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Why Spend Marketing Dollars When the Market is Hot?

Real Estate

Written by Derek Wenzell

The Bay Area has the distinction of being home to the top three real estate markets in the nation:  San Jose, Vallejo and San Francisco1—in that order.  All predictions for 2018 indicate that the seller’s market will continue, limited only by affordability and inventory.  So the question arises: why spend money on marketing when homes are selling themselves? It’s certainly a reasonable question with multiple answers. Let’s start with some considerations.

Inventories are Low, Affordability is Fading

According to the California Association of Realtors Housing Forecast, published on October 12, 2017, affordability is expected to diminish with only about ¼ of California households able to afford the median priced home ($561,000) by the end of 2018.  New home prices cool off, but still increase by 1.3% in San Francisco and 4.5% in the East Bay and San Jose.  Inventories, however, will continue to wane due to underbuilding.  This means fewer homes for sale, fewer qualified buyers in the market and more competition for those buyers.  A consistent branding and marketing program can keep your community top of mind and help you grab your share of a shrinking buyer pool.

The Real Estate Market is Cyclical

A master-planned community of 700 homes can take 10 – 15 years from launch to sell out.  Historically, the real estate market is cyclical, a period of gains for 5-7 years followed by declines for 3 or 4 years.  We’ve seen as many as three real estate cycles during a 15-year period and have found that a program of consistent messaging and branding will build equity in hot markets that will help sustain sales when markets cool.

An example:  a master-plan with 750 homes and 350 acres of open space opened in San Ramon the mid 1990s.  This is when markets were on the rise, fueled by the growth of the tech industry.

Built on former ranch land, the new community had little brand recognition at its launch.  The initial advertising focused on amenities in the master plan (none of which had been built):  4 new schools in a highly-ranked district, a library, 7 miles of trails, 25 parks and views of Mt. Diablo.  The approached attracted (as expected) family buyers who were willing to pay premium prices for a better lifestyle opportunity.  The four homebuilders involved in the community experienced strong sales with ascending price points for several years.

The branding program included print advertising, digital outreach (these were the early days of digital marketing), broadcast and, perhaps most important, on-site events.  A grassy park near the welcome center was completed early on, and served as a staging area that helped build a sense of community through frequent events:  4th of July Picnics, Halloween Parades, landscape and interior design demonstrations, fun runs, etc.

Then, WHAM!,  In 2001 the bubbled popped and the pool of qualified buyers shrank almost overnight.  Fortunately, our community had strong brand recognition at this point, and remained top of mind throughout the dot com bust.  Advertising became less image-building and more product focused with an emphasis on value:  all these amenities are included in the price of your home.

We were able to maintain sales throughout 2001 and 2002, when home values throughout the bay area fell 10%, and be ready for the next upswing from 2002 and 2007.  Even with the dot com dip, the community sold out in 2008, some 8 to 10 years before initial pro forma.

Buyer’s Remorse Tends to Increase With Prices

With more money on the line, buyer remorse is a factor right through closing and after.  At best, the real estate transaction is a fragile process with emotional, financial and relationship land mines throughout.  An on-brand marketing communication program can help build confidence in the purchase, especially important as the time between signing the contract and delivering a home increases.

Marketing Can Build Brand Equity

A strong corporate brand can be an invaluable differentiator when the market slows (and it WILL).  Consumer recognition of and response to your company’s name can be a deal maker or deal breaker, even in a seller’s market.  Homebuilders should consider using the flush times when project-marketing dollars go unspent to invest in corporate branding as a powerful leverage for the future.

First off, engage a qualified branding agency to do this work. JStokes has more than 30 years experience in branding for the real estate industry, so we know: You and your staff have daily priorities more related to tactics. Unless you assign this strategic exercise to a well-qualified outside consultant, it simply won’t get done.

That consultant will start with a brand review.  Your brand is WHO you are, WHAT you do, WHY you do it, and FOR whom. Another way to look at brand is REPUTATION.  What’s your reputation these days?

When was the last time you reviewed your corporate mission and values? Do you have them?  Are they still relevant?  Do they need refreshing or evolving based on your current and future goals?  Are all of the new employees you’ve hired since 2013 aware of them?  Do your customers know what you stand for?

At the core of every brand is a corporate mission and values.  It’s important that your company be able to articulate these and share them with every employee.  Based on a brand platform—core pillars, brand characteristics and brand essence—you should review your corporate identity to make sure it aligns.

Then, get the word out.  Let the market know what your company sands for, how you’ve given back to the community at large, that you’ve completed successful projects and what’s in the pipeline.

Your branding agency will suggest a program of consistent messaging based on your budget and goals that’s likely to include a strong web presence, e-communication, advertising and public relations.  As your positive reputation grows, so will your brand leverage and the ability to gain positive recognition when the market slows.

Strong brand equity is also helpful in shorter-term, smaller projects.  Every site plan we’ve ever seen has some less desirable units—those that border busy roads, are near power lines, or with undesirable views.  A strong brand for your community, even if it’s just 25 homes, will help you maximize pricing for all of your units.

Enjoy the hot market, but remember how we felt in 2008.  Then in 2010.  That, of course, was a historic swing not likely to be repeated, but the memory of it should make us all smarter.  And that means consistent marketing regardless of the temperature of the market.

1List of America’s to 20 Housing Markets,, October 31, 2017