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COVID-19 has accelerated the need for the home building industry to shift to virtual technologies, says Meritage Homes' COO Phillippe Lord, and those who don't will be left behind.
By Phillippe Lord, www.builderonline
Our industry is on the cusp of great change when it comes to customer experience. While real estate and home building sectors have been slow to embrace digital transformation, having relied on more traditional methods like in-person appointments and tedious paper trails to conduct the majority of business, the current landscape is fast-tracking advancement.
Ready or not, 2020 is the year of disruption, and COVID-19 is the surefire catalyst. Statewide shelter-in-place orders left no industry untouched, and home builders were challenged to reimagine their traditional practices—fast. Virtual technologies have quickly shifted to the forefront, from a point of contemplation to a critical necessity, catapulting the housing industry forward.
Digitalization is fundamentally changing the housing industry’s business models and shaping the future of real estate for home builders, agents, and consumers alike.
The Home Building Industry Prior to COVID-19 Prior to COVID-19, home builders relied on mainly in-person interactions to close a new construction home sale because they were a huge driver of sales leads. Oftentimes, the quick-and-easy nature of a “walk-in” home tour secured real interest for spontaneous passersby. For years, home buyers made in-person home tours an essential step in their home buying process. They wanted the opportunity to touch and see the details and finishes of their potential new home. Tours help buyers weigh the pros and cons of buying a new home, and often visiting the model firsthand helps them make the decision to buy with tangible certainty.
More than that, relationships built between sales associates and customers often stem from these important interactions. This is where associates were able to learn more about and cater to their specific buyer, establish trust, and prove themselves to be a valuable resource. This established rapport often elicits the buyer confidence needed for potential homeowners to move forward with their home purchase.
Changes Implemented With the Onset of COVID-19 COVID-19 presented the home building industry with a number of challenges. The most obvious being the stay-at-home orders. The quarantine put a speed bump around the most essential interactions between builders and buyers.
Additionally, COVID-19 stimulated a wave of uncertainty over the housing market and economic climate. Potential buyers who had been saving for years began to revisit their plans—converting their down payment into an emergency account, hitting pause on buying altogether, etc. Sellers reached a standstill as well. Roughly a month into the pandemic, Redfin reported that there was a 148% year-over-year increase in homes being delisted during the week ending March 29.
Conversely, stay-at-orders sparked many renters to think about the value of a permanent home. Coupled with low interest rates, many decided to explore purchasing a home of their own. Zillow recently shared that web traffic on for-sale listings and requests to connect with premier agents have ticked up recently, after slowing in the early days of the coronavirus pandemic in the U.S. in mid-March. By mid-April, overall visits to for-sale homes had rebounded up 18% year over year. Similarly, the BDX National New Home Consumer Search Index, which measures consumer interest and sentiments specifically related to the new construction housing market, was up 24% year over year in May, indicating that demand for new build homes has strongly rebounded.
In order to adapt to the COVID world and meet buyers where they are today, home builders accelerated their virtual offerings in a matter of weeks. Builders shifted to no-contact, private, or virtual tours across the nation. Sales centers took the utmost precautions with regard to the safety of their staff and potential buyers. Several leading builders took this time to announce online home buying solutions.
At Meritage Homes, we introduced a suite of virtual tools to help prospective home buyers continue their search for a home—entirely from the safety of their current home. With access to online mortgage pre-approvals, home search tools, virtual design appointments, on-demand sales consulting, and more, buyers are confidently able to find, tour, finance, and purchase a home without the need for in-person meetings. Since implementing the comprehensive solution in March, Meritage has seen a 15% increase in virtual sales, which shows the intensifying demand for these types of solutions in today’s world.
The Future of Home Building and the Impact of New Digital Solutions "Virtual home buying" and "digital solutions" are no longer buzzwords but key mechanisms for brands to leverage through the era of COVID-19, while sustaining momentum moving forward. We can expect to see digital transformation drive growth in the next five years. Virtual tools will help brands increase profits, stay ahead of the competition, and prepare for any coming waves of the virus.
Convenience is key for the modern consumer, especially as millennials—the influencers of today’s on-demand economy—are now the largest group of home buyers. Furthermore, Gen Z is on the home buying horizon. As these digital natives get ready to purchase, builders must be prepared to speak their "language." These buyers will demand access to tools and information at their fingertips, and builders will need to be equipped to meet this demand across channels.
All that being said, humans still crave in-person interactions, and that will never change. Moving forward, it will be essential to pair this with comprehensive virtual solutions to provide prospective buyers with a holistic approach to home buying.
The bottom line is that digital solutions are no longer new, shiny innovations—they are expectations. Brands must push past the transformative phase and into the present. It will soon be evident that builders who offer comprehensive digital home buying solutions that seamlessly permeate into offline environments will reap the long-term benefits.
ABOUT THE AUTHOR
Phillippe Lord has served as chief operating officer and executive vice president of Meritage Homes Corp. since April 2015. He is an experienced professional in the home building industry, and was instrumental in developing the strategic operations and market research department for Meritage Homes. He previously held leadership positions with Acacia Capital, Centex Homes, and Pinnacle West Capital prior to joining Meritage Homes.