Addressing Affordability Challenges in Today's Housing Market: Effective Financing and Marketing Strategies for New Home Builders

Blog posted On July 31, 2024

By Contributing Author Anthony Grasst, VP National Builder Division

Current Market Issues and Challenges

The housing market is facing significant challenges. According to a recent survey by the Mortgage Bankers Association, many potential home buyers are waiting to purchase in hopes that interest rates will go down. The decision for many to wait is causing an overall drop in mortgage demand. This trend is exacerbated by rising home prices and high mortgage rates, both of which have contributed to a decrease in affordability and buyer hesitation.

In response to affordability challenges, many home builders are offering incentives to help reduce the up-front cost to potential buyers. However, not all incentives are effective, and some builders are struggling to generate leads and increase sales.

The Struggle with Ineffective Financing Incentives

There can be many reasons that financing incentives don’t drive sales, some of the factors that contribute to the challenges faced by home builders include:

1. Unclear Value Proposition:  Marketing a financing incentive without clearly showing the value to the home buyer reduces their effectiveness.
2. Inadequate Marketing:  Not leveraging marketing platforms like websites, social media, and email marketing, raises the risk that marketing incentives will not reach home buyers.
3. Lack of Engagement by Sales Teams: Sales teams often lack the training to effectively communicate the value of financing incentives and affordability options to buyers.

The Solution: Leveraging Financing to Create Affordability

Financing incentives can be a powerful tool for creating affordability without impacting the sales price. Here are three key strategies home builders can implement to create effective financing promotions for their clients:

1. Align Financing Incentives with Buyer Preferences: Understand the financing preferences of your target buyers and tailor your incentives to meet those needs. Financing incentives that address the affordability challenges and financing hurdles buyers are facing will increase their attractiveness and relevance for your clients.
2. Communicate a Clear Value Proposition: Ensure financing incentives are communicated in simple, straightforward language that buyers can understand immediately. Use a mix of content formats, including video, social media, flyers, onsite QR codes, yard signs, and compelling listing language and photos. A comprehensive and cohesive marketing approach can significantly enhance the visibility and appeal of your financing offers.
3. Train Your Sales Team: Equip your sales team with the knowledge and skills to explain financing incentives in simple, easily understood terms. This training should focus on making the value proposition clear and relatable to potential buyers.

Summary

Affordability is the biggest issue facing both buyers and sellers in the current housing market. Financing is the most effective tool for creating affordability and increasing sales. By aligning financing incentives with buyer preferences, clearly marketing their value, and training your sales team, you can better engage buyers and drive sales.