Millennials are--no doubt--the future for home builders. They're also the present, but not in a critical mass sense. What they do in 2015 or even 2016 will not make or break almost any home builder's year. A first-time home buyer, on the other hand, can make or break a builder's year. This year is pivotal insofar as first-time buyers' reactivation is a must for a healthy food chain of recovery to continue in housing.
To be clearer, let's review three terms getting thrown around a lot these days almost as if they're the same thing.
Millennials: a marketing construct that refers to a generational cohort whose size is about 80 million people and whose ages currently range from about 18 to 34.
First-time buyers: a residential real estate term that refers to people who are moving from renting households to homeownership households. They may hail from any age group, although there's a statistical correlation between first-time home buyers and young adults. Still, it's a mistake from a home builder's viewpoint to say they're synonymous.
Entry-level buyers: another term from the real estate vernacular used to characterize those who chose the lowest price-tier in a market arena as their stepping stone into homeownership. Entry-level, relative to a given market, describes "starter" home price points. Again, statistically, there's a tie and some fair amount of overlap between entry-level, first-time buyers, and millennials. It's important to note the distinctions.
Here, Metrostudy chief economist Brad Hunter talks through the differences and what home builders--many of whom live or die based on their ability to take their next project financing draw by demonstrating work completion, sales, and settlements on a predictable and agreed-upon pace--should infer from each of the terms.
The value of all of these terms, with their differences, their similarities, and their overlap, is that they help us discipline ourselves with respect to discovering more exactly who will buy what we're selling, and who will come to work at our organizations, and who will be working on our job sites, and who will be investing capital in our projects, and who will be writing and reporting the stories of our business in the media.
More precise characterizations, descriptions, profiles, and studies of who it is that engages with and affirms value in our business, guide us on a number of important levels. Here are some important recent stories on the ways the "who" that home builders consider their customer universe is changing dramatically.
- Has Being Single in America Changed?
- For the College Educated, There's a Man Deficit in America
Who works at home?
- A rise in the number of those living alone
- Educational attainment among 25-34 year-olds
Households are changing, which means that the "who" in our value equation--be it our link to customers, employee associates, business partners, investors, and media workers--is in flux. Constructs such as Millennials, first-time buyers, and entry-level buyers help us focus on marketing messages, product development, land investment, and community programming.
This is why customer segmentation disciplines continue to evolve as important operational skill-sets in our organizations. BUILDER sister company Metrostudy has been elevating its customer segmentation solutions portfolio, drawing from on-the-street and job site level data of new residential construction.
Here's a look at some of the take-aways from a recent Housing Leadership Summit session, spotlighting how customer segmentation improves your knowledge about who your customer and potential customer is and what they want.
In the time-value-of-money context, July through December will be about driving sales hard and driving completions as efficiently and at as high a standard of quality as possible at as high a margin as possible. Right-the-first time, scheduling precision, anticipating the unpredictable, and customer care and delight need to be the consistent signals that what you're doing today will lead you to the next horizon, where, indeed, Millennials are the future.