'Luxury’ homes, built cheap (© ML Harris/Getty Images)

Behold the house of the future. It’s just like the house of the past, only with some subtle nip-and-tuck work. Across the country, homebuilders are redesigning houses using a set of strategies they call “value engineering”— the art of building a house on the cheap without making it look cheap. The new designs are smaller, but their clever layouts create a spacious illusion. They feature high-end finishes, but only in high-profile areas. And they can offer interesting surprises.

After watching demand for new homes plummet 75% from the market’s peak in 2005, builders are asking architects to revise boom-era home designs in ways that cut costs without diminishing what pros call “perceived value.” Translation: Keep the high-profile amenities, but skimp everywhere else. And apparently, the strategy works. KB Home says its new Open Series, “affordably priced to compete with resale and foreclosure homes,” contributed to a 59% spike in new orders in the second quarter of this year. In Fresno, Calif., McCaffrey Homes says that its modestly priced 231-unit Madison Place development is almost sold out. Even the luxury stalwart Toll Brothers says it has been tweaking plans to keep overall costs down, and with good results: the first gain in new orders since 2005.

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Indeed, at an open house at Madison Place, it looks like boom time all over again, as shoppers wander dreamily through the sumptuous model homes, checkbooks ready. The homes certainly recall a bygone era, with their “Tuscan” facades, granite countertops and walk-in closets big enough to house a rhinoceros. But there’s a reason the prices start at just $199,000 — and builder Karen McCaffrey is on hand to show off some of her artful economies. The massive “wooden” beam above the garage door, for one, is actually painted foam. Inside, the expensive wood-burning fireplace has been downgraded to a gas-burning model. And that big picture window in the dining room? Sliding panes were replaced with a fixed piece of glass. “You can’t open it,” McCaffrey says. But, heck, it looks positively fantastic.

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As buyers creep back into the market with tighter budgets and less generous financing, builders think they’ll be looking for these trimmed-down versions of overblown, overpriced boom-era construction. KB Homes, for one, says it does extensive research in every community to devise a precise mix of cutbacks and amenities designed to suit local tastes. Some strategies, like basing the home’s dimensions on standard lumber lengths, save builders thousands without any adverse effect. But even the shrewdest compromises can’t produce a mix that appeals to all buyers. And since these modifications typically adhere to local building codes, a homebuyer usually has little legal recourse — even if he or she feels cheated after discovering that the “double garage” isn’t actually wide enough for two cars. “There aren’t many cost-cutting measures that are good for the homeowner and the homebuilder,” says El Paso, Texas, housing inspector Mark Eberwine. “That’s a rare bird.”

Artful austerity
Value engineering is hardly a 2009 invention, but during past recessions, builders weren’t so concerned with preserving appearances. Today the artful austerity often starts before you walk in the front door. Builder Neal Communities, which has constructed more than 7,000 homes in southwestern Florida, now squeezes some 20-foot-wide dwellings into 27-foot-wide lots, leaving much less wiggle room than the typical tract-house plan. That’s part of a broader trend in which builders strategically situate homes to save money on infrastructure. Wedging a house to one side of a yard, for example, reduces landscaping costs, while plopping it close to the street saves thousands on sewer connections and asphalt paving. Others save money by narrowing the driveway from two car widths to one as it approaches the curb.

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When it comes to homes’ exterior shells, square-box shapes and two-story designs pack more square footage per construction dollar than sprawling ramblers with interesting nooks and bays. And builders are becoming increasingly proficient at generating high-end curb appeal using low-end materials. At Madison Place, for example, paint and polyurethane quietly sub in for costlier wood. That massive beam over their Tuscan-style garage doors is actually a sculpted foam pop-out painted brown and glued to the stucco facade. And the sturdy-looking wooden moldings around the windows? They were optically enhanced to appear bigger than they actually are, with a dark painted “shadow.”

But these creative design alternatives can come back to haunt homeowners. Those faux beams don’t have the longevity of wood, since foam deteriorates in sunlight, Eberwine says. (Architect Kevin Crook, hired by the developer to re-engineer Madison Place’s home plans, says foam was the best choice, because a heavy beam could crack the stucco.) And not only do shrinking lots diminish property value, but those narrow driveways can be tough to navigate. Maple Grove, Minn., resident Marco Pena says he’s shelling out $2,000 to widen his after accidentally digging up the lawn with a snowplow: “You think you’re on the driveway, but you end up on the grass.”