First-Time New Construction Buyers Value Communication and Transparency

Click the “Download” button to view and save the key statistics from this article.

The millennial generation — 70 million strong — is poised to pass the baby boomers in size, and many among this massive population have now entered their peak home-buying years.

With the oldest millennials turning 40 this year, this young, diverse group represents the largest generation of buyers for both existing and new construction homes. And, as the Zillow New Construction Consumer Housing Trends Report 2020 found, new construction remains as attractive to them this year as it did last year.

Since most millennials are new to home buying, we thought we’d take a look at how you might keep and grow the attention of young buyers who are venturing into the market for the first time.

Sentiment is positive, but understanding is limited among younger buyers

Millennial repeat buyers who purchased a newly built home in the last two years already have a positive opinion of the product: 94% say they consider new construction in their home search, with 76% expressing a preference for it and 27% saying they are only interested in newly built homes. 

However, younger buyers of newly built homes appear more likely to include “a completed home” in their definition of new construction compared to older buyers: 67% say they think of new construction this way, compared to 53% of baby boomers.

About half (54%) of millennial new construction (NC) buyers say new construction is a home they can customize, and 40% define it as a home that has yet to be built. Only one in four think of new construction as a home where they need to hire a builder to design and build it for them.  

One reason may be that 76% of millennial NC buyers purchase homes that are move-in ready or already under construction. Most (82%) buy in newly built subdivisions or communities with other new homes.

As people rethink their home needs due to working remotely, homeschooling and the potential desire for a playroom or outdoor space, the option to customize could be a deal-maker.

With increased options for telework, almost 2 million U.S. renters who can’t now afford to buy an entry-level home in their current metro area could potentially afford the nation’s typical starter home if they relocated to a less-expensive locale, according to Zillow research.

That creates new opportunities for builders, especially those developing more affordable options in places with a lower cost of living than the coasts or urban centers.

Buying for the first time is an especially emotional process

Uncertainty, confusion and feelings of being overwhelmed during the process are all hallmarks of the first-time buyer’s journey. While some of the problems have dollar figures attached to them, most have some connection to emotion: the fear and frustration of not knowing whether you’re paying too much or getting a good deal. Worrying if you’ll have enough money to finish the job. Confusion around financing options.

Think back to the first home you bought — or built for that matter. Remember all the unknowns and uncertainties? Remember how you felt making big decisions without all the information you wanted? The more you can bring knowledge and transparency to the process — and open the door to a meaningful conversation that transcends the sales pitch — the more confident your customers are likely to be.

Paint points around pricing and timing are also infused with emotion

So what do buyers need?

For starters, they need help determining what is a fair price for the home. About half (51%) of first-time buyers of new construction struggle with that question. Imagine standing in a partially built community, looking at a house that may still be under construction or hasn’t been landscaped yet. There are no other communities nearby. How do you determine value, and who do you trust to guide you to the right price? 

First-timers also struggle more around timing. Nearly half (47%) of first-time buyers who purchased a brand new home report difficulty coordinating the services of builders, agents, inspectors, title companies and others to ensure all the tasks happen on time. That may be why a growing percentage of new construction buyers want their agent to handle all communication with the builder.

Hidden costs and upgrades were difficult for 43% of first-time buyers of brand new homes, compared to 27% of repeat NC buyers. Almost one in three (31%) say they were overwhelmed by the process, compared to 12% who had previously bought a newly built home.

The biggest gap between first-timers and repeat buyers involved financing, a recurring pain point for buyers, but especially for newbies. First-time buyers of NC homes were more than twice as likely as their experienced counterparts to say they found new construction loans confusing or a hassle compared to repeat buyers (42% versus 19% of repeat NC buyers — a 23-point difference.)

Everyone who buys a home wants to come away feeling like a winner. Here are some things you can do to make that happen: 

Takeaways

• Educate buyers on the wide variety of options that encompass new construction. Display the full spectrum of possibilities at your sales center and on your website. Don’t assume people share the same knowledge.
• Educate buyers and their agents on the value of your offerings. New construction buyers overwhelmingly want to work with agents. Help them make sense of the pricing. If that requires some of the backstory, including the cost of permits and investment capital; the timeframe and cost of lumber, skilled labor and land; and the cost of customizations and upgrades, find a way to do that.
• Break down the buying process into manageable parts. Make visible the steps and communicate whether each step is on track. If there are delays, communicate them as early as possible so customers can adjust their timelines. 
• Develop harmonious relationships with trusted agents and lenders. More than a third of first-time NC buyers (36%) and 14% of repeat buyers cite conflict between their agent and the builder as a pain point. And 14% of NC buyers say finding the right mortgage lender was difficult or very difficult.

Definitions:

• Millennials are ages 26-40. For the purposes of this article, the definition also includes Gen Z, ages 18-25.
• Gen X covers ages 41-55.
• Baby boomers are 56-75. References to baby boomers include NC buyers from the silent generation, age 76+.