National Housing Market Outlook

The $6 Million Gamble

May 20, 2010
Builders make a $6 million gamble every time they start a new home community. A 75-home community that costs $80,000 per home to build equates to $6 million in construction costs. If the builder builds anything other than the homes most in demand in the market, they can easily leave $100’s of thousands of dollars of profit on the table.
Years ago, consumer research was expensive and inconclusive. The internet has changed all of that. Tremendous information can now be gathered electronically and, when coupled with inexpensive qualitative research, builders have learned that they can have far more confidence in success before they turn the architects, project managers and sales managers loose to guess what will be most profitable.
For about $400 per house (the cost of a typical change order or a rounding error on price if you build the right home), local data analysis, a targeted home buyer survey, and a real estate agent focus group can help you decide what homes to build and what features to include in the home.
Over time, the best builders will maximize their return on research because those dollars spent will be very low in comparison to the corresponding reduction in risk.

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