Housing

Planned Communities a Bright Spot During Housing-Market Downturn

Strong Marketing and Branding, Added Amenities, Have Kept Sales Alive -- Though Industry Has a Way to Go to Match '05 Peak

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When Bradley Raczka and his wife began looking for a home near Phoenix, they knew they wanted to escape the high prices and cold winters of their native Chicago. But they didn't know they wanted a master-planned community.

Anthem, Arizona, is a planned community north of Phoenix built in 1998 by Del Webb (now owned by PulteGroup) and aimed at families with active lifestyles like the Raczkas.

The Woodlands Waterway

"With three kids, family is important to us, and this offers many opportunities to do things and to be part of a community," Mr. Raczka, a Nielsen analyst, said. "It's got everything from a water park and a rec center to a skate park and catch-and-release fishing and pretty much anything else you can think of ."

The value of those amenities, along with the perceived security of master-planned communities, has kept many of them at least a little ahead of the rest of the housing market during the recession. And marketing has played a key role in the success of these communities.

"With master-planned communities, there is quite a lot of money spent to create a brand. And brands tend to sell better in this kind of economy because people are attracted to the security and safety of them," said John Ritter, CEO and chairman of Focus Property Group, which holds the No. 5 and No. 7 spots in real-estate advisory firm RLCO's Top 10 Master Planned Communities by net home sales in 2010.

The list, compiled annually by RLCO since 1994, tallied about 7,000 homes sold by the top 10 communities, a slight increase over 2009 and the most positive movement since sales began dropping off in 2006. However, the total is still less than a third of the peak of 22 ,000 homes sold in 2005.

Even so, RCLCO found that 85% of planned-community developers who took the survey believe this year will see "moderate increases" in both sales and prices, along with a definite "cautious optimism" in a comeback. Some 50% of the communities planned to increase amenity budgets for things such as trails and community parks in 2011.

But new-home builders and developers of planned communities aren't waiting for buyers to come and find them.

Source: Manufactured Housing Institute

For the almost 37-year-old Houston planned community called the Woodlands, No. 4 on the list, a combination of strong brand and reputation, a stable developer, focused planning and a consistent advertising and marketing plan have all contributed to weathering several downturns. "We are aggressive with our advertising and we have maintained the same level during this time," said Susan Vreeland-Wendt, director of marketing for the Woodlands Development Co.

The Woodlands not only promotes its wide inventory of homes and dedication to building a community with hospitals, schools and churches; it offers more incentives during downturns. For instance, the company is just finishing up a promotion offering a $2,000 MasterCard for purchase and close within specific time frames.

PulteGroup Senior VP-CMO (and former Chrysler marketing exec) Deborah Meyer said her company has adjusted marketing strategies during the downturn, such as providing free services to potential customers, getting deeper into customer insights, adding mobile marketing and even adjusting floor plans. The Pulte website, for instance, no longer asks visitors to register to look for homes. It also offers free credit reports to first-time home buyers and tips for planning a smart retirement.

Some planned communities born during the recession have done well. No. 2 on the RCLCO list, the Villages of Irvine in Orange County, Calif., sold 1,500 homes since opening in January 2010 and has announced plans to open two new communities this year.

"When we opened these new homes 18 months ago, many believed that it was a mistake and that we should wait at least another year," said Tom Veal, VP-residential sales and marketing, Irvine Co. Community Development. "But we had devoted a lot of resources to in-depth consumer research, and when it came time to open, [we] marketed many of the results of that research," he said, including innovative floor plans, a variety of price points, and low interest rates. One neighborhood that opened last November is completely sold out, and another one that just opened in March and is priced beginning at $1 million already has 15 sales.

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