What we should have learned from Hovnanian
Hovnanian’s Sale of the Century should have taught us something about the fundamentals of selling houses: There are buyers out there.
The sale of 2,100 homes over this special event weekend was the equivalent of a quarter’s worth of selling at the previous sales pace, and more than double the publicly expressed expectations for the event. People lined up eager to buy. A sense of urgency and a sense of value were created. The highly touted 30% discount gave people a reason to buy. The limit of the sale to the weekend gave people a reason to buy now.
In most markets a 30% discount to current price levels appears to more than take into account any projected price erosion over the next couple of years. That removes the fear of the downside that a purchase today carries. So the major objection has been eliminated. That is Sales 101.
Limiting the Sales Event to the one weekend created the sense of urgency, the need to act now. That is Sales 102. The event was billed as a “once in a lifetime” opportunity with a date final. People came to buy something they wanted at a good price. The opportunity was available for the weekend, and then it would be gone. The fact that Hovnanian generated 2,100 sales shows the market is not dead. It also shows that the consumer, although desirous of a house to call their own, is not stupid. The consumer will respond when they believe there is a real benefit to be had.
Now it is time for the industry to learn this lesson well and start practicing the wisdom it contains. Many builders are doing just that. These tactics will not eliminate the entire inventory; there was overbuilding due in part to the demand from the speculator segment of the market. This will go a long way in helping to re-align balance sheets and getting the companies back in line with the industry’s current operating environment.
The sale of 2,100 homes over this special event weekend was the equivalent of a quarter’s worth of selling at the previous sales pace, and more than double the publicly expressed expectations for the event. People lined up eager to buy. A sense of urgency and a sense of value were created. The highly touted 30% discount gave people a reason to buy. The limit of the sale to the weekend gave people a reason to buy now.
In most markets a 30% discount to current price levels appears to more than take into account any projected price erosion over the next couple of years. That removes the fear of the downside that a purchase today carries. So the major objection has been eliminated. That is Sales 101.
Limiting the Sales Event to the one weekend created the sense of urgency, the need to act now. That is Sales 102. The event was billed as a “once in a lifetime” opportunity with a date final. People came to buy something they wanted at a good price. The opportunity was available for the weekend, and then it would be gone. The fact that Hovnanian generated 2,100 sales shows the market is not dead. It also shows that the consumer, although desirous of a house to call their own, is not stupid. The consumer will respond when they believe there is a real benefit to be had.
Now it is time for the industry to learn this lesson well and start practicing the wisdom it contains. Many builders are doing just that. These tactics will not eliminate the entire inventory; there was overbuilding due in part to the demand from the speculator segment of the market. This will go a long way in helping to re-align balance sheets and getting the companies back in line with the industry’s current operating environment.
David Levin
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