New Home Quality and Customer Service Improving in Recession

If there is one silver lining to be found from The Great Recession, it’s been the significant increase in both product quality and customer service from the nation’s largest home builders, which should position builders to grab market share from the existing home market in the years ahead. In fact, according to the 2009 New-Home Builder Customer Satisfaction Study by J.D. Power & Associates, overall customer satisfaction among 26,231 buyers of newly built homes averaged 811 on a 1,000-point scale, up by 32 points in 2008 (the survey can be found online at www.jdpower.com/Homes.)

Now in its 13^th year, the study surveys buyers in 24 different markets and analyzes nine factors including workmanship & materials, warranty and customer service staff, price & value, sales staff, construction manager, home readiness, the builder’s design center, location and any recreational facilities provided by the builder.

Paula Sonkin, vice president of the real estate and construction industries practice for J.D. Powers, argues that it’s actually been the building bust itself that has forced homebuilding companies to bolster their operations throughout the entire process. In the end, that’s been a great boon to buyers, as Sonkin says that builders are offering “unprecedented high levels of quality, value and service at relatively low prices.”

Leading the pack nationally for 2009 was Michigan-based Pulte Homes (which at the time also included the Del Webb and DiVosta brands), which ranked highest among builders in 12 different markets, but builders such as Brookfield, Pardee, Lennar and K.Hovnanian were also leaders in specific markets.

But what I found most interesting about the survey is how different the same company ranked in different markets (in some cases scoring a 5 in one market and a 2 in another), which points directly to the importance of division presidents’ leadership in a largely decentralized industry. Yet in view of the growing importance of a builders’ brand name in a cluttered home buying universe, allowing one division to remain the weakest link in a multi-city chain could arguably be costing its reputation – and therefore potential sales -- for the entire organization.

The study also found that as the importance of workmanship and materials have increased, factors such as the sales staff, construction manager and home readiness are less important than in the past. Still, in 2009 the proportion of homes that were delivered finished and on time increased to 76%, or up from 70% the previous year, which is definitely more good news for an industry still under great duress.

J.D. Powers also survey buyers for its New-Home Quality Survey, which is in its third year for the same 24 markets nationally, and in this case build quality has improved from an average of 11.51 problems per home in 2009 to 9.55 problems per home in 2009. Again, Pulte Homes led the pack nationally, with other builders such as KBHome, Ryland, Standard Pacific and Taylor Morrison leading in individual markets.

What was also interesting from the survey was that while 31% of new-home owners consider their homes to be environmentally friendly, nearly two-thirds reported that their builders did not identify ‘green’ features in these same homes. Adds J.D. Powers’ Sonkin, “Builders that neglect to point out environmentally friendly home features to buyers are missing out a very important opportunity.” And the top three reasons owners gave for choosing a green home? Saving on energy costs, reducing water usage, and minimizing their impact on the environment.

The 2010 survey is now underway, and if recent history is any indication, the nation’s best-known builders will continue to improve their product quality as well as their customer service rankings. The industry may be down – at least temporarily – but I think the survey proves that it is far, far from being out.