Keeping Clients Warm When the Market is Dry: How to Manage Inventory Shortages

Exterior of model home.
When inventory is slim, you can network and build relationships with builders and developers to get information about new homes and projects before your competition.

The United States is dotted with urban areas where would-be residential buyers are having trouble finding available new homes in or close to the city at the price point they’re seeking.

While your client may feel as though there’s not much out there for them, you can help them navigate this tough housing climate. In this article, we offer tips on how to manage inventory shortages:

Relationships and Networking

San Diego Realtor Chad Dannecker of Dannecker & Associates works in a market that is notorious for new home shortages. He suggests that buyer’s agents nurture longstanding relationships with developers, which will open up insider information on “private, pre-public opportunities to see floor plans and to make reservations on the new homes at hand.”

Kathy Vallee, a Realtor with Re/Max Associates Park City Homes and Land in Tucson, Ariz., agrees that staying close to home builders is key.

“Whenever new construction homes experience a shortage, I like to meet with local builders whom I have a relationship with to find out if there maybe something in the works,” she explains. “Because I belong to a mastermind group that meets once a month to discuss inventory and share our pocket listings, I’m able to stay abreast of anything that may surface or be on the horizon.”

Content Marketing Techniques

Here’s what’s happening behind the scenes while a new development is being built: developers are in the early stages of hiring their sales people and a marketing company and getting geared up for the grand opening. They often don’t spend much money on marketing the project until their sales office is open.

“This is the perfect time for an agent to own the narrative about the project by creating an inbound marketing program,” advises Dannecker. “A landing page with a video, floor plans and any other details about the project should start building an ‘interest list’ for the new housing project.”

And how do you connect with developers to begin with? Vallee suggests creating an online directory listing all your favorite vendors. This gives you opportunities to connect. Any tip? Organize industry networking events.

Being ahead of the curve by developing landing pages gives a Realtor a way to keep relationships with perspective buyers warm, even when there’s no inventory currently available. Cultivating trust is another important element of the relationship. “Share the local housing market reports to demonstrate where the market has been the past year and where it is heading. The more information your buyer is equipped with, the more they trust you as an agent and will likely remain engaged and confident in your ability to find them the perfect home,” says Vallee.

Understand the Market

Why do inventory shortages happen in the first place? Jeff Shaffer, of real estate investment and operations firm McKinley Partners in Oakland, Calif., explains that private builders can be constrained in their ability to deliver new home inventory to the market depending on home buyer demand, mortgage availability, capital for development or their own conservative approach.

“Today, homebuyer demand is mostly at the ‘move-up buyer’ price range, less so at the entry level price point,” says Shaffer. “Those buyers have a bit better economic means to purchase and ability to qualify for mortgages; and with the rise of home prices, some of those people once again have equity in their existing home that enables them to purchase a bigger home.”

Shaffer says that move-up buyers are motivated to act quickly since they’ve likely been in their current home for a longer period of time than recent buyers and have more equity built up. And, because they have been in their home for quite some time — maybe longer than they anticipated — they are ready to make a move.

Builders’ profit margins are better at higher price points, so they are naturally attracted to producing new homes for the most sure market segment — but that’s a small percentage of the overall inventory during healthy economic times.

“As builders and lenders gain confidence that the market has stabilized, mortgage availability to entry-level buyers should increase and builders will put more (new homes) at a greater range of price points … into the market,” Shaffer says. “We could see noticeable traction in the entry-level home sale segment by mid-2015.”

2015 is just around the corner and Dannecker is creatively keeping his future clients engaged. Once someone has entered their contact information into his landing page form, Dannecker sends new information about the project in a weekly email blast, which can include short copy, a photo with text or even a video.

Dannecker says this is a good opportunity to involve anyone involved in the process, from the sales team, the developer, the city planning department, architect, contractor, etc. “You would be surprised how all of the parties involved in the development and building process get excited and share information that isn’t common knowledge,” Dannecker says. “It’s contagious.”

About the author 

Sarah Kinbar

Sarah Kinbar is a writer and editor with a passion for design and images. She was the editor of Garden Design magazine, curating coverage of residential gardens around the globe. As the editor of American Photo, Kinbar worked with photographers of every genre to create a magazine that told the story of the photographer's journey.

She has been writing about architecture, landscape design and new-home construction for NewHomeSource since 2012. During that time, she founded Kinship Design Marketing, a boutique agency that provides content for website redesigns, blogs, inbound marketing campaigns and eNewsletters.

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