Smaller, cheaper, more flexible — and 5 other ways new homes are changing with the economy
Newly built houses are energy-efficient and stripped of extras but still have plenty of multifunctional living and storage space.
What hasn't killed new homes is making many of them better.
Money troubles, difficulty getting financing and competition from overabundant, cheap existing homes keeps forcing many smaller companies out of business. But the pressure to make distinctive, cost-competitive products is inspiring builders to make fundamental changes, many of them improvements. (Bing: What's the scoop at this year's International Builders' Show?)
"Homebuilders had forgotten what a huge competitive threat the existing-home market was," says Boyce Thompson, editorial director of the Builder magazines by Hanley Wood, a housing-industry publisher and market-analytics company. When the housing bubble burst, "they were being outsold 24 to one, and they had to seize on what distinguished new homes from old."
New homes, reshaped by today's economy, are:
1. Energy efficient
For the same reasons buyers like fuel-efficient vehicles, they're drawn to highly energy-efficient homes. The lower operating costs are reassuring to people who are putting every penny into a purchase and must contain their ongoing expenses.
A new energy-efficient, weather-tight structure is one of the strongest arguments for new construction, Thompson says. With rising fuel costs, buyers see efficiency as a "must," says AvidBuilder.com, owned by Avid Ratings, which surveys homebuyers and owners for the housing industry.
Many larger builders — Beazer Homes and Lennar Corp., in particular — are stressing the energy efficiency of their homes, says Jonathan Smoke, who leads research at Hanley Wood.
Smaller builders like Alex Pettitt of Spring Builders, in Austin, Texas, led the way. Pettitt has built homes for years using strategic design, efficient windows, super insulation and sophisticated heating and air-conditioning systems. Demand is taking off, he says, in part because the geek factor is gone. "Green," efficient homes have become indistinguishable from other homes and "have none of the perceived sacrifices," Pettitt says. Solar panels are nice but not necessary on an extremely efficient home, he adds.
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Buyers don't always pay a premium for efficiency. One example: The Builders Association of Eastern Connecticut's house of the year in Griswold, Conn., costs less than $800 a year to heat, and the 1,600-square-foot home sold for $220,000. The three-bedroom, two-bathroom home is well-insulated: The R-35 insulation in the walls and R-60 in the attic exceed government recommendations.
When the National Association of Home Builders surveyed members last year, 68% predicted homes were going "greener," with low-emissivity windows, engineered wood components, water-efficient dual-flush toilets, low-flow faucets and other water-conserving features.
Home-products manufacturers are making it easier, with counters, wall coverings, tile, hardwood flooring and paint with recycled content and reduced or eliminated off-gassing.
Even the appraisal industry is on board, training appraisers to give extra credit for some green features when establishing the value of a home.
"Right now, solar panels appear to be a bit too much, but eventually, maybe five years from now, they will be more standard, even in modest house sizes," NAHB economist Stephen Melman says.
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"By 2007, buyers were becoming skittish about home prices and their jobs," Melman says.
New-home sales in 2005 totaled 1.28 million, but that number dropped to 776,000 in 2007 and 322,000 by 2010. In 2011, they hit a record-low 302,000.
Builders responded by bringing down home prices and sizes. They are competing with an oversupply of existing homes, and costs for materials such as lumber and copper are rising, but they've enjoyed one area of savings: Falling land prices are keeping new homes affordable.
For 35 years, the American home grew larger. In 1973, when the Census Bureau started keeping track (PDF), the median house was 1,525 square feet. Homes swelled to 2,277 square feet by 2007 and then began to shrink. By 2010, the median single-family home was 2,169 square feet.
The downsizing may have stopped. The American Institute of Architects' Home Design Trends Survey shows signs that home size is stabilizing. Census figures (.XLS file) from the third quarter of 2011 show the median new home at 2,242 square feet, a bump up.
Nevertheless, in this economy, harried middle-class buyers equate big homes with escalating utility bills and housekeeping and maintenance burdens.
"Buyers today look at a huge, 20-foot vaulted ceiling in the family room and wonder how they can afford to heat the space," Thompson says.
In the boom, buyers based home purchases on the expectation of big profits at resale. Demand grew for everything oversized and lavish, whether the features would be useful to the current buyers or not.
Today, the math is quite different. Quick profits from resale are out of the equation. That puts emphasis on design and on features that buyers will enjoy now.
As a first time home-buyer I am only interested in iivable space that I can use.
The article is correct that designs are simpler, but you do get the "typical" up sell.
1.) House needs to be energy efficient and well made. I am not paying to heat/cool the great outdoors.
2.) Frivolous ammenities: sauna, whirlpools, giant size master baths, no thanks.
3.) Fancy landscaping= equals more money to take care of and more water usage to. Skip that.
4.) Plain vanilla house that is well made and durable and does not require alot of up keep.