How To Find Homebuyers In A Prospect Pool That's Shrinking ... For Now

A preliminary Labor Department revision of March 2023 through March 2024 job market data delivered a sharp cautionary note.

Compared with the still-official numbers, employers might have added 818,000 fewer jobs in the 12 months through March, the Labor Department said. That means the economy could have added around 178,000 jobs a month over that period, as opposed to the current estimate of 246,000 jobs a month." – Sam Goldfarb, Wall Street Journal [gift link]

This preliminary adjustment will get another once-over before another "actual adjustment" in February 2025. The underlying caveat, however, is that the strength of the employment economy in the past 18 months may have been exaggerated.

This is especially relevant at a moment when homebuyers across the new home spectrum have taken a pause. Typical discretionary purchasers have begun to hesitate for psychological reasons, while more price- and mortgage rate-sensitive first-time buyers have taken the sidelines due to today's daunting financial/math challenges, ranging from down payments to monthly payments.

When those larger pools of customer prospects – the age demographics pools, the jobs- and household formation pools, the metro area economic growth trend pools, the family formation pools, etc. – start to shrink at times like these, narrowcasting in on customers as precisely as possible.

As a function of business success and longevity, many homebuilding enterprise business strategists lean into "trusting their gut" and kicking into a S.W.A.T. plan as an adaptive strategy when times get tough and business slows down.

Here's an alternative lens to look through.

Trusting your gut may be right, but there's a catch. The data has to be right there in the mix as well.

Here – as always – is a perspective on what's predictable from Collaborative Fund's Morgan Housel. It may strike you at first as out of left field. Give it a minute. Housel writes:

The hard thing is that while the number we know today can be something real and verified, the story we multiply it by is driven by what you want to believe will happen or what makes the most sense. Forecasters get into trouble when the number we know from today gives an impression that you’re being objective and data-driven when the story about tomorrow is so subject to opinion."

"Trusting your gut" is, in effect, your "story about tomorrow." It comes from what you believe – with reason – from your wisdom and experience from what's proved to work in the past.

But, when it comes to navigating the shrunken pools of prospective new-homebuyers, trusting your "story about tomorrow" may add up to a lost opportunity.

Take a look at how Morgan Housel characterizes that lost opportunity:

1. A fact multiplied by a story always equals something less than a fact. So almost all predictions have less than a 100% chance of coming true. That’s not a bold statement, but if you embrace it it always pushes you towards room for error and the ability to endure surprise.

2. The most persuasive stories are what you want to believe are true or are an extension of what you’ve experienced firsthand, which is what makes forecasting so hard.

3. If you’re trying to figure out where something is going next, you have to understand more than its technical possibilities. You have to understand the stories everyone tells themselves about those possibilities, because it’s such a big part of the forecasting equation.

Couple those observations up with how what amounts to a lost opportunity for homebuilding business leaders and strategists right now – "trusting their gut" – could be turned to an opportunity found.

Here's who and what that opportunity look like when business leaders and strategists look around the room in their organizations.

Your marketing team is your customer expert," says Ed Carey, co-founder and CEO of audience town, a marketing analytics business platform for homebuilders and residential real estate. "When you know your customer, you sell more homes. We might poke fun at homebuilder strategists for making decisions with their gut, but maybe we could help them prove that their gut was right — with data. It's all about knowing who your customers are and what they need. Your marketing team is your land development team, and it's becoming the biggest source of information for your product. Your marketing team is your business future. See them that way. Because of the tools available to them, AI and data are being harnessed for marketing use cases, and they have the best tools available now. Give them money, give them power."

In other words, the opportunity not to lose is your ability to look beyond the crude tools of age demographics, household formations, and broad-stroke local economics for the who, where, and why of customers who remain undeterred in today's market. Put your customer experts – your marketing leaders – into budget and business planning. They're your opportunity gained.

Morgan Housel writes:

We can use historical data to assume a trend will continue, but that’s just a story we want to believe in a world where things change all the time."