Well it’s not been dull. The last 2 years in the resort development industry have posed some great challenges to our industry. But, as the never failing optimist and constant analytic, I like to steadily review where we are, and what we’re learning from our prospects, purchasers and developer clients.
There are buyers. We’ve seen them. And we’re selling to them. The vacation and second home buyers we’ve worked with in the first quarter of 2008 were actively looking for investment/second homes, and were more prepared to commit than ever before. Challenge being, they are looking for the best (community, lifestyle, investment, price, experience, future…) and if you’re not selling it, they will find someone who is.
While we’ve all poured over NAR’s 2007 Investment and Vacation Home Buyers Survey, and anxiously await the Q1 2008 numbers due out this month, the value I glean from this report: more than 2 million investment and vacation properties were purchased in 2007. For our team, we’ve seen quantifiable positive movement among purchasers in Q1, but their motivations are focused on a few common elements:
1) Remarkable Product
2) Non-speculative Product
3) “Don’t make me regret this” pricing
4) Places They Love
5) Easy to get to
Remarkable product. The buyers we’ve worked with this year are looking for well-thought-out communities that are well-amenitized, but not over-amenitized. Large scale communities with a “fire sale” mentality (everything is on sale!) only serve to remind buyers of the potential for vacationing or trying to rent out a home next to a construction zone, or worse, an unkempt parcel of land. Phased communities or smaller offerings continue to pose greater appeal and less implied risk to prospective purchasers.
Non-Speculative Product.No one wants to be the first or second purchaser in a community for any reason these days. And the days of volume pre-sales are behind us for now. Buyers want to look, touch, and experience the community, get a glimpse of the lifestyle for themselves. More than constructing your community’s entry, one or two model homes and construction engagement of a community amenity is the fastest route to sales. Having a great physical representation is the best way to really present the unique lifestyle of your community and your credibility as a developer. While this requires a greater financial commitment from the developer, the difference in sales pace is significant.
“Don’t make me regret this” Pricing. No one wants to feel like a fool at the next cocktail party when they learn they’ve over paid for their vacation home. Much of the purchaser hesitation in the last 18 months reflects the “wait for the bottom” mentality. Question is, is your product positioned to be valuable today, regardless of the mythical “bottom”? While markets vary by location, in many of our markets, we’re confident we’re on the upswing, but if your buyers are still focused on the bottom, perhaps they aren’t seeing the real value in what you’re presenting. We’re still in a market where buyers will want to negotiate, but a clear understanding of your goal for each sale and where it falls within the overall program for your community will make this a more manageable and less painful experience. There will come a time again when negotiation will not be an assumed part of the vacation/investment real estate purchase. While pricing is a significantly more detailed topic, we’ve employed a variety of “above the line” incentives that have enjoyed success.
In Places They Love. This perhaps should be the first item on the list. Whether your community is an investment purchase or a true vacation/second home, buyers will continue to buy with their hearts. It’s very rare that you’d hear someone say “I can’t for the life of me imagine why someone want to be there, but I bought it…”. In nearly every case, the area surrounding your community already has loyalists, people who have been coming for years and who love it for their own personal reasons. The task is to help them translate their love for an area to their love for your community and how that will enhance their love of the area.
Easy To Get To. While the emotional side of your community’s offering remains a critical component to driving value and sales, the scales are ever-tipping toward more rational purchase motivations. While 9/11 reminded us all of the value of spending more time with our families and friends, we recognize our time available to vacation is limited by work, kids activities, social pursuits, extended family commitments and more. Our time to simply ‘drop out’ for a week or more at a time is more limited than ever, and we are recognizing it. But, we are all open to the idea of long weekends, taking a “quick drive or flight” to our vacation house for mini-vacations seems more plausible to many of us. For vacation home and investment-minded purchasers, how often they or renters are likely to be able to use the property is a prime concern. This perhaps explains the 20% increase in fractional real estate sales in 2007. And is supported by NAR’s Investment and Vacation Home Buyers Survey, stating the median distance from vacation property to primary residence is 287 miles, typically about a 4-1/2 hour drive.
In sum, Q1 has surprised us here, and pleasantly so. We continue to see people actively looking for real estate, and not all are pennies-on-the-dollar investors (look for my blog on the International purchaser).
We are all recognizing that it will be sometime if ever we enjoy the nirvana resort real estate sales of the early 2000s, but have seen and continue to see positive movement in the marketplace. Our goal and focus is to continue to connect with buyers, understand their motivations and create connections between great developers and their future homeowners. For us, it means nimble, analytic processes and taking a hard, scrutinizing eye towards what’s working. Keep an eye out for the next blog on Resort Real Estate Marketing – What’s Working, coming soon!
