The Tipping Point for New Homes Over Existing

Used to be homebuilders found buyers who wanted the new-car smell of a new home with community parks and the ability to customize features, like an inlaw suite or home office or granite countertops.  Today’s homebuilder has more advantages over existing housing stock than ever before, as I learned from a seminar I attended of the American Society of Building Designers.

We have reached the tipping point where existing homes should not be able to compete with a new home.  Think of all these features possible with new homes that existing homes can’t touch:

·         No gas and electric bills (Zero Net Energy)

·         Luxurious comfort from even heat distribution, elimination of harmful chemicals

·         Proper site orientation and shading to allow sunlight in where and when it’s needed

·         Open floor plans

·         No moisture problems from a new, well-designed building envelope

·         Community amenities made famous by The Irvine Company, such as parks, pools, and new schools

·         Pleasing planned communities with open spaces, designed to encourage social interaction

·         Home automation for the technophile buyers

Existing homes may have a few advantages of their own – locations closer in to jobs and fire-sale prices for the moment.  But as Sam Rashkin demonstrated in his passionate blueprint for the building industry, the ownership cost of a new home, after taking into account reduced utility bills and maintenance expenses, is surely lower than that of even a short-sold existing home.  Sam is head of the U.S. EPA’s energy efficiency program called Energy Star for Homes, and has contributed to USGBC, NAHB, and DoE programs with energy efficiency goals.  Sam made an impassioned case for the homebuilding industry to seize the moment, elevate their craft, and permanently leave existing housing stock in the dust.

 

 

There is much work to be done.  Many homebuilders are still focused largely on getting low bids and trying to sell directly against these distressed existing homes.  As a result, there is pressure on subcontractors not to innovate, but to focus mainly on keeping costs low.  And material manufacturers feel that pressure as tight margins, commoditization of our products, and more tough times ahead.

But there are good signs if you look hard enough.  Several major homebuilders in the Greater LA area (Meritage, Woodside, KB) are using continuous insulation stucco systems on all their projects, and highlighting that feature in selling their homes.  Of course, these “one coat stucco” systems have been in use in other markets for decades, but Title 24 and the demand for “greener” homes have driven their adoption in Southern California in recent years.  California’s Title 24 energy code ratchets up the energy efficiency mandate on homes in 2014, with additional code cycles set to take effect in 2017 and 2020.  By 2020, California’s Title 24 will likely mandate Zero Net Energy home performance.  Forward-thinking homebuilders will get there sooner and establish their brands as synonymous with energy-efficiency, much as Volvo has with car safety.

As stucco manufacturers and allied companies, the challenge for us is to provide products and technical assistance to encourage this metamorphosis of our industry.  As the homebuilders go, so go our businesses.  If we can help builders seize this opportunity now, when we’re at the tipping point, we can strengthen our industry, decommoditize our products, and gain some competitive advantage for our own companies. 

Sam Rashkin’s book is titled Retooling the U.S. Housing Industry, and is a great place to start this process for your company.