Who doesn’t want the most reasonable price for what they are buying? When it comes to affordability, home buyers pressure builders, and builders pressure suppliers. Post-recession, suppliers are now in a position to raise costs. How can builders continue to respond to home buyer’s demand for affordable product?
The NEXTadventure project, which is targeted to the 55-plus demographic, is no exception. Research for the Taylor Morrison NEXTadventure project proved affordability is very important—37% of boomer survey respondents cited price as the most important factor in purchasing a new home.
Steve Kempton, Florida regional president for Taylor Morrison, explains how his company balances the cost demands.
“We constantly look for waste and inefficiency in design to try to offset material increases,” Kempton says. “We also work to regionalize plans and then regionalize sourcing of material. It’s a combination of value engineering and using economies of scales to your favor. Try to find a win-win-win for the contractors, suppliers, and for us.”
Kempton points out that home buyers consider the home price in two ways: first in the original purchase price and second in the ongoing cost of carry on the house. Specifically, boomers are balancing their final income on a long-term basis. They want to continue to live a certain lifestyle and oftentimes they are doing so with remaining savings, not a steady income.
“One of the things that we have worked diligently on is focusing on creating a lifestyle through programming that is affordable that also allows us to create economies of scale on programs such as lawn maintenance and pest control,” Kempton says. “We focus on building communities to a certain size where they feel personable and comfortable but still offer the economies of scale.”
Taylor Morrison sharpens its pencil when looking at land acquisition, development, and the actual home product. This allows the company to control building product price increases in conjunction with affordability in the original purchase price. Taylor Morrison evaluates if it can value engineer some dollars out of a house to potentially get fewer contractor hours and eventually reduce the cost of the home, so it can charge less to the home buyer. Kempton calls it “an advanced equation of land planning and lifestyle programming.”
The company also works hand in hand with contractors. Even though Kempton points out that there doesn’t appear to be any relief in the near term, Taylor Morrison is working to be more effective, to work closer with trades on schedules, and to be very process oriented.
“Ideally, when they show up we want the job to be ready for them,” he says in reference to contractors. “It has become more about working with them as a team to find out where we are wasting resources so that with limited resources we can still get the same amount of work down. We also work with communities to develop more talent.”
Through its involvement in the NEXTadventure project, Taylor Morrison was able to create further efficiency and streamline functions. Kempton explains that, “Real estate is a local business and at a regional level, we help support the teams with branding of Esplanade communities and this NEXTadventure brand will help them focus on where they want to be in their local market. We like to give them something that has already been tried and tested. After they have that, they can then focus on forward-looking projects. After we have a strong, research-based project like NEXTadventure, all we have to do is help them with amenity design and execution.”
The NEXTadventure project is a project that came directly from consumer feedback and was put into action in real time. The project started in March, its design based on focus groups and analytics. As Kempton states, “You can walk in and feel good about it and you don’t need to understand why. It’s all of it together. All the experts have made a statement without the need to explain it.”
