Competition drives big home-construction firms to hit the media
Used to be that if you were shopping for a newly built home, you found a real estate agent. Now, home builders come into your living room.
To lure home buyers, three of the city's major residential builders are embarking on a springtime advertising blitz that they hope will catapult their name atop that of their competitors.
Why now, when sales of affordable housing are growing 3 percent a month?
'Part of it is competition,' said Bruce Dunlap, vice president of sales and marketing for Arbor Custom Homes in Beaverton. 'We have very large communities compared to our competitors and a large amount of traffic we have to drive every day to our homes.'
Home sales have remained fairly constant despite the recession Ñ with the exception of $400,000-plus McMansions. Much of that has been because of low interest rates and a slowdown in the escalation of home prices. Portland is still considered one of the more affordable cities on the West Coast: The median price for a home in Portland is $180,000, compared with $559,000 in San Francisco.
'Anything under $240,000 is selling right away,' said Nancy Gregg, owner of Portland-based Gregg Real Estate. 'There's a lot of builders in that production line.'
For home builders, sales are in direct proportion to market awareness Ñ hence, the onslaught of new advertising just as the school year is ending and parents are looking to move.
• Arbor Custom Homes is spending $2 million this year to promote its new houses on radio, TV and newspapers. Under the slogan, 'One neighborhood at a time,' Arbor's homes can be spotted on billboards at Portland International Airport, along Oregon Highway 217 and the Sunset Highway, and on local TV affiliates.
• Renaissance Development Corp. began airing nine commercials this month on three local TV stations showing the restaurant-size kitchens and vaulted ceilings featured in many of its $300,000-plus homes in well-heeled areas such as West Linn and Sherwood. The ads note that 'it takes more than just a good floor plan to make a home.' The company, which spends $300,000 a year in advertising, also is running new print ads in New Home Magazine.
• D.R. Horton Inc., which moved into the market four years ago when it merged with R&P Properties, has ads on Clear Channel's five Portland area radio stations steering listeners to its Web site. Its motto: 'America's confidence builder.'
'We're the No. 2 builder in the country, but we're not known here,' said Larry Vinton, Horton's vice president of sales and marketing.
Advertising 'won't bring in many buyers, but we're trying to drive traffic to the product,' he said. 'The other umbrella view is that when people are looking for a home, D.R. Horton is one they'll consider.'
Rather than advertise, Legend Homes uses other promotions, such as one-day-only lot sales, to generate interest. Last week, six families camped outside its Bauer Highlands development on Northwest Saltzman Road to get first dibs on a limited number of 4,400-square-foot lots that border the metropolitan area's urban growth boundary.
'Advertising hasn't been the most effective use of our money,' said Scott Paskill, director of sales at Legend Homes and chairman of the sales and marketing council for the Homebuilders Association of Metropolitan Portland. 'It's hard to gauge those results. We have people camping out at our developments. People wait for concert tickets, but this is the biggest investment of their lives.'
A changed market
The Portland home-building market has changed dramatically in the last five years. Many small builders have been forced out by rising land prices, which almost every builder and real estate agent blames on the constraints of the urban growth boundary. The price for one acre in Beaverton averages $200,000, Dunlap said.
The outcome: Only larger, national home-construction companies such as Newland Communities, Arbor Homes, Centex Homes and D.R. Horton are left. Their mode of operation is to buy hundreds of acres in one swoop and build 100 or more homes.
D.R. Horton, for instance, has 20 subdivisions with homes ranging from $120,000 to $400,000.
Arbor, which sells about 500 homes a year, also has emerged as a production home builder in the last five years.
'We'll develop a site and a lineup of 10 plans and real competitive prices,' Dunlap said. The houses range from $150,000 to $350,000.
Renaissance Development's owner, Randy Sebastian, is building between six and 10 neighborhoods at any one time from Renaissance Heights in West Linn to Bauer Highlands in West Portland.
Portland 'used to be a small builder place where they did five or six houses,' he said. 'It's definitely more corporate. They do 100 or more homes at a time. It's very hard for a small company to raise the kind of capital it takes to buy large parcels. It won't change with the urban growth boundary.'
Some small builders have either left town or gotten into high-end home remodels because of the land limitations and prices, said Dick Hartung, owner of Tigard-based LHL Construction.
'People that are big enough go out and tie up all the land,' said Hartung, whose company builds seven to 10 homes a year. 'The lots are not available. It will continue to drive people out. We have to develop to survive and in a niche we may not be accustomed to. It's tough.'