In our 30-plus years working with top home builders as real estate marketing consultants to manage their home sales, we’ve certainly seen our share of housing cycles, all of which rise and fall due to a variety of circumstances.
While the softening market we’re experiencing in mid-2022 has its own set of unique factors, we’re still reminded that one thing never changes: the critical need to educate the buyer.
There is still a shortage of nearly 4 million homes
Ever since The Great Recession, builders in the U.S. have not been keeping up with demand, leading to a cumulative shortage estimated as high as 3.8 million homes. What this means to homeowners is a natural long-term bottom to home prices due to this supply/demand imbalance, even if prices sometimes fall in the short term.
Although the current market may be bad news for home flippers, it’s great news for buyers of new homes who intend to stay there as their lives and families expand.
So how do we educate our buyers?
Step 1. Help buyers understand the numbers
Put everything in context and build trust as a way to ignore the noise, and help them make that psychological leap towards signing the sales contract. After that contract is signed, we have developed a consistent process of communication with regular follow-ups and the reporting of construction milestones each month to keep buyers engaged.
We have found that helping buyers maintain the same level of excitement they had when signing the contract makes it much easier to glide through the closing.
Step 2. Have mortgage lenders available on site regularly
Ensure that buyers understand and trust the process of obtaining a mortgage with one-on-one conversations with an expert. That’s why new communities sold by the Advantage Group have lenders on site two to three days per week.
Although mortgage demand did wane in recent months due to higher lending rates, recent declines in 30-year fixed rates may soon mean a ‘return to normal’ faster than anticipated. In addition, buyers today can increasingly take advantage of a popular program known as a permanent fixed-rate buydown.
Depending on the mortgage product offered, this allows the seller to pay up to 3 points to lower the mortgage rate by as much as one percent or more throughout the life of the loan. Buyers also get to qualify based on the lower payment amount, allowing them to spend more on a new home.
Some buyers are also taking advantage of temporary, fixed-rate buydowns to have more money for upgrades, landscaping and furniture. For example, with a 2-1 buydown, buyers can enjoy lower mortgage rates in the initial years of their loan, which as of August would offer starting rates under 4 percent for the first year and under 5 percent for the second. However, buyers still need to qualify for the payment at the full rate starting in the third year.
For those buyers interested in adjustable-rate mortgages, or ARMs, today’s options are much more conservative than in the past. For buyers this generally means the rate can only go up by 1 percent per year and rise to a maximum of 9 percent to 10 percent during the life of the loan.
Step 3. Focus on the home and not the interest rate
With less competition these days for the available supply of homes, now is a great time to focus on the home and not just the interest rate. It’s certainly much easier to swap a mortgage with a refinance to a lower payment when rates change versus selling a home which does not meet the buyer’s needs. Whether created onsite or online, model home complexes are an excellent way for buyers to envision creating a different lifestyle in a newly built, energy-efficient home which is often larger than their current residence.
Our agents routinely act as personalized real estate consultants to confirm that the home the buyers choose not only fits their needs, but also provides a safe, comfortable refuge in which to spend quality time with their families.
Step 4. Sell the competitive benefits of new homes
Sell the competitive benefits of new construction homes versus existing ones, especially when it comes to design, energy efficiency and technology.
- Today’s new homes are not only more open and expansive, but also interact with the outside world much more than in decades past.
- Today’s new homes continue to become more energy efficient as products improve, and in California all new homes must offer solar panels, saving the buyers on utility costs from the day they move in.
- Today’s new homes also come with comprehensive warranties, allowing buyers to focus on creating their own version of The American Dream without worrying about ongoing maintenance headaches.
Continue to boost confidence in the new home purchase
Regardless of the steps involved, our job is to ensure that buyers feel informed and confident about their new build home purchase. From the very first time they step into or call one of our sales offices, we strive to address their fears of buying in a changing market, fully explain the entire process of building and buying a new home, and guide them in finding the best match for their lives.
With poll after poll showing homeownership ranking as the highest means of obtaining The American Dream, our mission is to remind our buyers that getting there generally requires a long view, and not to worry about short-term fluctuations in the housing market.
Want to hear more about the steps we take each day with buyers in our new home communities? Contact the Advantage Group today.