By Steve Brown
RISMEDIA, May 9, 2011—(MCT)— With new-home sales at historical lows, builders are doing a lot of head-scratching about what kind of houses buyers want.Changing demographics and tougher lending standards are influencing their decisions, too. The industry is trying to get a handle on where home designs are headed after the downturn.
“There is a lot of pressure today to retool,” says Steve Brooks, CEO of Addison-based Grand Homes. “We had to redesign houses and figure out what kind of product people would want to buy.
“We have to keep reinventing our plans.”
That’s an expensive proposition for builders, who can’t afford to fritter away thousands of dollars on floor plans and features that don’t meet buyers’ needs and expectations. Consultants are telling them that the next generation of consumers won’t want the big-box houses that were the industry’s bread and butter before the crash.
“The industry has been talking about this for years and years,” says Dr. James Gaines, an economist at the Real Estate Center at Texas A&M University. “They are afraid to change a successful model.
“If you get it wrong, you have a real problem.”
More and more younger buyers are turning up their noses at typical suburban tract homes. “Trying to keep doing the same cookie-cutter houses is going to be increasingly difficult,” Gaines says. “Homebuilders worry that the demand pool for the suburban home with the quarter-acre lot and the fenced back yard will be shrinking.”
Younger buyers prefer urban-style living in closer-in locations, he says.
“They don’t need as much space, and they want the space configured differently,” Gaines says.
Brooks says his independent building firm now offers 240 floor plans that buyers can adjust to their tastes.
“With multicultural and generational buyers, you have to have so much more product today than ever before,” he says.
“The new generation of buyer has no purpose for a living room. They’d rather have a game room or a media room. And they don’t need that fourth bedroom.”
Some of Grand Homes’ new models offer “Life Spaces”—rooms that can be outfitted for a variety of uses. But builders still have steady business from “move-up” buyers who want a familiar suburban home.
“We’ve had to keep our old designs for our older customers,” Brooks says.
Award-winning Plano, Texas-based builder Bill Darling doesn’t fully buy into the notion that the next wave of buyers will want smaller houses.
“With our typical single-family buyers, we’re not seeing them willing to give up much room,” Darling says. “We have seen them willing to put fewer bells and whistles in the homes.”
That may be due in part to tougher home lending and appraisal standards.
“In the heyday, we all escalated the frills, and the buyers thought that was standard—and they could finance it easier,” Darling says.
Darling Homes and other builders are working on model homes that offer cheaper prices—many below $300,000 —without sacrificing street appeal or luxury features.
“We have seen several builders focus on taking cost out of their homes,” says Ted Wilson of consulting firm Residential Strategies Inc. “Some of this may occur in the form of more efficient design—less wood—and smaller square footages, but some can be seen in the form of less finish-out.”
“The trick on value engineering is to sacrifice cost only on those items that the customer places least value on,” Wilson says. “So while the builder keeps the granite countertops, he might cut back to a lower-grade bathtub.”
Wilson said builders are taking the slow approach toward embracing the younger generation of buyers, who are buying homes and starting families later in life.
“Most builders are still in recovery mode and remain cautious with any revolutionary concepts,” he says. “The one consistent thread is that the buyer continues to shop hard.
“Housing is in a recovery mode, but the consumer is still looking for the best deal he can find.”
Baby boomers set the tone for housing in recent decades, but their influence is starting to wane, Wilson says.
“This is not to say that the McMansion is dead—far from it,” he says, “just that the following generation—the Gen X group—is not as large as the preceding group.”
And most of the millennial or 20-something buyers aren’t yet ready to commit to home ownership—particularly after the decline in values they have witnessed in many areas of the country.
“I’ve heard that some of the new homes in California are getting a lot smaller, but I don’t see how that works around here,” says Jimmy Brownlee, Dallas-Fort Worth regional president for K. Hovnanian Homes. “Our buyers aren’t asking for that. We are trying to open our houses up and give them more light.”
Brownlee says his firm has dumped hundreds of dated designs it offered before the bust.
“For a while you were seeing a lot of Old World stuff,” he says. “But we’ve backed off of that a little bit.
“We’ve lowered some of our roof pitches and tried to get the houses to be more efficient,” Brownlee says. “We had plans that weren’t selling, and we got rid of them or cleaned them up.”
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