How Builders Can Profit from Entry-Level Homes
In a world of low-cost and quick-turn home building, home builders increasingly rely on retaining existing customers and building brand loyalty. While many builders opt for larger houses with wider margins, however, a strategy for building smaller homes that meet the demand of the market could be more profitable.
Entry-level Homes Offer Builders an Opportunity for Growth
Building entry-level homes for first-time buyers offers builders the potential to reach a new, valuable buying group. The entry-level buyer segment is rapidly growing, and building homes that are priced for these new customers allows builders to grow their business with an untapped market.
According to a 2018 report from the National Association of Realtors (NAR):
• Buyers 36 and younger comprised the largest share of home buyers at 35%
• 65% of these buyers were also first-time home buyers
• Only 11% of the homes purchased by this segment were new builds
Unfortunately, existing housing inventory isn’t keeping up with market trends—most available homes are out of reach for first-time buyers, price-wise. Therefore, this gap offers home builders a unique scenario for growth.
Tapping Into the First-Time Buyer Market
Although building affordable entry-level homes for first-time buyers offers home builders an incredible opportunity, the choices builders make in material selection may put this opportunity at risk. If a first-time buyer’s experience with a homebuilder is negative—such as from callbacks, system failures, or other issues—builders risk losing future business when the homeowner starts looking for their move-up home.
Don’t let your material selection prevent first-time buyers from considering your homes; follow these three tips for success:
1. Select low-maintenance materials
With reports showing that young buyers expect to stay in their homes for roughly 10 years, the materials must be durable. First-time buyers are accustomed to the renter lifestyle with little responsibility for maintenance; therefore, homes should be equipped to give first-time buyers a grace period of 5 to 10 years worry-free.
Builders should think carefully about products that are intended to have shorter life spans. For example, water heaters are expensive to fix, and cheap models typically need to be replaced within seven years. Try to find low-maintenance or maintenance-free products and equipment for these first-time buyers.
2. Choose materials that are both dependable and cost-effective
Shifting to entry-level homes means builders must be cost-conscious, but that doesn’t mean they have to sacrifice quality. The key to making a profit and building trust with first-time buyers is to choose materials that are both durable and affordable.
For the current market of entry-level buyers, low-quality homes are a deal-breaker. In fact, 47% of buyers 36 and younger who purchased new-build homes did so to avoid renovations and problems with plumbing or electricity, according to the NAR study. Having a reliable plumbing system is especially important for builders since there have been at least 20 class-action lawsuits involving plumbing pipe and fitting failures since 2000, with more than 30 builders named as co-defendants by unhappy buyers.
FlowGuard Gold CPVC is an excellent option for entry-level homes for this reason. Compared to other piping materials, FlowGuard Gold CPVC piping is the most affordable option, with nearly 50% more cost savings in some cases. Even with these cost savings, FlowGuard Gold piping systems offer superior water quality, chlorine resistance, world-class environmental performance, and more. More than 11 billion feet of FlowGuard Gold pipe has been installed in the United States since 1959, and it is the only plumbing material that has never faced a class-action suit.
3. Emphasize that affordable prices don’t mean cheap materials
Buyers often assume that less expensive homes are more affordable because they are built with low-quality materials. In reality, the lower cost is tied to lower square footage and perhaps fewer amenities.
Clear up this misconception and educate buyers on the quality of your material selection. If using FlowGuard Gold CPVC piping systems, homebuilders can leverage an entire library of sell sheets and additional resources to address concerns and build trust with buyers.
Proper Material Selection Affects Your Brand
Builders can avoid hurting their reputation with costly plumbing issues when they select materials with proven reliability. Many builders fail to realize that four of the five most common piping materials have had multiple class-action lawsuits against them due to large-scale failures. Understanding the differences in performance and safety of plumbing pipes will help you select the most dependable products for your homes and build trust with first-time buyers.
Interested in using FlowGuard Gold CPVC plumbing systems in your next build? Contact us to speak to a representative about making the switch.