.
- Individualized Buying Experience—While some manufacturers are beginning to adopt on-line product customization on their websites, the industry lags well behind what has proven effective in the automotive category. But, websites are just one element. For example, why not generate post-purchase consumer excitement and interaction while the product is being built by including the consumer in the process. Real-time production updates, even webcams of their product being built, could all add to the experience. A secondary benefit to manufacturers is that this represents a value-added reason why channel partners would want to share previously guarded information/data about their consumers.
- Builder Implications—We believe this consumer mindset evolution represents a tremendous opportunity for smaller custom builders, and a potential threat to the big production builders. Production builders will need to develop the means to provide consumers with an increased level of customization (or perceived customization), while maintaining the efficiencies and scale advantages they have traditionally enjoyed.
With technology evolving on a daily basis, this is great news for manufacturers and builders willing to embrace change.