If Homes were Marketed Like Apple Products
The Core of the Matter
With 31% of the smartphone market,Zach Epstein, NPD: Apple was best-selling U.S. smartphone vendor by wide margin in Q2, August 23, 2012, BGR.com 66% of the tablet marketAP, Worldwide market share for tablet systems a market dominated by Apple’s iPad, Sept 5 2012, Washingtonpost.com and 6.7% share of the very splintered and entrenched desktop marketMarket share for browsers, operating systems and search engines, August 2012, Netmarketshare.com., Apple is a company that cannot be ignored. Among Generation Y, the Millennials and their younger followers the share is even higher. If you're talking about real estate buyers, typically the more financially stable segment of the population, I'd posit that you'd see an even higher market share given to Apple.
Younger generations have avoided buying cars.Brad Tuttle, Car Ownership Not Popular With Generation Y, May 2, 2012, Time.com The first major purchase they make will instead be a computer or smartphone. Technology is now their first introduction to installment payments for big ticket items. A computer is often the first item where a young consumer must buy with an eye towards maintenance costs and longevity. They may have to choose between a style leader something that's less fashionable but more affordable. Basically, buying a computer is now the average Chicago consumer's training for buying a house.
Apple has succeeded where the real estate industry has failed. They've convinced those cash-strapped younger consumers to pay a premium for equipment.
The average news-aware reader will know that Apple fiercely guards its trademark "look" when it comes to technology. The company is not so protective when it comes to spreading that look through the rest of society. We've seen this before in the 1930's with the polished chrome Streamline Moderne style. It expanded from the sleek, silver trains to permeate everything from accessories and furniture to restaurants and architecture. The Apple look is now winding through current design trends like a cable-knit thread.
A savvy developer of new homes might note the popularity of the Apple look and adapt it into the homes that they create. After all, if buyers are willing to pay a surcharge for Apple products when it comes to computers it stands to reason that they would also pay a premium for a home with the same clean lines and sleek materials. Those developers would miss the overall appeal of the Apple brand. To truly inspire the younger buyer who has been immersed in the overwhelming Apple marketing push since the late 1990's, the housing market needs to closely examine all of the factors that made the company so popular in the first place.
SATIRE ALERT. SATIRE ALERT. AWOOGA AWOOGA.
There is, however, a danger in the housing market following Apple's lead too closely. Let's examine at how a home builder/developer who followed Apple's business model precisely might behave.
- Apple gained popularity as an alternative to the ancien regime of Windows-based systems in the 1990's. For the same underdog appeal to work in the housing market, homes of this nature would have to be marketed as a laid-back alternative for people who like a casual lifestyle. The campaign would target the creatives and the iconoclasts.
- Homes of this nature would also have a reputation for being completely free of pests and impenetrable by criminals looking to steal your belongings.
- Buyers would have only a select handful of models of home available. All of the homes would follow the same style guide. Basically, everything would look like this:
And the consumer would be trained to think that all of these other styles below are dated emblems of the last generation's passé best effort.
- Homes would come with a 1 year warranty by default. (NB: This is actually pretty common if you buy a new home from a developer anyhow.) If anything broke, you'd be able to call the developer and they would come in and fix it free of charge. However, if you were to make any changes to the arrangement of rooms or attempt to make any of your own repairs, the warranty would be void.
- You would only be able to install appliances, furniture and equipment approved by the developer and sold through the developer's own store. Certain third-party furniture shops might be approved for smaller accessories like pots & pans, but all larger items would have to be vetted by the developer beforehand.
- On the other hand, all furniture and large appliances would be marked with your home's unique fingerprint, so in the event of a theft they can be immediately replaced and eventually returned to you.
- You would not be able to upgrade the electrical system to supply more power. In fact, the electrical panel, plumbing and HVAC system would be completely sealed shut.
- Similarly, you would not be allowed to build a new wing or any comparable additions, although your developer would be happy to sell you a larger house.
- If your home was somehow destroyed catastrophically, the developer would be able to move you to a new one in exactly the same location, with exactly the same style, layout and features.
- When you move between homes built by the same developer, your belongings are transferred free of charge.
- Every 24 months the developer would release a new model and push really hard to convince you to move.
- The water heater would hold an abnormally large amount of water, but the windows would be subject to cracking in inclement weather.
- A cottage industry might spring up around the individuals who are willing to void their home maintenance warranty and rearrange their rooms and furniture using outside elements.
- Homeowners would very rarely sell these homes to each other, and there would definitely be no expectation of turning a profit on the sale of a used home. Instead, when it's time to move, they would trade their home back into the developer for refurb/resale and pay most of the cost of a new home out of pocket.
Obviously some elements of this fantasy scenario are totally impractical for real world behavior. Every home is substantially different. Even if we're talking about units within a single skyscraper, the views, noise and light will change from floor to floor. Once a home is built the developer usually gets out of the picture pretty quickly, leaving the structure to be resold on the private market.
However, there is an environment that's very close to this the business model described by above. It's the high-end luxury rental market, and in Chicago it's thriving. If you swap out the developer I described above with a REIT-owned Loop high rise rental building like Aqua or Alta at K Station, it quickly shifts from a ridiculous proposition to a frighteningly similar. Admittedly only iconic architects like Frank Lloyd Wright have been able to get away with mandating (and nailing down) the furniture in a property in order to preserve a certain design aesthetic, but the rest of it is pretty close to a luxury rental scenario.
Is it any wonder that millennials are choosing to rent for far longer than ever before? Is it a surprise that 2 bedroom/2 bath rentals in these buildings are commanding $3300+ per month when their MLS-listed neighbors are averaging $2400?
The Chicago resident who wants to have the Apple experience in real estate can have it in the rental market. If the buy/sell market wants to capture that sector of the population, it must find a way to bridge the gap and make homeownership as close to renting as possible for a generation that has discarded the concept of permanence. I have no answers as to how it can be done. I welcome your suggestions.
|↑1||Zach Epstein, NPD: Apple was best-selling U.S. smartphone vendor by wide margin in Q2, August 23, 2012, BGR.com|
|↑2||AP, Worldwide market share for tablet systems a market dominated by Apple’s iPad, Sept 5 2012, Washingtonpost.com|
|↑3||Market share for browsers, operating systems and search engines, August 2012, Netmarketshare.com.|
|↑4||Brad Tuttle, Car Ownership Not Popular With Generation Y, May 2, 2012, Time.com|