Dallas Townhomes

Posted on Mar 2, 2012

Dallas Townhomes

Dallas Townhomes

A large homebuilder sought to increase the number of homes sold and the profitability of their newly acquired townhome builder. The award-winning builder had an in-town, walkable neighborhood focus and delivered stylish, modern, multi-story townhomes, built over a number of years within one neighborhood.

Challenge

The townhome builder faced a number of challenges. With a single in-town neighborhood focus and years of building in that location, the builder created a robust resale supply of townhomes that now represented direct competition for their new home sales. Over that time period, the builder had also increased the quality and number of features in the homes, raising prices to reflect the new finishes and appointments. The target customer interested in the location was generally a single professional, who, with an economic downturn underway, increasingly found the higher home prices out of their reach. Additionally, the very modern townhome designs had a disproportionately higher percentage of male than female purchasers, potentially missing a significant portion of the target buyer population. Finally, the parent company sought to increase both the number of homes built and the profitability of the townhome builder. With high-priced townhomes to sell, increased competition, a shrinking buyer pool, home designs limiting buyer appeal, and growth goals, the builder sought innovative solutions.

Solution

To understand the opportunities, the builder undertook a comprehensive opportunity study, incorporating both conventional and consumer-focused research methods. The first phase of the study, focused on understanding depth of demand for housing in this location, revealed the problem: the builder could choose to maintain the current price point, and sell fewer homes, or lower the price point significantly and meet the new annual sales goal. Because prospective homebuyers could find a similar resale home nearby, a unique offering was called for, a change in style, along with a new price-point was the solution. A guided new construction townhome tour and work toward a new price point lead to a new product vision. The revised, lower price point (starting base price at $229,990) created a better value than area townhome resales, and put the homes within financial reach of their target customers. The research showed the townhomes needed to be priced below $300,000, and more specifically between $229,990 and $269,990 with square footages ranging from 1500 to 1900 square feet. Early designs were fine tuned through customer focus group discussions and further depth-of-demand studies. “The new product vision, which worked with the specific attributes of this site, allowed us to reach our goals, even in an economic downturn. The work, connecting to customers, allowed us to keep style and innovation, give buyers what they wanted and met our goals,” noted Don Barrineau, Division President. The result: an architecturally unique townhome community, selling at sales pace goal, with net profits exceeding 18%. The success of the new product in this location led to additional testing for a second location, and higher profits still.

Results

  • Sold 54 townhomes in 7 months
  • Sold first building homes within 60 days
  • Attracted a broader customer base
  • Achieved 14% margins initially, with reduced prices, reduced finish costs, while keeping architectural interest
  • Improved to 18% margin average
  • Repeated success, and the floorplans, on additional communities