DECIPHER™ Case Study 16:
Price Optimization, Sales Analytics, Product Premium Maximization, Competitive Performance Benchmarking, Investor Reporting
Synopsis
Delivered base pricing and lot premium optimization for over 40 projects. Other projects included comprehensive market intelligence reports, demand modeling, and price modeling which enhanced project NOI ranging between $500,000 to over $20,000,000.
Background
D.R. Horton, Inc., America’s Builder, has been the largest homebuilder by volume in the United States for twelve consecutive years. Founded in 1978 in Fort Worth, Texas, D.R. Horton has operations in 79 markets in 27 states across the United States and closed 26,924 homes in the twelve-month period ending June 30, 2014. The Company is engaged in the construction and sale of high quality homes through its diverse brand portfolio that includes D.R. Horton, Emerald Homes and Express Homes, with sales prices ranging from $100,000 to over $1,000,000. D.R. Horton also provides mortgage financing and title services for homebuyers through its mortgage and title subsidiaries.
Challenge
Several months before “going to sale,” a national homebuilder previously commissioned four other local and regional “consultants” to provide pricing estimates for each product type. Executives had a very low confidence level arriving at critical pricing levels based on the generic research provided based on outdated surveys, poor primary research, and erroneous calculations. After a referral, CA was subsequently commissioned.
Solution
CA was engaged to conduct a comprehensive pricing study of over 300 single-family detached development units in a master planned community in Southern California. CA delivered a comprehensive base pricing and lot premium analysis that utilized econometric demand models, proprietary forecast models, generated 1,200 pricing scenarios, and, most importantly, delivered optimized base price recommendations as well as lot premium calculations for every single development unit. CA also provided a scenario matrix that allowed these homebuilding executives to change pricing strategy if specific economic drivers changed in the subsequent days, weeks, or months from opening. When mortgage rates unexpectedly increased by 34 basis points during the first several weeks after the final report was submitted, the client had the flexibility to adjust pricing without commissioning another addendum study.
Results
Delivered base pricing and lot premium optimization for over 40 projects. Other projects included comprehensive market intelligence reports, demand modeling, and price modeling which enhanced project NOI ranging between $500,000 to over $20,000,000.
Return on Analytics
>800%
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