Here’s a lesson in how to survive and prosper in today’s demanding housing markets.

In the spring of 2007, when Professional Builder magazine published its Annual Report of Housing’s Giants, Dublin, Ohio-based franchising behemoth Epcon Communities still seemed to be on top of the world, with $500.8 million in 2006 revenue from closing 2,782 attached condo homes, all in the pinwheel cluster fourplexes the firm pioneered for Baby Boomers entering a move-down phase of life. At No.63, PB put Epcon in a category it called “Rich and Famous.”

But we all know what happened next. By the time the 2008 rankings appeared, nobody was rich and famous, and Epcon’s 2007 revenues were down to $312.1 million on 1,734 closings. Epcon principals Phil Fankhauser and Ed Bacome knew the time had come for drastic action. “We had confidence that our market segment — pre-retirement and retired Boomers — was still there and still growing,” Fankhauser says today, “but it was obvious we were missing something.”

Consumer Research Redefines Niche

The pricing dynamics of markets across the country, where Epcon’s 135 franchisees build, had shifted dramatically, but the Epcon principals suspected they were also missing a preferred product choice. So Epcon engaged Oxford, Miss.-based ProMatura Group, a market research firm specializing in consumers aged 50 and over, to study Epcon’s targeted buyers and find out what they really want in a move-down home (even if no one is offering it), and what the housing form, square-footage range, and price should be, along with bedroom counts and even preferred architectural styles, living spaces and details.

The eye-opener came when ProMatura CEO Dr. Margaret Wylde told Epcon that more than half its targeted niche still wants a detached home, rather than the single-level attached product that Epcon franchisees were building. “Margaret told us going into an attached home is a compromise move-down buyers make to stay within their budget,” Fankhauser says, “but most still prefer detached homes, especially if they don’t have to worry about exterior maintenance.”

Armed with Wylde’s research report, Fankhauser and Bacome set about finding a way to give their buyers more choice. Epcon decided to go back to the drawing board and design a totally new product line to pack real magic into their offering to senior buyers, both married and single, and to add product designed for a compatible market niche, younger single females, who actually find comfort and security in communities that surround them with retired neighbors.

This was a major undertaking for Epcon, since standardized product allows the group to engage in regional purchasing programs that help Epcon drive down costs and keep pricing affordable for buyers on fixed incomes. “Price has never been more important than it is today,” cautions Fankhauser.

In the end, Epcon decided it needed four new models for the attached fourplex product line, and three detached models that could be built in the same communities with the spinning, pinwheel fourplexes, which require an intricate weave of winding roads. 

Design Charettes

Epcon engaged four architectural firms from across the country in a competitive design charette process, hoping to pick one firm to design both product types. But in the end, Epcon picked a different architectural firm for the detached homes. The surprise was that both winners came from Epcon’s own back yard in Columbus, Ohio, where Fankhauser and Bacome still operate the model franchise for the whole Epcon network, which now spans 30 states.

Columbus-based Dean Wenz Architects won in the attached competition and Glavan Feher Architects, also of Columbus, developed the conceptual architecture for the three detached models. Both design firms developed multiple exterior elevations, enabling franchisees to tailor the product to their local markets. Both employed open floor planning to an extreme that allows every major living space to borrow from adjacent spaces, so the homes (both detached and attached) seem much larger than they really are.

(Fankhauser challenged me to guess the square footage of each model as I walked them for the first time, and I didn’t come close on the first couple of homes, always missing on the high side.)

Epcon opened the new models, in a Columbus community called Sugar Run, in the fall of 2008, and immediately began selling the detached homes at a pace three times that of the attached homes. All of Sugar Run sold at twice the rate of older Epcon neighborhoods in the Columbus market. “Sugar Run is a great success even though prices there are $12,000 to $15,000 higher than the same homes in other Columbus communities,” notes Bob Franke, Epcon’s vice president of franchise operations, “because of higher land costs.”

The attached homes range from 1137 to 1806 square feet, base priced in Sugar Run from $168,900 to $249,900. The three detached plans (all 42 feet wide) run from 1516 to 1994 square feet, base priced from $204,900 to $269,900. However, the detached homes have optional sunrooms and a second story bedroom addition that drive up both square footage and price.

“All across the country, we’re now confident we have the right product for Baby Boomers,” Fankhauser says, “as they contemplate moving down from the big houses in the suburbs where they raised their families. And the Boomers are still the biggest market segment out there.”

Fankhauser projects Epcon’s revenues and closings this year will be up 40 percent over 2009.

Bottom Line

The lesson for builders across the country, driven home by Epcon’s success, is that as housing markets across the country begin to recover, don’t assume you can go back to building the same product as in 2005, or even some stripped-down version of it that just manages to hit the right price.

The demographics and psychographics of the market have changed. The pricing dynamics have changed. Buyers are no longer easily wooed by home appreciation. But they can still be romanced by a product that meets the demands of their lifestyle, in locations where they want to live. (More than before, that may mean cutting their transportation costs!)

The right thing to do is what Epcon did: Invest in consumer and market research to learn everything you possibly can about the wants and needs of targeted buyers. And then provide that research to your architects, so you end up with the right product, at the right price. That’s the Right Stuff.

Bill Lurz has been reporting on every aspect of the home-building industry since 1970. A former editor-in-chief of Canadian Building and senior editor of Professional Builder, Bill is currently editor-in-chief of AvidBuilder.com. He can be reached at bill.lurz@avidbuilder.com.