So far the residential recovery has been driven by the top of the market—the wealthy and retirees who are buying new homes. But earlier this year, D.R. Horton—the largest builder in the U.S. according to our BUILDER 100 list—made a bet that the next leg of the recovery will be driven by the return of the much-maligned entry-level buyer.
“We believe that the true entry-level buyer is underserved in the current market, especially after the significant increases in home prices in the last two years,” said Donald J Tomnitz, Horton’s CEO, in the company’s second quarter earnings call in April. “Therefore, we recently introduced a new brand, Express Homes, targeted at the true entry-level buyer that is focused first and foremost on affordability.”
But developing an affordable product in an environment of rising land, construction, and entitlement costs is no easy task. Just ask William Hezmalhalch, president of WHA (William Hezmalhalch Architects), a planning and design firm with offices in Southern and Northern California.Hezmalhalch, an award-winning designer, was an obvious choice. He has a long track record with Horton and has worked on entry-level projects for other builders. The 30-year veteran was brought in by D.R. Horton’s Southern California division to lower its price point in some of the country’s priciest markets. To tackle the problem, he started with four walls and focused on the essentials.
The vision for Express is simplicity. “If you take a look at Express in general, we are going to be offering essentially a product that's not going to require options, not going to require upgrades,” Tomnitz said on the earnings call. Basically, Express will be a turn-key operation.
Hezmalhalch knew he couldn’t simply scale down more expensive homes for the Express Homes he was designing in Southern California.
“There had to be a whole new level of design discipline to be able to pull out costs,” Hezmalhalch says. “The idea is to get the construction costs down and to get the price point down. In order to do that, we had to rethink how to do the floor plan.”
Hezmalhalch found a simple, logical starting point. “Our design principle was to develop a shell for the house for the lower level and upper level with as minimal walls inside as possible,” he explains.
Inside, he included the basics. On the lower level, Hezmalhalch developed a “box with a two-car garage and some exterior walls.” Then he added stairs, kitchen cabinets, and a downstairs bathroom. He left open spaces that the buyer could turn into bedrooms. “The rest of the spaces would be defined by windows, furniture placement, and floor lines,” he says. “That’s the way we really developed a shell.”
To push costs even further down, Hezmalhalch organized all of the plumbing in one area, and he found more efficiencies in the windows and doors by limiting the sizes. While Hezmalhalch is focused on Express in Southern California, Jill Williams with KTGY is working on those homes for Horton in Northern California. Williams also looked for savings by “watching how many window sizes that we utilize and looking at how plumbing can be laid out in a most effective way.”
Cost savings is embedded in the simplicity of this line of homes. “You have less lumber, less drywall, less electrical, and less structural,” Hezmalhalch says. “You have less everything because you’re eliminating a lot of walls and windows. It saves a lot of materials cost and a lot of labor costs, too.”
This simplicity will help D.R. Horton turn homes faster, which also saves costs. “Certainly, on the Express side, we believe we're going to be able to turn that inventory a lot faster because the cycle time on the construction side of the business is going to be significantly less, and we are focusing on that,” Tomnitz said on the earnings call.
The Final Hurdle
While architects in California are working to take the cost out of Express Homes, the localities seem to want to add it back in. On the exterior elevations, Hezmalhalch relies on massing and a single-story porch to define the entry and develop a human scale. The simplicity of the design helps reel in costs, but invites criticism.
“If anything, right now, they’re kind of ramping up their requirements for detail,” Hezmalhalch says of the local jurisdictions. “That’s an interesting challenge.”
Countering these requirements requires more effort. Hezmalhalch plans to develop unique patterns of architectural styles and elevations that would reinforce a boxy, simplistic approach. And, it requires more communication with localities. “We’re adding the cost of trying to educate the cities on what our game plan is,” he says.
Despite the additional efforts, Hezmalhalch remains committed to building a more affordable product. “I’m excited about it because I think it’s a real necessity to design homes that get down to this lower price point,” he says. “We’re trying to pull down the lot sizes a little bit and pull down the square footages a little bit ... to get this price point down so that it’s something that a young staff member in our firm could afford to buy.”