Market Conditions
Despite a downturn in sales, last year was still the 11th best housing market in the last 50 years. And there are a number of indications that the housing slump has stabilized and is poised for a steady recovery. The New York Times reported in July that median home prices actually increased in June of 2007 while inventory dropped more than four percent.
These projections bode well for the housing market and are supported by the 2007 “State of the Nation’s Housing” report released by Harvard’s Joint Center for Housing Studies on June 11, 2007. According to the report, the longer-term outlook for housing is more upbeat. Household growth between 2005 and 2015 should exceed the strong 12.6-million net increase from 1995 to 2005 by some two million. Together with the enormous increase in household wealth over the past 20 years, healthy income growth will help propel residential spending to new heights.
“If You Build It…”
The ideal strategy for real estate investment and development is to “strike while the iron is not” and buy low. By the time the housing market adjusts back up in a more positive direction, an ideal business opportunity has been lost. Those not paying close attention can fail to take advantage, and those who accept the doom and gloom without appreciating the relative overall strength of the market in relation to historical context may have talked themselves out of some exciting business opportunities.
Such opportunities exist for those who build condominium communities, particularly those targeting baby boomers and active adults, many of whom have largely been able to avoid the downturns experienced by other sectors of the housing market. Fueled by a large and growing demographic of 78 million strong, this is an area of the housing market that continues to resist the national trend.
For these individuals and businesses that typically require 18 months or so to develop and launch a new project, the timing is ideal. A leveled-off market is prime for development. With materials relatively stable and the most significant cost factor of them all - land - sometimes available at incredibly affordable rates, opportunities abound. As an added bonus, a fluctuating marketplace is also an ideal scenario in which to recruit and hire experienced talent.
The Franchising Model
One such strategy to market entry is franchising. A relatively rare approach, franchising allows even the inexperienced professional to gain access to purchasing power, proven product, essential training and guidance, and floor plans and elevations that have already gained recognition and acceptance in the marketplace.
A good franchise system offers a wealth of knowledge to assist any newcomer in capitalizing on a market such as “active adult.” Bruce Alexander, owner of WNC Lifestyle Communities, an Epcon Communities Builder based in Asheville, NC, says, “I have found the information bountiful, the people professional, and the product a crowd pleaser.”
In spite of the difficult market conditions, the franchising system has distinct advantages that have allowed real estate veterans and “lay” persons to enjoy tremendous success despite cyclical housing trends. One of the benefits to serving a niche market is that the franchisor can become an expert in that niche and can adjust quickly to changing market demands and conditions. For example, a franchisor that offers product catering to the sophisticated demands of today’s baby boomer generation can still offer product in high demand, as that demographic’s needs are vastly underserved at present. Such specialization and sophistication can work to the franchisee’s advantage; as a new entrant into the industry, he or she can reap the rewards of the company’s toil and labor to gain that sophistication simply by becoming a franchisee.
Franchisees enjoy great flexibility that large builders and construction firms do not. Even today, there are markets in some parts of the country that remain “hot.” They may be underserved from a housing standpoint, or they may be markets with booming economies experiencing population growth. The large builder will typically not be nimble enough to change course and cater to that one individual market without opening a satellite office there and transferring resources and personnel. But a franchisee operates somewhat autonomously with the ability to penetrate any market in which he or she can find land.
The key is to be proactive, not reactive. Seizing opportunities, rather than letting larger trends dictate development direction, will allow savvy entrepreneurs to become their own bosses while bucking the national trends to great success.
About the Author
Nanette Overly serves as vice president of sales and marketing services for Dublin, Ohio-based Epcon Communities. Epcon Communities is one of the leading developers and franchise operators of condominium developments in the United States. Since its founding in 1986, Epcon Communities and its franchise partners have developed more than 25,000 homes targeting active adults in 31 states. For more information, visit www.epconcommunities.com.
