5/27/2008 - "Green" Homes Soften A Tough Real Estate Market
Home builders attending the May 11-13 NAHB National Green Building Show in New Orleans were told by market analysts that they have a long way to go to sell the benefits of sustainable construction technologies to their prospective customers.
But at a time when housing demand remains largely sluggish around the country, advances in green building are providing a notable shot in the arm for builders, and as the housing industry moves out of its cyclical downturn green business appears headed for a galloping rate of growth.
Builders polled in the latest survey by McGraw Hill Construction on the evolving trends and opportunities in the green residential marketplace cited demand from this quarter of the industry for keeping their businesses alive during hard times.
We have hit the tipping point for builders going green, said Harvey M. Bernstein, McGraw Hills vice president of industry analytics, alliance and strategic initiatives.
This year, the number of builders who are moderately green those with 30% green projects has surpassed those with a low share of green those who are green in less than 15% of their projects, Bernstein said.
Next year, he predicted, we will see even greater growth, with highly green builders those with 60% green projects surpassing those with a low share of green. This year has seen an 8% jump over last year, and we expect another 10% increase next year.
Its official. Green has gone mainstream, said Ray Tonjes, chair of the NAHB Green Building Subcommittee. And now, the NAHB National Green Building Program is making it easier for home builders to provide sustainable, environmentally friendly homes for their customers. Were ready for the market transformation that McGraw-Hill Construction estimates.
Green is driving a lot of what really is happening in this marketplace, said Bernstein.
Green home building is poised to generate between $12 billion and $20 billion in sales this year, accounting for a 6% to 10% share of the housing market, according to the McGraw Hill report, up from $7 billion in home sales and a 2% share in 2005.
This years green building is projected to double over the next five years, reaching a 12% to 20% share of the U.S. housing market with $40 billion to $70 billion in sales in 2012.
Green homes are defined by McGraw Hill as those containing energy-efficient, indoor air quality, water-efficient, resource-efficient and site management features.
Forty percent of those surveyed by McGraw Hill said that the down market has made it easier to market green homes, and 16% said that the housing slump has made it much easier.
The higher quality associated with green building appears to be the key factor driving demand going forward at a time when homes need to stand out in a market with a glut of inventory, Bernstein said. Acknowledging that current adverse economic conditions are imposing an obstacle, he said that rising energy costs are influencing customers and increasing their willingness to pay a premium for green housing.
Experiencing the strongest growth in green building this year are the Pacific, South Atlantic and Mountain regions, in that order, the survey showed. From consumer surveying, the states with the highest percent of green home purchases from 2004 to 2006 were Washington, Nevada, Colorado, Texas and Florida. Texas was the one state where builders seemed to be less bullish on prospects for green building than their customers, he said.
Among other survey findings:
- Eighty-five percent of those polled said that homes have become more energy-efficient over the past two years. Other features making homes more environmentally friendly include: tighter insulation (55%), more recycled content (41%), better indoor air quality (39%) and more water conservation (28%).
- To learn more about green building, builders are most often using print sources (90%), followed by home building Web sites (71%); home building product manufacturers (64%); and NAHB trade shows, conferences and workshops (58%).
- Seventy-six percent reported no difference in the time it takes to gain project approval for green homes versus those that are non-green.
- Ninety-five percent said that creating a better quality product that would retain its value longer was a very or somewhat important motive for building green. Next down on the list of motives was its the right thing to do (91%), which was the top motivating factor in a similar 2006 survey. That was followed by expanding business with customers interested in green building (90%), lowering recycling costs (90%) and staying ahead of the compet ition (80%).
- Triggers impacting expansion of green building include: energy costs and utility rebates (84%), emphasis on efficiency (77%), superior performance (76%) and gaining a competitive advantage (74%).
- Among obstacles with the greatest impact on future green home building: consumer willingness to pay (82%); higher first cost (82%); overall economic conditions (81%); lack of education about green building (72%); lack of awareness about green products (72%); and codes, ordinances and regulations (67%).
- Builders who are heavily involved in green building said there was an average 7.5% higher incremental cost to build green over an average project; moderately involved builders reported an average 10% cost premium; and builders who are only minimally involved perceived a 10.8% higher cost on average.
- Only 24% agreed that environmental regulations hinder green building.
- The most highly used green building features were: air sealing/tight construction; increased insulation; water-reducing plumbing fixtures; Energy Star windows, appliances, HVAC, exterior doors and lighting; and instant tankless water heaters.
- The most requested green building features were: increased insulation, instant tankless water heaters, Energy Star appliances, air sealing/tight construction and insulation foundation walls and floors.
- The top five most important energy efficiency options were: high-efficiency HVAC equipment (94%), Low E glass windows (92%), reduced air infiltration (90%), more energy-efficient appliances (90%) and above-code energy programs such as Energy Star certification (84%).
- The most important water conservation options were: water-efficient fixtures and faucets (81%), water-efficient appliances (80%), storm water mitigation (65%), water filtering systems (42%) and gray water recycling (33%).
- The most important green material options: hi-performance, engineered wood products (78%); allergen-free, chemical-free building materials (66%); recycled building materials, such as those used in decks and sheds (63%); alternatives to wood products (61%); and certified sustainably harvested lumber (53%).
- The most highly rated green materials: OSB (78%), alternatives to dimensional lumber (72%), construction waste reduction (55%), easily available products and materials (54%) and recycled/recyclable products (52%).
- The most important indoor air quality options were: HVAC (90%), formaldehyde-free finishes (73%), low VOC paint (66%) and minimum off-gassing (65%).
- Seventy percent of those surveyed recognized green brands in house wrap, doors and windows, insulation, water conservation and HVAC. No product category had less than 25% recognition, Bernstein said, and anything over 5% is considered significant.
- Without prompting, green product brands cited by builders included: GE (34%) and Whirlpool (13%) appliances; Tyvek house wrap (63%); Andersen (17%), Pella (12%) and Marvin (8%) windows; Trane (17%), Carrier (14%) and Lennox (13%) HVAC; Trex exterior framing (27%); Owens Corning insulation (26%); Kohler (21%) and Delta (14%) water conservation; Sherwin Williams (32%) and Benjamin Moore (8%) paint and wall finishes; TJI wood framing (8%); and James Hardie cladding (19%).
More information on green building from McGraw Hill construction can be found at: analyticsstore.construction.com and greensource.construction.com.
For information on green building resources from NAHB, click here; or e-mail Calli Schmidt, or call her at 800-368-5242 x8132.