Price Vs. Value: Which Wins With Today's Home Buyers?
The next generation of home buyers will pay more for what they truly value.
What are the nation’s builders thinking about these days? How they can more effectively engage the next wave of millennial and Gen Z buyers.
Engaging these people in homeownership is a challenge. They have over a trillion dollars of student loan debt, delay commitments (jobs, marriage, children, homes), and embrace a sharing economy rather than acquisitions (car share, bike share, apartment share, live-in with parents). Plus, they are vexed by the fact that even though interest rates are low, there aren’t enough available, affordable homes for them to buy.
According to The Deloitte Consumer Review, customization and personalization matter to millennials—from soft drinks to DIY projects. Courtesy Deloitte
However, a major opportunity with this demographic group exists, which can effectively offset these challenges. Over and over again these future home buyers prominently display their willingness to pay more for a better experience. And not just a little more—a lot more. We’re talking multiple times more cost for the same product.
Consider some examples. When the smartphone was introduced for $500, they waited in lines around the block to buy it even though it cost 10X more than the basic $50 cell phone. They were willing to pay for a completely different mobile device experience.
They will wait in long lines at Starbucks for myriad coffee options that cost three to five times more than convenience store coffee in order to have a better daily break experience. They will buy fast food at Chipotle that costs two times what a McDonald’s meal would. Why? They want a healthier and tastier eating experience.
Consumers are willing to spend 20 percent more on a product or experience that is personalized, says a recent Deloitte survey. Courtesy Deloitte
Why is this so significant? Consider that NAHB has frequently cited the statistic that for every $1,000 increase in the purchase price of a home, over 200,000 more buyers cannot afford to buy that home. I must assume this statistic has contributed to a prevailing builder business strategy focused on minimized first cost. Yet $1,000 adds less than $5 per month to the mortgage—or about the price of one latte at Starbucks.
Builders must keep in mind that the next generation of buyers want, and are willing to pay substantially more cost for, a better experience. To take advantage of this characteristic, builders must apply proven innovations for better communities, better landscaping, better designs, better color, better architectural details, better health, better natural comfort, better durability, better efficiency, better quality, better technology, better controls, and I could go on.
According to CGS 2019 U.S. Consumer Sustainability Survey, 86 percent of millennials will pay more for smart home tech versus 65 percent of baby boomers. Courtesy: CGS
Want to learn more details about how to apply this knowledge to your business?
Attend my ongoing Housing 2.0 Program, a roadmap for the future that empowers building professionals to design and construct higher performance, healthier, more sustainable homes at a fraction of the cost.