Tuesday, January 21, 2020

A Little Help in Understanding the Millennial New Home Buyer

There are three types of new home builders; the multifamily, the tract and the single family home builder. Each has a very unique place with the Millennial new home buyer.

Let’s take a look at how they are impacting each of the three types. The multifamily builder/developer can’t seem to build enough two and three story townhouses to fill their needs. As you drive closer to urban areas you will see more popping up as far as 50-60 miles out.

These are inexpensively massed produced by some of the biggest homebuilders in the country and they all have the same game plan. Build as many as you can as fast as you can, make them look nice built near an urban area where tenants and homeowners can find all the amenities needed by this generation,

Good restaurants, brew pubs, active social areas and as often as possible, public transportation. Millennials are probably the most social generation to ever buy and rent new housing.

If a developer can’t find enough shopping close to where they want to build their project, they simply add a couple of strip centers and up pops mostly Millennials to fill their project. Or the developer may see an opportunity parcel(s) that first needs built out to support the Millennial demands which might include a supermarket, drycleaner, a couple of good restaurants that deliver and maybe even a Gym or an urgent care facility.

Living just 70 miles from both Baltimore and Metro DC, I’ve seen first hand what I’ve just described. In a very rural area just 7 miles south, I first noticed a supermarket and a convenience store being built in a very rural setting. Over the last 5 years not only have the three story townhouse projects shown up directly across the street, now there is a huge new one being built surrounding the entire shopping complex. Meanwhile townhouse and townhouse communities began showing up 3 miles south of the first area.

This one went a bit further. Not only are they building these homes next to a Walmart Supercenter, they’ve attracted not one but two multi-story competing medical centers directly across the street from each other.

And all this activity is only a 90 minute drive from Metro DC, the hottest area on the East Coast.

Second type of housing is the tract builder. This group of builders, the top 100 home builders in the US are almost always the same players found in the first group. That’s why they are the Top 100.

They are still building communities across America but given a choice many of them would switch to building multifamily. First, the demand for luxury homes is still strong but it’s definitely slowing down, It’s not what Millennials really want or more importantly, can afford at the moment.

They are usually built near shopping and the other amenities that Millennials want and have sidewalks, some type of walking and bike paths, and open areas. Again things every person says they want. But the appeal of having to pay a high price to live in a home separated from each of their neighbors is not entirely appealing to Millennials any more, and of course you have to cut your own grass and other things townhouse living doesn’t require.

It’s not that Millennials are lazy, it’s just that there are better ways to use up their week than mowing grass.

And that brings us to the single family new home builder. Most build less than 20 homes a year. Of course there a quite a few that build a lot more than 20 but it’s not enough to keep the average above 20 or less a year.

This group is coveted by suppliers and vendors but lately, not so much by Millennials. Often called scattered lot builders within the trade, they struggle to effectively use marketing that could attract the Millennial new home buyer, are having a hard time finding good labor and subcontractors that aren’t working for a bigger builder.

Many single family home builders are turning to new ways to build their homes. Prefabricated walls, trusses and even floor systems have begun taking some of the labor problems off their plates but not enough. Being a small SFH (single family home) builder also means your voice is small compared to the larger builders.

Need an electrician? You might find one that could squeeze you in. Again something from my local area tells me subs control the flow. A small regional SFH site builder near me builds some really nice homes, mostly brick upscale ranch style. I recently learned he is down to one electrician and two plumbers. All three are in their early 60’s and are looking at retiring soon.

He must be desperate because he reached out to me for help in finding people to replace these men. Just because we go to the same church means I have any insight as to where to look.

Just in case you’re wondering why the Modcoach hasn’t mentioned modular once so far it’s simply because I like waiting till the end to say “told you so!”

Most site builders are still brushing off modular as some kind of lesser quality but in reality the opposite is true. Quality, sustainability, energy efficiency, predictability and having 75% of a home built offset and delivered just doesn’t seem that appealing to most site builders. The truth of it is the Millennial that can afford and desires a new SFH actually likes all those things. They watch YouTube, communicate with others socially and have learned more about modular construction than any previous generation before them.

Site builder are a hard bunch to convince to switch and with little or no training provided them by the modular housing industry many try one or two homes and go back to site building with all its faults. “The devil you know”

Building with modular construction is not like turning on the “modular” switch and everything works better, No, it’s a true method of construction that has to be learned and practiced.

It takes practice to become a good modular home builder and there are simply very few sources to learn how to do that.

The Modcoach mantra for becoming a good modular home builder is “Practice Makes Perfect”. If you’re a site builder that has given some thought to switching to modular or someone that wants to become a modular new home builder and can’t find anyone to help you, let me know and I’ll send you to websites and factories that will help.

Contact me at modcoach@gmail.com. I promise I will get right back to you with some answers.

No comments: