The Demand For Green Homes Melina Duggal, AICP, Senior Principal, - PowerPoint PPT Presentation

The Demand For Green Homes Melina Duggal, AICP, Senior Principal, RCLCO | July 26, 2012 Images: digitalart / FreeDigitalPhotos.net

MARKET RESPONSE TO GREEN DEVELOPMENT AGENDA  The Active Market  The Market for Green  Importance of Green Features  Implications for Homebuilders 1 RCLCO Research and Development

RCLCO Research and Development 2 The Active Market

WHO IS IN THE MARKET?  2010 – 50% 1st-time buyers  2011 – 37% 1st-time buyers  Median income  Median income = $80,900 $80 900 • Translates to $250K-$300K house  Married couples (64%)  No children under 18 (64%) Image: digitalart / FreeDigitalPhotos.net  42% were renters  Foreigners Image: digitalart / FreeDigitalPhotos.net SOURCE: RCLCO; 2010 and 2011 NAR Profile of Home Buyers and Sellers; U.S. Census Bureau, Associated Designs 3 RCLCO Research and Development

AGE DRIVES HOUSING CHOICES – THE ACTIVE MARKET DRIVES DECISIONS 2011 % % of % of 2011 Generation 2011 Age g Over 10 Buyers in y Renters in Pop. US Pop US Pop. 2011 2011 Eisenhowers 66+ 37M 14% 8% 4% Baby 47 – 65 75M 29% 30% 18% Boomers Gen X 31 – 46 64M 25% 37% 31% Gen Y 12 – 30 80M 31% 25% 47% Gen Z (?) 0 – 11 50M SOURCE: U.S. Census Current Population Survey (2011); 2011 NAR Profile of Home Buyers and Sellers 4 4 RCLCO Research and Development

WHAT ARE THEY BUYING?  84% are buying existing homes  Value  Home features o e eatu es • Flex space • Outdoor living • Energy efficient Energy efficient • Luxury touches • Less formal Photo courtesy of LWR Communities  Small lot SFD versus attached product  Small lot SFD versus attached product C. 2011 James F. Wilson / Courtesy Builder magazine 5 RCLCO Research and Development

HOW CAN NEW COMPETE? New Resale 76% SFD 78% SFD 61% suburban area 49% suburban area 12% urban area 19% urban area $230K median price $180K median price 2,250 SF median 2 250 SF median 1,800 SF median 1 800 SF median 3B/2b median 3B/2b median Biggest compromise Biggest compromise – lot lot Biggest compromise Biggest compromise – price price size & condition SOURCE: RCLCO; 2010 and 2011 NAR Profile of Home Buyers and Sellers 6 RCLCO Research and Development

TRENDS BABY BOOMERS  Leading edge (56-65 years old) – starting to hit retirement age  Trailing edge (47-55 years old) – mature families, second homes  Themes: e es • Work as part of their retirement (home office) • Downsize • Acceptance of two level homes – master down Acceptance of two level homes master down • Natural light • Entertaining space  Seeking:  Seeking: • Recreation • Enriching experiences • • Ideal lifestyle Ideal lifestyle • Original and authentic places C. 2011 James F. Wilson / Courtesy Builder magazine 7 RCLCO Research and Development

TRENDS GEN X  31-46 years old – prime home buying and family stage  Large impact on new home communities  Themes: • Single-family detached • Suburbs • Larger lots • In the market for 2nd homes C. 2011 James F. Wilson / Courtesy Builder magazine • Big kitchens g • Family spaces  Seeking: • Kid and pet friendly Kid and pet friendly • Healthy , active lifestyle C. 2011 James F. Wilson / Courtesy Builder magazine 8 RCLCO Research and Development

TRENDS GEN Y  12-30 years old – first time home buyers and renters  Diverse group  Themes: e es • More open to urban areas than other generations (likely age-related) • More accepting of attached product, but still prefer p g p , p SFD • Community space important • Walkable neighborhoods • Affordability • Flexible spaces to accommodate future lifestyle  Seeking: g • Places to connect (party spaces) • Sustainability • Technology gy C. 2011 James F. Wilson / Courtesy Builder magazine 9 RCLCO Research and Development

TRENDS – OVERALL  Multigenerational housing  Cultural preferences  Energy efficiency e gy e c e cy  Right-sized homes 10 RCLCO Research and Development

RCLCO Research and Development The Market For Green 11

WHY CONSIDER GREEN  Can’t compete with resales on price, therefore need a different product  Buyers have changed and so have their expectations  Buyers have changed and so have their expectations  Products and technology have changed  Intense competition for new buyers – creates a unique selling point 12 RCLCO Research and Development

MANY REASONS TO BUY A NEW HOME Change in Family Status 25% Retirement 23% Need for Appreciation 22% Want New Construction C 16% Low-Maintenance 16% Want One-Story Living 16% As an Investment 15% Be Closer to Family/Friends 14% Sense of Community 14% Be Closer to my Job 14% Take Advantage of Interest Rates 11% To Reduce my Commute Time 10% Want a Home that Saves Energy 10% Want Recreational Amenities 10% Want a Home that is Environmentally-Safe 3% Seek Universal Design 3% Be Closer to Public Transit 2% Be Close to Medical/Health Facilities 1% 0% 0% 10% 10% 20% 20% 30% 30% SOURCE: RCLCO Consumer Research 13 RCLCO Research and Development

“GREEN” COMPETES IN CROWDED FIELD SCHOOLS, SPACE, SIZE MORE IMPORTANT Excellent school system Seclusion and space from neighbors First-floor master bedroom Reduced electricity bills Indoor parking for at least two vehicles Use of materials that do not contain potentially hazardous chemicals A larger home with more square footage Costs more today but saves energy and has reduced energy bills over time “Most Important” Appliances that use less water and less energy Factors When Additional storage space Choosing a New Home Improved indoor air quality Improved indoor air quality A smaller home with less square footage Uses the sun for home heating/energy Energy Star certification Pedestrian-friendly location Proximity to major highway or thruway Hardwood floors 0% 0% 2% 2% 4% 4% 6% 6% 8% 8% 10% 10% 12% 12% 14% 14% 16% 16% 18% 18% 20% 20% SOURCE: RCLCO Consumer Research 14 RCLCO Research and Development

DEMAND FOR “GREEN” BENEFITS ENERGY SAVINGS AND HEALTH BENEFITS Surfacing that minimizes runoff Walking distance to work Use of renewable materials “Most Important” Pedestrian-friendly location Factors in Next Home Energy Star certification Energy Star certification Purchase Uses the sun for home heating/energy Improved indoor air quality Appliances that use less water and less energy Costs more today but saves energy & has reduced energy bills Use of materials that do not contain Hazardous chemicals Reduced electricity bills 0% 0% 1% 1% 2% 2% 3% 3% 4% 4% 5% 5% 6% 6% 7% 7% 8% 8% SOURCE: RCLCO Consumer Research 15 RCLCO Research and Development

IMPORTANCE OF RESOURCE CONSERVING FEATURES Construction Waste Recycled 29% Water Recycling System Water Recycling System 27% 27% Decks Made of Recycled Materials 24% Wood NOT from Old Growth Trees 22% Carpets Made from Recycled Materials 14% Which of the Which of the Following Resource- Conserving Features Bamboo Floors 12% are “Very Important” in your Next Home? in your Next Home? Wood Veneer Floors 10% Wood Adhesive and Fiber Building Materials 9% SOURCE: RCLCO Consumer Research 16 RCLCO Research and Development

DEMAND FOR HEALTH-IMPROVING FEATURES Which of the Following Indoor Air Quality Improving Amenities, Features, and Benefits are “Very Important” in Your Next Home? 35% Low-Formaldehyde Insulation Whole-Home Air Filtering System 35% Formaldehyde-Free Particleboard 35% 29% Environmentally-Friendly Paints Solvent-Free Wood Finishes Solvent Free Wood Finishes 25% 25% 24% Solvent-Free Adhesives SOURCE: RCLCO Consumer Research 17 RCLCO Research and Development

RCLCO Research and Development 18 Demand for Green

MAJORITY WILL PAY MORE FOR ENV. FEATURES WITH MONEY BACK OR HEALTH BENEFITS Willingness to Pay More for Environmental Features 45% 40% 40% 35% 30% 25% 25% 20% 15% 10% 5% 0% Wo ld not pa more Would not pay more Pay more for home if it Pa more for home if it Pa more for home Pay more for home with ith Pa more for home Pay more for home with ith would help the cost saving cost savings or health environment benefits 2007 2012 SOURCE: RCLCO Consumer Research 19 RCLCO Research and Development

THREE PRIMARY MOTIVATIONS BASED ON BENEFITS, NOT FEATURES Green homes are better for “the environment” for the environment Green homes save energy (and have lower utility bills) Living in a green home is better for my health and that of my family 20 RCLCO Research and Development

“GREEN” BUYERS- THREE CLASSIFICATIONS FOREST GREENS, GREENBACK GREENS, & HEALTHY GREENS 6.1% 21 3% 21.3% Forest Greens Greenback Greens 58.4% 58.4% Healthy Greens 8.5% Others SOURCE: RCLCO Consumer Research 21 RCLCO Research and Development

“BECAUSE IT IS THE RIGHT THING TO DO” Environmental Responsibility Potential Forest Forest Greens Greens – 24% Buyers for whom “the Homebuyers who environment” is already care about the the top priority in their next environment and are home. willing to spend willing to spend money for it. Total “convincible” segment. SOURCE: RCLCO Consumer Research 22 RCLCO Research and Development