Washington-area builders say they are trying to reduce the cost of homes, but contend there are few tricks that will help them do so.
It's mainly a matter of building in higher densities -- more houses per acre to reduce land costs -- and making houses smaller, they say.
It also boils down to a more efficient, more standardized operation to save construction time and reduce costly changes.
Builders contacted in an informal poll agreed that changes must be made to attract new buyers during the 1980s.
For example, Clarence Kettler, of the Kettler Brothers firm, said that a detached house with two "master" bedrooms with individual baths -- already being offered here by some builders -- will be one house of the '80s. Such a house costs more than a house with one master bedroom, of course, but Kettler points out that an increasing number of houses are being shared by unrelated investors.
"It may be a $70,000 house but it's only $35,000 for each if they are willing to share use of the living room, dining room and kitchen in a town house," he said.
However, Kettler and the others interviewed emphasized that reduced government regulation, higher density and diminished floor space are major requirements to reduce housing costs and prices. Kettler also mentioned that the combined kitchen, living room and dining room saves money for the town house buyer who is able to use "the same space three ways."
Arthur Titus, senior vice president at Ryan Homes in the Washington-Baltimore area, conceded that a long-awaited housing cost study being made by a task force for the Department of Housing and Urban Development is likely to be worthwhile if it recommends a reduction in minimum standards for features in government-insured houses. "Both builders and buyers must evaluate their own prejudices against what is necessary," he commented.
Ryan, which builds more houses than any other company here, introduced a three-story, one-bath, two-bedroom town house in Newington Forest in southern Fairfax County last year that sold "exceptionally well" for around $50,000, despite the small size -- 900 square feet and less than 15 feet wide.
Spencer Stouffer, marketing vice president for Miller & Smith, which builds in Virginia and Maryland, emphasized that a shorter construction cycle saves money when interest rates are high.
"You can save 2 to 4 percent of the selling price of a house if you can start and finish it within three months instead of five," he said. "That means more standardization, more panelization and no changes from the model."
Other cost savers are unfinished basements and plastic door knobs, he said. The firm decided not to go with a cheaper heat pump, he said, "because we have confidence in the one we have been using."
Fred Kober, president of the Christopher Companies, which builds in Reston and in the Tidewater Virginia area, said: "The size of the unit prevails. You can save some money by omitting a first-floor powder room. In the Norfolk area, it is customary not to put a refrigerator in a new house but it's standard in Washington.That's a $300 or $400 item."
Suggesting that buyers are willing to accept smaller houses in order to meet the cost and financing squeeze, Kober cautioned that those same buyers might want step-down living rooms, larger master baths or skylights as minor compensating frills.
Bernie Norwitch, regional marketing vice president for the Ryland Group, sounded the same note by comparing smaller cars to houses. "People will buy smaller cars to save money and gas but they want carpeting, air conditioning and some frills like that," he said.
Norwitch and others remember the flop made by the no-frill houses that were introduced six years ago when the housing market was in a slump He cautioned that middle-class tastes cannot be dictated, because most builders are catering to a wide range of medium-income people.
Norwitch also said that substituting a shower stall for a tub in a bathroom, as suggested in preliminary HUD report, would not really be a cost-saver if the shower stall has a sliding door instead of a curtain.
Ryland introduced a small house with electric baseboard heating last year in Richmond, effecting a $2,000 saving on heat pump and duct work for central heating and cooling. "An owner could put in his own room air conditioners, which operate at less cost than central air," Norwitch said.
"We are putting pressure on subcontractors to hold the line on prices in this depressed housing construction market," said Richard Sullivan, regional vice president for U.S. Home Corp. here. "If they don't go along, we can seek other bids." Sullivan agreed that builders seem to be building smaller houses at greater density, adding that U.S. Home plans to build some 16-foot-wide town houses and some medium-rise condominium apartments.
There are no "tricks or surprises in trimming housing costs," he said, adding that some downward revisions in FHA minimum standards might benefit buyers of low-priced houses.
Henry Goldberg, president of the Artery Organization Inc., said his company is thinking about reducing some of its prices, but added, "We know that there's no magic involved. Unless you cut back on quality, you can only go for higher density and less space in the sale house.
"We are examining new sites and new concepts for back-to-back town houses and those built as combination town houses and apartments in higher density situations."
Northern Virginia builder Edward R. Carr, whose houses range from around $56,000 to $300,000, said that he continues to see federal, state and local regulations as the principal deterrents to reducing housing costs. While he looks for no dramatic change to permit lower prices, he has some hope that new federal regulations may make possible some cuts in costs.
"We also need a steady mortgage money market to enable builders and buyers to plan better," Carr said. He also said that his firm plans more smaller houses on smaller lots.
Martin Poretsky, a partner in Poretsky & Starr Inc., which builds in Maryland and Virginia, said that the firm will offer some smaller town houses in the Germantown area this year.
"The houses will have 1,200 to 1,600 square feet -- smaller than what we are now building," he said. "Also, we will have a model with two master bedrooms for ownership sharers. That's a trend we cannot ignore."
While homebuilders increase their efforts to hold down housing prices in order to attract first-time buyers now priced out of the market, it is a fact of housing financial life that the average mortgage loan increased slightly from $48,300 in 1979 to $51,600 in 1980. Meanwhile, the average mortgage rate increased from 10.6 percent to 12 1/2 percent. The combination of the slightly bigger average mortgage at a higher rate increased the average monthly payment for interest and principal from $453 to $557, a difference of $104.
That rise in the cost of owning a house made a purchase impossible for many persons who might have otherwise qualified on the basis of income and savings. Those inflationary pressures also caused existing home sales to decline markedly in 1980, from 3.7 million in 1979 to an estimated 2.8 million in 1980, according to the National Association of Realtors.
John R. Wood, new president of NAR, who blamed record high mortgage rates for a 15 percent decline in house resales in every region of the nation, added that the long-term trend toward larger homes appears to have reversed itself. He said that smaller, no-frills houses needing some "sweat equity" (owner work) from the buyers will make ownership possible for "many buyers who otherwise have been shut out."