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People who are in the market for a new home said that lowering the price or buying down the mortgage rate to reduce monthly mortgage payments would be most likely to influence their home-buying decision. But most said they weren't as attracted by deals that would allow them to make a smaller down payment.
That's according to a nationwide survey of 1,700 prospective home buyers completed by Fulton Research Inc., a Fairfax consulting firm. While the annual survey, conducted for Builder magazine, is designed to help new-home builders gear their houses to more buyers, some of the shoppers' responses could also offer clues to homeowners seeking to make their houses more attractive on the resale market.
Despite the large number of town houses in the Washington area, new-home shoppers in the mid-Atlantic region said they prefer single-family houses -- even if it means having a lot the size of a postage stamp. When the house hunters were given a choice of six detached homes on small lots totaling an acre in size or six attached town houses per acre, 69 percent chose the single-family house on the small lot.
Luxury touches, such as whirlpool tubs, French doors, decks, patios, walk-in kitchen pantries and ceiling molding, continued to rate highly with new-home shoppers, as they have in past years. And new-home buyers said they're willing to pay a little more for certain features: More than half of the house hunters in the mid-Atlantic region would pay extra for a sun room and one-fifth would pay extra for a fitness center and a home office.
But that doesn't mean they want all those extras immediately. Fulton said that the typical buyer these days wants a "stripped down" version of a luxury move-up home and plans to add some of the luxury touches and the extra rooms later.
"With the economy tightening up, people are buying more conservatively," he said. "There's always going to be a market for the big home, but not as much as previously."
House hunters also have some very specific preferences on the type of rooms they'd like to see in their new homes. More than half of those surveyed said they prefer an average-size kitchen and a family room over having the same amount of space in one large, country-style kitchen. More than half also would settle for a smaller living room if it meant getting an extra-large family room.
Lavish master bedrooms have become popular in new homes and most shoppers surveyed said they wanted a large master bedroom that included a sitting area.
While the desire for luxuries is continuing, the hard realities of the real estate market are hitting home with many new-home shoppers. Forty-four percent of the survey respondents in the mid-Atlantic region thought the investment potential in a new home is poorer than in past years, while 25 percent thought it was better. Thirty-one percent thought it was about the same.
Ironically, while home builders are trying harder than ever to win over potential new-home buyers, half of the survey respondents in the mid-Atlantic region don't think they can get the home they want at the price they can afford, said George Fulton, president of Fulton Research.
Almost one-third of the home shoppers complained that the house they could afford was too small, and about one-quarter said they would have to endure too long of a commute.
The gap between what home shoppers can afford and what home builders offer is particularly wide in the mid-Atlantic region, the survey showed. Home shoppers in the region are prepared to pay $220,280 for a new home. But the average price of a new home in the Washington area is $301,000, according to Housing Data Reports, a local group that collects data on the new-home industry.
As a result, home builders, who are painfully aware of the stagnant market for luxurious new homes, are scrambling to make their homes affordable to more buyers.
"I think every builder in the market that I know of is retooling to get down into the broad middle of the market" by scaling down the sizes of homes and cutting out extras to lower the price, Fulton said. If builders still are trying to sell lots of houses priced $300,000 and up, they're "in a very thin stratosphere," Fulton said.
Fulton said he was surprised by the finding that lower down payments won't lure many would-be home buyers. Even among the renters surveyed, who don't have the equity from a previous house, just 12 percent said a smaller down payment would influence them to buy a new house.
"They must have more money saved up than we realize or more sources of money," Fulton said.
Although the survey was conducted before the recent run-up in oil prices, energy conservation was on the minds of home shoppers. Fully 91 percent of the respondents said they would pay an additional $1,800 for energy-saving features if they could recoup that amount in three years through reduced energy bills.
"That's an impressive number," Fulton said. "If anything, it says it was on the top of their minds."