Real Estate Brands Continue to Shine in a Dark Market
In this market, more than ever, your clients are looking for the safety and security of a purchase that will hold its value through tough times in the future. With home prices continuing to fall, finding that security may prove more difficult than finding that lucky leprechaun and the pot of gold at the end of the rainbow. Oddly, in these troubling times, many are turning to the time tested real estate brands that have been so successful in the past, and will continue to lead the way in new home sales both today and in the future.
No other sector of the real estate sales market has been hit harder than new home sales. The mortgage crisis was the first domino that fell for all of us, but it really reverberated loudly to all those developers that had a building coming out of the ground or a sub-division that was in its final construction stages. As credit requirements tightened and the market became flooded with inventory, prices began to decline. To make matters worse for developers, the tightening lending requirements started to force developers into situations where they were not allowed to close any of their sold inventory until a certain percentage of the development had already been sold. Known as a pre-sale requirement, this new twist in new home sales sometimes equaled up to 60% of all homes in contract before a lender was able to fund a loan for that particular development.
So as the sales process slowed to a near stop for many of these new home developments, and the market continued to dry up and void itself of any new prospects, many developers were finding an inability to close units. Faced with standing inventory, and numerous cancellations from prospects that no longer could qualify for the loan or simply wanted to wait for the market to come back around, many of these developers threw marketing dollars into expensive ads in magazines and newspapers, or re-vamped their marketing approach to include another sector of the buyer market. But many of these attempts proved futile as the market continued its decline.
But branded real estate, however, did not have quite the backlash. With devoted clients and proven locations throughout the world, many branded developments continued to capture both prospects and sales. In fact, some locations I have visited actually experienced an increase in sales traffic over the last year.
As I have written about in the past, one such development, the residences at Four Seasons’ Bora Bora, certainly has not been as affected by the global economy as one might think. Sure there are those people that try to point out the condition of the global economies and can’t seem to fathom how the sale team is able to secure buyers for $12 million dollar properties. But buyers to the Four Seasons brand in Bora Bora have all indicated their allegiance to the brand and will be the first to explain that Four Seasons will hold its value both today and in the future.
Another development with similar traits is the Ritz Carlton Residences at LA Live. This downtown Los Angeles high rise is considered the epicenter of the downtown revitalization. While other non-branded developments are lowering their prices to try to capture what is left of that market, Ritz Carlton LA Live has experienced an increase in traffic and sales. While the development does not expect to close any escrows until late-2010, today’s buyers for that product are happy to see that Ritz Carlton is not an “on –sale” brand. That’s probably the reason many Hollywood A-listers and top sports figures are clamoring to place a deposit on the already 60% sold development.
Other brands, including Capella, a smaller luxury brand that competes with Four Seasons, still continue to see exceptional levels of interest at many of their developments around the globe, including stagnant markets like Mexico and parts of Europe. Once again, it is the brand loyalist that will explain their reasons for purchasing to be simply a trust in the name and a belief that the name will only add vale down the road.
