By Elizabeth Razzi
Special to The Washington Post
Saturday, January 24, 2009
Frugality is finally showing up in new home developments.
Although the number of new single-family houses sold this year will probably be down about 68 percent from the peak of almost 1.3 million sold in 2005, there will still be about 420,000 households buying new homes this year, according to the National Association of Home Builders.
But recession-chastened house hunters are looking for different things than the boom-era buyers who snapped up homes that grew bigger, fancier and pricier by the month.
Because they aren't held back by the need to sell an old home, first-time buyers now make up a greater share of the market. They're trying to stretch their dollars at every turn, and many are concerned about the cost of heating and cooling, especially after having experienced the surge in fuel costs last summer.
Builders say buyers are judging a home in terms of how comfortable it will be as a living space for the long term, rather than as an investment they can flip for a profit after a couple of years.
Choices they are making are just starting to appear in statistics. In the July-September quarter of 2008, the average size of a house under construction fell 7.3 percent, to 2,438 square feet from 2,629 square feet in the previous quarter, said Gopal Ahluwalia, vice president for research at NAHB. "This is the first time we have seen such a significant decline," he said.
It may be only one quarter's worth of data, but Ahluwalia has other reasons to think the drop may be more than a fluke. He surveyed builders early this month, and 90 percent reported that they were building smaller homes. Eighty-nine percent said they were building lower-priced homes.
Until recently, builders have focused mostly on grand houses larded with upgraded countertops, flooring, cabinets and bath fixtures. Heading into the spring, which is usually peak season for home sales, many builders are calling attention to the ways their homes save money and energy. Smaller size is one way they're trimming the cost.
For example, Atlanta-based Beazer Homes recently started to shrink its designs. Diana Van Stone, vice president of sales and marketing, said their high-end houses, which used to be about 3,600 to 3,700 square feet, now average about 3,000 square feet.
"On the higher end, we've whittled away at that quite a bit," she said.
Entry-level homes, at least in some locations, are getting a trim as well. Some of Beazer's houses in the Greenfield development in Hagerstown are now about 1,900 square feet, compared with the old standard of 2,500 square feet.
The Hagerstown area is a particularly price-sensitive market, Van Stone noted. Beazer's detached houses there start at about $260,000. Smaller, less-expensive houses may not be on their way to more expensive markets closer to the District, however. "A lot depends on the requirements the county may have set when they approved the community," Van Stone said.
She said the company is also paying more attention to energy-conserving and environmentally friendly features such as efficient appliances, programmable thermostats, compact fluorescent lights and paints that emit less toxic fumes, all of which are now standard features.
"Our homes are offering what we feel the public is moving toward," she said. "I think people's priorities have changed. Now it's not only about living in the home with my family, but whether I can afford it in the long run -- being able to truly afford it," Van Stone said.
Fairfax-based Brookfield Homes may be taking the smaller-and-greener trend the furthest. The company recently set up an "energy lab" in one of its model homes in the Snowden Bridge development near Winchester.
The house has a small wind turbine and solar photovoltaic panels on the roof, both of which generate electricity. There also are solar collection tubes on the roof to heat the home's water supply, and a geothermal heat pump to provide heat and air conditioning.
The features are already available as options on Brookfield's models, and the company will be collecting information this year on how the technologies perform compared with traditional sources of energy.
The energy lab is on display in one of the smallest detached houses available at Snowden Bridge. It's part of the builder's Village series of detached houses, which range from 1,250 square feet to more than 1,600 square feet -- basically the size of many townhouses. Base prices range from $185,000 to $225,000. Optional garages and extra rooms can be added to increase both size and price.
These smaller houses accounted for about 65 percent of sales over the past six months, sales manager David Poole said. "It's an easy buyer to get into that house just because of the circumstances of the economy," he said. "People aren't buying big, huge homes with no yard."
The smaller homes also happen to be more efficient (and less expensive) to build. That's no small matter for builders that are struggling through the worst market of their lifetimes.
If you were to add all the renewable-energy technologies to the Snowden Bridge test house, it would boost the price by about $25,000. A la carte, they cost more.
The geothermal heating/cooling unit is most expensive, at $12,000. The technology takes advantage of the consistent 55-degree temperature that the earth maintains just a few feet below the surface, all year, to heat the air in winter and cool it in summer. The only machinery visible is what looks like a traditional forced-air furnace in the basement. There's no need for a noisy air-conditioning or heat pump unit that drowns out conversation in the back yard.
Three electricity-generating photovoltaic panels mounted on the roof cost $10,000.
A package of liquid-filled tubes on the roof -- it somewhat resembles a car radiator -- collects solar heat that is then transferred to the hot water tank. That unit costs $7,000.
The roof-mounted wind turbine to generate electricity is no more obtrusive than a large wind vane. It costs $2,500.
Buyers can qualify for federal tax credits of up to $2,000 for each of the geothermal and solar hot water systems. The tax credit for the photovoltaic panels can cover 30 percent of the cost, and the wind turbine may qualify for a tax credit covering 30 percent of the cost, with a maximum of $4,000.
The wind turbine can produce a maximum of 400 watts, Poole said. On a recent calm day, the roof-mounted turbine produced no electricity.
But on that same partly cloudy, 41-degree day, the two photovoltaic panels were producing 93 watts of electricity, according to monitors in the energy lab. And solar hot-water tubes were heating the water that entered the hot water tank to 106 degrees.
Poole said the company estimates that a home using all four technologies would cut energy costs by about 70 percent.
Other energy-conservation extras are available. The $4,000 "green plus" package includes compact-fluorescent lights in all fixtures and water-saving dual-flush toilets. It also replaces traditional fiberglass wall insulation with blown-in cellulose that provides a more air-tight seal, Poole said.
The insulation uses a binder material to keep the fiber (mostly recycled newspaper) from settling near the floor. It requires less energy to manufacture than traditional fiberglass insulation, according to a manufacturers' trade association.
The homes may be the size of an entry-level townhouse, but with windows on all four sides and the option of having a main-level attached garage behind the house, they have the convenience and feel of larger houses.
The builder also is trying to appeal to buyers' sense of getting their money's worth by making features such as hardwood floors, crown molding, granite countertops and 42-inch kitchen cabinets standard.
That's a big turnaround: Granite countertops have become standard, while recycled insulation is an upgrade.