Katlyn, a young and talented stylist getting married in September, was thrilled to be preapproved for an entry-level home in Greenville, South Carolina. She and her fiancé eagerly began their home search, only to face constant disappointment. After five unsuccessful offers in which they were outbid by all-cash investors, the couple finally secured a contract on a “good enough” home within their budget. Unfortunately, the inspection revealed over $100,000 in necessary repairs. Disheartened, Katlyn confided that they had given up hope and signed a yearlong lease. She believes that with rising prices, they may never be able to find a home.
This scenario is becoming increasingly common. First-time buyers often face fierce competition from investors and encounter homes needing significant repairs. These challenges can take an emotional toll, causing many to lose hope. According to a NerdWallet survey, 1 in 20 American renters who sought to buy a home in 2023 have given up hope entirely. Redfin reports that 40% of renters in 2024 believe they will never own a home, up from 27% in 2023.
Market challenges, such as rising interest rates and prices, have also impacted affordability. The NAHB’s Priced Out Data shows that with a 7.25% average 30-year fixed interest rate, only about 20% of American families can afford a median-priced home. Despite these hurdles, first-time home buyers still make up 32% of the market, according to the National Association of Realtors. This is an increase from 2022 but still below 2019’s 38%.
Renters like Katlyn, who qualify for mortgages but lose hope, need confidence and clarity. Builders can play a pivotal role in addressing these needs through three key strategies:
1. Demystify the Home Buying Process Online
Builders should provide clear and transparent information online, including pricing, estimated monthly investment, and process details. A live online sales professional should be available to answer questions, help determine buyer needs, and add a personal touch. Buyers should understand what a builder has to offer and if those offerings have the potential to meet their needs before ever setting foot in a sales office.
A study by Label Insight found that 94% of consumers are likely to be loyal to a brand that offers complete transparency. Transparency builds trust and confidence among buyers, making the home buying process less daunting.
2. Focus on Customer Needs Over Price Incentives
According to Jeff Shore, author of “The 4:2 Formula: Getting Buyers Off the Fence and Into a Home,” a customer will proceed with a purchase decision when their current dissatisfaction (the pain points a customer is looking to alleviate) and the future promise (the needs and wants of the customer) outweigh their cost (the monetary investment) and fear.
Current Dissatisfaction x Future Promise > Cost + Fear
While 58% of builders, according to a recent market report by Zonda, offer affordability incentives like rate buydowns to reduce the “Cost + Fear” side of the equation, builders must also acknowledge that understanding and addressing individual customer needs is crucial. Sales teams must be trained in strategic discovery that centers around uncovering each buyer’s unique challenges and motivation—the reason the customer started shopping for a home in the first place. This discovery brings clarity to the customer’s mission and often gives customers the confidence they need to alleviate buying fears.
In addition, sales staff should be knowledgeable about current market conditions and financing options in order to effectively educate buyers on these matters and provide confidence. Chelsea Timmons, vice president of community experience at Tri Pointe Homes’ Austin, Texas, division and inaugural winner of BUILDER magazine’s Builder on the Rise award, is celebrated for her leadership and team development skills. In the competitive Austin market, her team excels with first-time home buyers, with 78% of their business coming directly from this segment. Timmons credits her team’s success to their diligent focus on uncovering their customers’ mission and gaining a deep understanding of buyer needs.
“When you know your customers well enough, you earn the right to share what information you have to offer. You shift from selling to becoming their trusted adviser,” Timmons says. Her sales team connects with buyers by learning their stories, motivations, and needs.
She explains that her team’s understanding of their customers creates an environment where they can directly address customer goals, versus adopting a strategy that becomes overly focused on offering the lowest prices.
Her team is also comfortable talking to customers about their financing goals. Timmons states, “Our customers may give us a budget, and my team will ask, ‘Where did that budget come from? Help me understand.’ They use their insight into customer needs to help navigate pricing to achieve the customer’s goals. Often, it’s not what the customer initially expected.”
3. Extend Support Beyond the Contract
A holistic purchase experience centered around buyer confidence all the way to the point of closing and beyond is essential for lowering buyer cancellation rates and increasing referrals. According to Eliant, which conducts over 200,000 evaluations of home buyer and homeowner perceptions each year, this holistic approach includes: setting realistic expectations for home buyers; demonstrating value in builder design upgrades; keeping buyers informed and excited during the construction process by contacting them regularly and before the customer has to ask; jobsite cleanliness; effective communication by loan officer partners before the customer has to ask; delivery of a completed home on the promised time schedule; and warranty repairs completed right the first-time.
Builders have the unique opportunity to address many of the concerns faced by first-time home buyers. By providing inventory and focusing on affordability, builders can tap into this large market segment. First-time buyers represent a significant portion of the market, and addressing their concerns directly can lead to increased sales and customer loyalty. By adopting practices that emphasize transparency and sales processes that focus on uncovering each specific customer’s motivations and needs, builders can provide a comprehensive, confidence-building experience that helps first-time buyers navigate the market successfully. With the right support, these potential buyers can achieve their dream of homeownership, and builders can expand their market reach by addressing the specific needs of first-time home buyers.
