Preparing for a Housing Recovery
Early this year, Becky Weiss, owner of Union Street Flowers and Gifts in Westfield, Indiana, began noticing things that suggested the housing market in her area might finally be due for a rebound. Laid-off construction workers were being called back to work. The city itself had broken ground on a two-year project to build a $45 million, 350-acre sports complex -- a development she figured would help draw even more people to her community 20 miles north of Indianapolis.
Eager to take advantage of any momentum shift, Weiss began advertising via Welcomemat Services, a marketing company whose franchisees deliver "gift checks" from businesses to individuals and families that have recently moved into their areas. So far, Weiss says, the program has been paying dividends.
"As the housing market has improved, I'm seeing people coming in with my coupons who've never been in our stores before," she says. "They're new to the area. I feel like I've had a good return on my investment." Encouraged by the results, Weiss is working on a new direct mail campaign that will target both her Welcomemat and existing customers.
It's not just wishful thinking
National numbers back up Weiss' anecdotal evidence about the housing market. According to the widely followed S&P/Case-Shiller national home price index, the typical sale price for a home rose 0.9 percent in August after jumping 1.6 percent in July, putting home prices at their highest levels since the summer of 2003. Meanwhile, new housing starts surged 15 percent in September to their highest annual rate in four years. And, the country added 1.15 million new households in the 12 months ended in September, far above the 650,000 annual average over the prior four years.
A strong housing market benefits businesses of all sorts, and not just the obvious examples: real estate agents, homebuilders, subcontractors, furniture retailers and the like. Banks sell more mortgages. Florists see an uptick in business as new homeowners dress up their purchases or receive flowers as welcome gifts.
Fletcher Findley, co-founder of a two-attorney law firm in Seattle, has seen new business from first-time homebuyers who've concluded they now need to write a will. Daniel Sentell, director of communications for Broad Financial in Monsey, New York, anticipates more business for his company as investors who want to include real estate in their retirement savings plans do so via the self-directed and solo IRAs his firm helps create.
If you fail to plan, you plan to fail
If you think your company could benefit from a stronger housing market, it's time to prepare to take advantage of the opportunity. On the manpower front, figure out where you're most likely to need more help if business picks up. If you're a manufacturer or retailer, assess your inventory levels and revisit potential chinks in your supply chain. If your own house has increased in value, consider whether you might be able to use it to secure financing now that you wouldn't have qualified for a year or two ago. Finally, think about ramping up your marketing and advertising activities.
Think it's still too soon to act? Here's what some of your competitors are already doing:
- Networking. In addition to increasing their advertising, Sentell and his colleagues are attending and speaking at events that target real estate investors. They're also looking to partner with real estate companies to promote buying real estate via self-directed or solo IRAs.
- Websites and social media. Gary Zaremba, president of Pepzee Realty in Dayton, Ohio, is upgrading his company's website and simultaneously looking for more opportunities to use social media to publicize his property-rental business. He's also reaching out to the investment community to promote the idea of investing in real estate. In the meantime, he says, the housing-market uptick is already helping by allowing some of his renters to upgrade from apartments to single-family homes and by stimulating demand for his property-rehabilitation services.
Marketing consultant Sonny Ahuja, who specializes in social media, says many of his construction and remodeling clients are launching upgraded websites, too, and boosting their advertising budgets. "All are seeing an increase in their businesses as more people are moving into new and old homes," he says.
- Online advertising. Sentell says his firm has strengthened its Google AdWords campaign for real estate topics, a tactic that many of Ahuja's clients are using, too. Ahuja notes that one such client -- a mold-removal company based in Milwaukee -- brought in so much new business in the course of a four-week AdWords campaign that it had to temporarily suspend it until its crews could catch up on the work.
Housing is not, by itself, a huge component of the U.S. economy. Residential investment historically has contributed about 5 percent to the nation's gross domestic product. But a rising tide from a strong housing market lifts many boats. If this is the long-awaited start of a housing recovery, why not make sure your company is ready to take advantage of it?
A former reporter for The Wall Street Journal and Dow Jones and contributor to Barron's, Randy Myers is a contributing editor for CFO and Corporate Board Member magazines.