Economic Research. Everyone wants to know when the market is going to turn around. The answer depends on your particular market. In many areas I’ve seen signs that perhaps we’ve hit the bottom, while in other markets the economic indicators aren’t so positive.
How do you discern the economics of your particular market? Here are some questions you need to answer:
The answers to these questions can be found by doing research at your community’s library, official website, or town hall; by visiting the local Better Business Bureau; or by speaking to area Realtors. The NAHB Economics Group also has a number of economic reports that may assist you in gathering this information.
The Multiple Listing Service (MLS). In today’s marketplace, custom builders aren’t only competing against each other to build a client’s new home. Clients who previously would have been interested in building a new home instead are looking at the resale market—especially in areas with heavy inventory. The MLS is your best source for understanding resale—and often new-home—competition.
When it comes to housing availability in your market, there are several questions you should be able to answer. For each, concentrate on the specific neighborhoods in which you are building. Also look at the data both for homes sold within the past year and for all active listings. Understanding the answers is even more critical for custom builders who are building or sitting with a spec home. Find out:
Competitive Research. In today’s troubled economic environment, builders of all types are looking to diversify. Those known for their production homes are trying to move into the custom and remodeling marketplaces, architects who previously worked on more production-oriented homes are branching into the custom marketplace, and many builders are trying to diversify into remodeling. I recently met with a custom builder who had lost one job to a new builder in the marketplace and another project to a fellow veteran.
Just who are your competitors, and how much do you know about them? Make a list and be sure you can answer these questions about each of them:
Other questions you should be able to answer include:
One way to find the answers to many of these questions is to “mystery shop” your competitors. Train a friend to become a shopper for a custom home and have that person become a prospect for your competitors. Teach him or her to ask the questions that will help you better understand the ins and outs of your competitors’ sales and design operations; knowing this can help you better compete against them.
