New homebuilders look to energy efficiency for edge - East Valley Tribune: Business

New homebuilders look to energy efficiency for edge

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Posted: Tuesday, May 31, 2011 3:15 pm

Homebuilders are navigating this year's traditional selling season without the government tax rebates that a year ago infused the housing market with a short-lived burst of activity.

In an effort to revitalize weakened demand from homebuyers, they are employing traditional incentives like allowances for designer upgrades, interest rate write-downs and covered closing costs.

Many builders are also taking a more innovative approach, by redesigning floor plans to align with the most pressing desires of budget-constrained households. They're adopting energy- and water-saving technologies -- including rooftop solar systems -- geared to lowering utility bills.

Because the economic recession shrank the pool of immediately qualified customers, some builders also have begun to offer sidelined buyers financial counseling.

The fondest hope of homebuilders today is that they can get an edge against the foreclosure-ridden resale market that's their fiercest competitor.

D.R. Horton has taken on the resale market with its "builder short sale." It seeks to entice buyers by deeply slashing its new home prices for a limited time so they are more competitive with foreclosures and resale homes that are listed at prices below their mortgages.

The need for builders to get creative has never been greater.

Last year's tax incentives accelerated new home purchases by first-time buyers that otherwise might have occurred this year. Also, today's would-be buyers feel no sense of urgency. Many are hesitating because they believe home prices could drop further.

A spring slump took builders by surprise. "Everyone in the industry at the beginning of this year felt we were at the cusp of a turning point and the market would gradually get better. Nobody expected a stall," said Steve Johnson, a director for MetroStudy, a real estate consulting firm in Riverside, Calif.

"Builders that are going to survive have to step up and build a better house," said Matt Sauls, regional marketing director for Los Angeles-based Pardee Homes.

Because resale homes today frequently sell for less than the cost to replace them, it doesn't make sense for homebuilders to compete primarily by lowering their own prices, say real estate experts.

"There is no question that the market will dictate price. But we have to look at other strategies that are better," said Mollie Carmichael, principal at John Burns Real Estate Consulting in Newport Beach, Calif.

To differentiate new homes, the homebuilding industry has invested in improved design and energy efficiency.

Brookfield Homes -- which operates in California, Washington, D.C., and several Canadian markets -- drew on extensive consumer research for design features of homes it will offer later this year in Ontario, Calif., said Carina Hathaway, vice president of marketing. Features include a kitchen island large enough to seat five, extra storage space in the garage, an extremely large family gathering space, and eight-foot-high French doors.

Many homebuilders are heavily marketing more technological design features, such as extra insulation, programmable thermostats, heat-deflecting windows and rooftop solar panels -- all aimed at lowering monthly utility bills.

The environmental advantages of conservation are clear. But builders say buyers now are more interested in how energy- and water-efficient construction will make home ownership more affordable.

KB Home is efficiency testing all of its model homes and putting up stickers to inform prospective buyers of the average utility bill, said Steve Ruffner, president of KB's Southern California division.

Other builders emphasize the financial benefits of energy-saving features.

"I think it is what separates new homes from used homes. All of our homes are at a minimum Energy Star (rated), and that is 15 percent better than code and significantly better than a used home," said Greg McGuff, president of Lennar Homes' Inland Empire division.

Meritage Homes in April opened Kona, a single-family community in Winchester, Calif. Every home has a solar system harnessing the sun's power to run air conditioners and electric appliances and to provide hot water and heat in winter.

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