Gehan Homes, the Sumitomo Forestry-owned Texas and Arizona private home builder, will jump on an increasingly crowded bandwagon of builders who’re rolling out sub-branded, newly engineered floorplans and elevations to meet the burgeoning tide of demand from entry-level buyers, especially from the slow-to-market young adult mega-segment.
Gehan’s introducing its Gray Point Homes line with a separately hatched web presence and marketing/positioning plan, a strategy not unlike sibling mid-Atlantic Coast multiregional builder Dan Ryan Builders’ plan for a push into a 55+ communities with a line called Elevate. Too, Atlanta-based Ashton Woods unveiled an entry-level rental- and resale challenger under the separate and distinct branding of Starlight Homes.
The Gehan strategy, which draws too in essential ways from America’s No. 1 builder D.R. Horton’s customer segmentation and branding strategy, reflects the real-life ways that varying life-stages go with profoundly varying needs and the narrative to meet them. Would-be entry-level buyers–many of whom are currently renters–see the world through different eyes than those who’ve already experienced homeownership, and/or who have arrived at the final stretch of their career arcs.
Affordability–whether it’s defined in monthly payment terms, income to home price ratios, loan-to-value, price-interest-tax-insurance and energy terms, and the capacity to ante a sufficient down payment–means something distinctly different for young would-be rental refugees.
Affordability, for young adults, tends also to encompass measures other than the pocketbook. Time, connectivity, access to activities, and the ability to shape and evolve the home into a personalized interface are priorities that many Millennials consider to be must-haves in the cost-vs.-value spectrum of homeownership.
For builders, the entry-level brand proposition is less about a design platform, and more about a strategic, operational, and an investment program–starting with land and lot acquisitions, and hitting every process and discipline from customer relationship management and enterprise resource planning systems, to architecture and engineering, to workflows, to logistics, to marketing and sales.
The massive potential of the Millennial generation is a known. How those 77 million individuals behave as a cohort in their housing preferences is only beginning to be revealed.
For under $1,000 a month, homeownership’s appeal and attainability is dramatic, as LGI Homes, D.R. Horton’s Express Homes, and a host of more-recent strategic initiatives have proven. Gehan’s press statement notes:
According to Realtor.com’s Housing Forecast, millennials are expected to account for 33% of homebuyers in 2017. As rental rates continue to increase and credit conditions ease it is creating more demand at lower price points. Gray Point Homes is designed to target this segment with affordable homes featuring updated floor plans and the ability to personalize, while achieving lower monthly payments.
“Gray Point Homes will now be marketed in our first time/entry level communities. This brand will become synonymous with the same core values as Gehan Homes while providing market segmentation to address a maturing housing cycle”, said John Winniford, Chief Executive Officer. “The brand will incorporate our new 30’ and 40’ wide product that has been developed over the last year. These plans fit the need for an emerging market looking for high quality affordable housing.”
Gray Point Homes is introducing new communities across Texas, offering 14 floor plans and 42 elevations. The brand will launch in its first new home community in Houston at Balmoral, a 580-acre Land Tejas development, just off North Sam Houston Parkway and Woodland Hills Drive. Mostyn Springs, located in Magnolia, TX will soon follow. Gray Point will operate in all four Texas markets with another 18 communities scheduled to open over the next year.
Will Dan Ryan Builders and Sumitomo’s other portfolio operators pick up on the Gray Point brand, and in turn, will Gehan Homes’ adopt Dan Ryan’s Elevate brand for the 55+ attainable segment? Time will tell.
Strategically, each of the Sumitomo operators has spoken to total autonomy when it comes to doing the best product for each respective regional opportunity. At the same time, all of the individual operators profess to be anxious and willing to port best practices and ideas across the growing Sumitomo empire as a matter of doing business.
The population barbells–Millennials on the one end of the spectrum and aging Baby Boomers on the other–offer a positive scenario for new home development over the next decade place. What’s interesting is that builders are resorting to a strategy they tended to avoid like the plague–branding–to align design, engineering, location, price, and messaging with those who’d find the most meaning in those features and functions.
