Experts in the U.S. auto industry offer some good insights into how to handle economic roller coasters. A few weeks ago, as the Trump Tariffs first hit, Car and Driver reported that automakers were pivoting quickly, pulling back on frills and extras, emphasizing base model products.
For example, Will Hardeman, managing partner of Continental Automotive Group, noted that “in some cases, the industry got into a feeding frenzy by putting too many options and equipment on their cars,” he says. “They achieved good margins, but they might need to offer more basic versions of cars. The industry has gotten into upfitting cars with lots of fancy options.”
That same strategy could be applied to the homebuilding sector.
Homebuyers from my generation, the “Boomers,” have become a bit spoiled in our expectations about new homes. Our COGNITION surveys over the past couple of years suggest that we’ve passed some of those preferences on to our Millennial offspring.
Perhaps the whole industry bears a bit of the blame. To excite clients and entice them to spend more, we’ve blurred the distinction between luxuries and necessities.
For example, when did the three-car garage become an essential upgrade? Why are granite countertops still a top choice, when so many cool (and more sustainable) materials exist? Does every home need an outdoor kitchen and a window wall instead of French doors to the patio?
This economic turbulence might be a chance to downsize some of housing’s most extravagant "nice-to-have” features. I believe we can still deliver outstanding homes that move quickly from completion to closing, simultaneously doing less environmental harm and staying financially solvent.
Some of you are thinking: “Those luxuries are client preferences—out of my control.” But we’re living through an economic sea of change. At this writing, “extreme fear” is the metric that’s driving the U.S. stock market, and consumer confidence just hit a 12-year low.
Maybe we can squeeze some lemonade from those lemons. That fear, at this date, hasn’t deeply impacted the housing market, at least not in the U.S. as a whole. Most of the leading forecasters suggest a slow but steady pattern of sales over the next few years.
Already, the industry is easing toward houses that are smaller and more affordable. Some of these forecasts probably understate the shift. They were made before the recent tariffs, and the downsizing trend was already underway. What impact will the Trump tariffs have? That’s still playing out. But it’s a safe bet that buyers will remain cautious for some time—willing to buy but wanting to spend less for their dream home.
The upper end of the housing market may stubbornly absorb higher costs on everything, but everybody else will be looking at budgets.
Where can cost cutting happen? A lot of things are non-negotiable, even in the more modestly priced end of the production housing sector—say, between $300,000 and $500,000. There’s no way homebuyers are going back to galley kitchens, low ceilings, and wall-to-wall carpet.
For example, if they’re willing to forego the 25-foot foyer entry, can you offer them lower monthly energy bills and a smaller HVAC system up front?
I’d like to offer you a “sell sheet,” if you will, to help you talk with clients about their new homes in a way that’s realistic about the market’s current concerns. What you’re offering them, to borrow a cliché, is “peace of mind.”
What you, the builder, architect or developer, can provide that your less-progressive competitors may not, are homes that require lower energy inputs, less maintenance and less upfront investment. At the same time, they keep occupants safe, comfortable and feeling good about their purchase.
Here are five ways you might hone your product to get a “win” for your business and your clients, even in this stressful environment: