During their madcap chase through the late 1980s, builders across the country with the word ”upscale” ringing in their ears lost sight of a big chunk of potential home buyers.
”We left the first-time buyers alone for some time,” said Mark Tipton, a Raleigh, N.C., builder who is 1991 president of the National Assocation of Home Builders.
”We forgot about half the market – affordable space for people who live on budgets,” said William Devereaux, division manager for the Washington, D.C., office of Berkus Group Architects, one of the country`s leading residential architectural firms.
Now, say Tipton, Devereaux and others who discussed the subject at last month`s home builders convention in Atlanta, many builders are going back to the long-forsaken first-time buyer as they try to attract prospects in a stalled housing market where yesterday`s upscale model is today`s unsold inventory.
”In an economic recession there is always a shift to the lower end of the market,” said Gopal Ahluwalia, research director for the home builders group. ”In 1991, the shift will probably continue.”
Trends already have emerged that show the proportion of first-time home buyers in the market is growing. A just-released study by Chicago Title & Trust Co. reported that the percentage of first-timers buying homes in the U.S. went from 37.8 percent in 1988 to 41.9 percent in 1990.
Bad news to builders, however, were the survey`s figures showing that the percentage of first-timers buying new as opposed to existing homes went down from 23 percent to 15 percent.
To recapture the first-time buyer market, a number of builders are thinking small, either downsizing their housing lines or, where possible, building on smaller lots.
One of those making the change in a big way is Rolling Meadows-based Sundance Homes, which is coming out with a new series of homes significantly smaller in size and in a lower price range than those the company has been building over the past several years.
”We`re adjusting to the marketplace and offering a product to reach a greater number of people,” said Michael Schall, vice presdident of sales and marketing for Sundance.
”We started thinking about this about eight months ago,” said Schall.
”You`re always trying to anticipate market conditions, and in this type of buisness have to be thinking one, two years in advance on how to position yourself correctly.
”We could see as prices escalated through the boom of `80s that we were missing a larger and larger share of the marketplace,” he pointed out.
Sundance`s new direction is represented by 14 different single-family detached houses in three product lines in sizes between 1,100 and 2,200 square feet, with the heaviest concentration under 2,000 square feet.
”We`d basically been doing from about 2,000 to 3,000 square feet, so this really brings it down,” said Schall.
The most affordable line is the Americana series, ranging from 1,100 to 1,500 square feet with two or three bedrooms and priced from $100,000 to $120,000 at Sundance`s Spring Lake Farm development in far northwest suburban Lake in the Hills.
The other new lines are the three- and four-bedroom Country Classic models, with sizes from 1,500 to 2,000 square feet, and the Vintage, sized from 2,000 to 2,300 square feet. At Spring Lake Farm, which is projected for 500 homes, the Country Classics are priced from $120,000 to $135,000 and the Vintages from $140,000 to $150,000.
The Vintage homes also are being introduced at Sundance`s Arbor Ridge project in Lisle and the Heritage at Stratford community in Bloomingdale, where they will be priced at $170,000 to $200,000. Homes in those developments have been selling at from $225,000 to $275,000, Schall said.
Schall said it`s unusual for a middle-size builder such as Sundance, which has been building about 250 to 350 homes a year over the last several years, to come out with so many new models at once. ”It`s a matter of making adjustments to the marketplace,” he said. ”It`s a lot of fun.”
Builders are scrambling for ways to see that the fun, and the marketability, doesn`t go out of their new models along with the gross size.
Devereaux and others point out that, because of the recession and an abrupt rejection of what are now considered to be the crass values of the
`80s, home buyers may be willing to scale back their expectations somewhat- but not too much.
”Things like a concern for the ecology and recycling are all aspects of a new non-materialistic feeling,” he said. ”In the `80s you couldn`t move for the Jacuzzis and luxury baths. We were like kids loose in a toy store. Now the pendulum is swinging back.
”But we`re not going back to seven-foot ceilings and outside toilets,”
he said.
Devereaux said that today`s builders in the affordable market are seeking a way to create value through a balanced, scaled-down use of some of the popular design techniques of the late 1980s such as intensive use of glass and volume spaces like high ceilings.
Schall agreed that builders can`t turn back the clock. ”The last time we were selling in this size range was in the early `80s, but by no means are we going back to that product.”
Instead, he said, the homes in the low-end Americana line have the standard late-1980s amenities such as extensive window treaments, vaulted ceilings, kitchens with islands and two-car garages as well as optional luxury master baths with whirpools.
”People are really surprised,” he said. ”They think in the affordable range they have to sacrfice quite a bit. In this line, they can have all the hot buttons but at an affordable price.”
Builders and architects agree that the trick to offering these amenities in a low-end product is keeping the basic home design simple.
”Simplicity ultimately ends up being affordable,” said Aram Bassenian, of Santa Ana, Calif.-based Bassenian/Lagoni Architects, a firm with a wide national residential practice.
He advocates keeping the basic footprint to a simple shape, shunning angled and curved walls and designing two-story plans for efficient structural and plumbing stacking.
The same philosophy was followed by Michael Kephart, the Denver architect who designed Sundance`s new lines. ”We use very simple foundations and very simple roof forms,” he said.
On one design, he pointed out, dormers at first included solely for looks may now be taken out. ”Too many dormers make a house feel smaller,” Kephart explained. Taking them out is thus not only less expensive, ”but it also makes the house feel more substantial,” he said.
Another technique that marries good design with affordability is to group windows, eliminating extra openings, headers and sills that would involve costly carpentry labor. ”The cost is far less, but you get the same amount of light, and light is important in a small plan,” he said.
These cost-effective techniques aren`t new, but they were sometimes disregarded in the 1980s, according to Kephart. ”When times are good and things are rolling, people get a little bit sloppy about design,” he said.
Kephart and most architects maintain that the most elaborate design work must concentrate around the front door. ”It`s important to put whatever extra attention to detail there is in the most important place: the entry. The homes are not devoid of detail, but the detail is used more thoughtfully.”
Thus such elements as arches, columns and round or half-round windows are typically grouped around the entry, though they may be absent elsewhere.
Though these concepts may seem to be fairly simple, architects often warn that designing smaller homes can present a special challenge. ”In expensive homes,” said Bassenian, ”there`s a lot of room for error, but not in affordable homes.”
Inside the downsized home, Bassenian maintained, interior spaces should be combined for maximum impact, as in living-room-dining-room-foye r groupings. Rooms should be flexible and circulation within the plan should be minimized, he added.
While affordability is the current building industry buzzword, some observers warn that downscaling may not be the panacea builders expect it to be.
William Apgar of Harvard University`s Joint Center for Housing Studies said too many builders are concentrating on the recession and ignoring longer- term trends indicating that the moveup market is still basically strong because most of the Baby Boomers will be in their prime earning years during the 1990s.
”The Baby Boom tradeup sector will be the strongest part of the market, especially in the Midwest and South, because they`ve never had as much upper- end product there,” he argued.
Mitchell Rouda, editor of Builder, the magazine of the National Association of Home Builders, contended some builders have ”misinterpreted” the recession to mean they should focus on first-time buyers.
Such builders will find it hard to compete with resale homes in the first-time market, Rouda said. His warning is perhaps borne out by the Chicago Title & Trust figures showing a declining percentage of entry-level buyers opting for new homes.
And builders assocation president Tipton expressed the hope there woudn`t be a mad rush by builders back to the first-timers. ”There`s a tremendous return to that market,” he said. ”I hope there`s not an overreaction where everybody`s doing just that.”
But Sundance president Maurice Sanderman expressed confidence he`s made the right choice. ”The population demographics are there for moveup buyers, but they`re not buying in recession times,” he said.
He pointed out that third- or fourth-time moveup buyers have to sell their existing houses, and the buyers of their houses have to sell as well. Everybody in that chain, he noted, has to deal with a consumer confidence problem, making the entire process very difficult right now.
”The affordable market is a bread-and-butter market that`s there all the time,” he said. ”There`s always a need for starter homes for the masses who can barely afford them. From a builder`s point of view, it`s a very safe, no- brainer decision to build affordable.”
