In our latest podcast episode, CR Herro, the Vice President of Innovation at Meritage Homes, articulates changes coming to the new home industry. Like the car industry in America 30 or 40 years ago, new home builders are facing a transition. When car buyers experienced superior product from Japan that would cost them less in gas and maintenance, there was a huge shift in automobile market share as people traded in their gas guzzlers for energy-efficient cars. Similarly, new home builders will need to make homes smarter, more efficient, and more convenient, adding features that consumers not just want, but need.
But the new home buyer will also need to be educated. Buyers need to understand that technologies have improved to the point where solar panels on the roof are cash flow positive if financed. That the right combination of insulation, windows, and appliances can save home buyers thousands of dollars per year. That HERS scores can help them gauge how efficient a home is and how much it might save—or cost them—in monthly utility bills. France is doing this. Germany is. Japan is. Will new home builders be able to adapt and thrive here in the US? Will US consumers make them?
Podcast host Dean Wehrli talks with CR about the adoption curve, where early adopters are likely setting the stage today for what eventually will become a majority of buyers who consider monthly utility expenses in their purchase decision. But there will other critical influencers too. Realtors, mortgage originators, and government officials will need to join consumers and builders to work toward better homes for a few key reasons:
- California’s requirement that all new homes include solar panels by 2020 will increase the conversation around energy efficiency tremendously, likely resulting in more states following along.
- Realtors who adapt to the changing real estate world and add value to the transaction will win clients by educating them about home efficiency and total costs, and the options they have in the marketplace. Those who understand and can communicate HERS scores, etc. will win the market while they change how it is viewed.
- Mortgage guarantors, insurers, underwriters, and security owners have recently learned that home buyers with lower monthly utility costs default less. These lower-risk home buyers deserve a lower interest rate or alternatively can use the additional monthly cash flow to qualify for a larger mortgage than current standards allow. Making it cheaper to a buy a better home is a potential game changer.
Home builders will have a competitive advantage here, just as more efficient and smarter new cars had a competitive advantage in the 1980s. New homes are already valued at a much higher than usual premium over resales. Will the premium widen? The empowered consumer will likely decide this.
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