At the NAHB Suppliers Summit held in November in Washington, D.C., real estate consultant John Burns shared insights into how consumer shifts are shifting housing demand. “The new home industry has lost market share to the resale industry,” Burns says. “Home builders haven’t changed the way they do business to be more aligned with consumer shifts that have happened.” Burns spoke about four areas that home builders need to focus on to own the housing conversation: sustainability, convenience, healthy living and better values.
1. Sustainability
Energy efficiency is particularly important to younger buyers. “They’re looking for homes that are energy efficient or are even LEED Certified (which can save $5,000 to $10,000 in energy bills), use solar power and reclaimed materials,” Burns says. Their interest in sustainability stems from a desire to do right by the planet. They will make purchasing decisions based on that value.
“Builders who are focused on sustainability are getting better premiums,” Burns says. He cites Babcock Ranch in Florida, known as America’s first solar powered town, as a great example of developers and builders defining the future of building.
Just as with anything new, however, Burns says buyers will need to be educated about sustainability. Builders need to help them understand the vast array of products, materials and building methods that go into creating a sustainable home, such as low-e sliding doors, water efficient landscaping, smart home technology, HVAC and roofing options, and the choice to not use products made from unhealthy chemicals (such as formaldehyde). “Meritage has just about turned a home into a museum to show how the insulation and the technology make the home more efficient,” Burns says.
2. Convenience
From purchasing and selections to amenities, choices in homebuilding should be made “fun and easy” for consumers, Burns says. “Buying a home can be overwhelming. People want choice but they want it to be easy,” he says. “When they buy a car, they might have three packages to choose from. Housing is going to go that same route.” To that end, builders might offer curated home packages.
When it comes to smart home technology, builders should no longer be questioning whether to incorporate it. For one thing, many first-time buyers are coming from apartments where the technology is standard. And many of those younger buyers see technology as something that will make life more convenient for them.
Boomers, on the other hand, are especially focused on less maintenance since many are move downs who no longer want to spend half a day mowing the law, raking leaves or cleaning gutters.
But for both cohorts, walkability matters. He looks at this trend as part of what he calls “surban™” living. Consumers want a blend of urban and suburban living with green spaces, as well as easy access to nightlife, culture and transportation.
3. Healthy Living
According to a recent EPA report, Americans on average spend 90% of their time indoors, where concentrations of some pollutants are often two to five times higher than they are outdoors. Indoor air quality (IAQ) and healthier homes in general are top of mind for many buyers. “The health and wellness aspects of homebuying are getting more and more attention,” Burns says.
He cites Thrive Homes in Denver as a company that’s building homes that a are energy efficient and have a focus on clean air. “No one wants to be breathing garage fumes,” Burns says.
Along with bringing in fresh air, builders and designers should be looking to maximize sunlight, especially in high-density environments. Natural light has been shown to elevate mood, increase vitamin D storage, and aid in sleep.
Consumers are also interested in getting outdoors, and to that end successful builders are offering amenities such as free bicycles for residents and access to ponds and lakes: 90% of the 50 top-selling master-planned communities (MPCs) include a significant water amenity.
4. Better Value
Buyers of newly constructed homes know that they’re going to pay more to purchase a home than if they’d bought a resale, but they want good value for their money. Builders are more and more entering into the national discussion on affordability and “trying to balance the need to make money and build smaller,” Burns says.
He cited LGI Homes’ success with its Brinley Manor neighborhood in Raleigh, N.C. “It’s part of a new model of low-priced homes,” he says. The highly efficient homes sell for on average $241,000, and LGI is getting 24% gross margin. They’ve had 2,000 sales per quarter with seven sales per month per community.
With these smaller homes, design choices are imperative for affordability on the builders’ side—using every square inch of the house and specifying alternative materials. Consumers are looking for style and comfort and are willing to trade size for better amenities and higher end finishes.