EVERYONE WANTS TO HAVE good taste, it seems. The masses have caught on to Michael Graves, snatching his housewares off Target's shelves as soon as they're stocked. Couples who used to drive Fords and Oldsmobiles are trading them in for Mercedes and BMWs; the sleek, small Mini Cooper has been a surprise hit with auto buyers. The sales of Whirlpool's high-style Duet washer and dryer more than doubled the company's projections. Many of today's consumers seem more focused on the value of the items they buy—with good design part of that equation—not simply the price.
In an effort to better understand the effect of design on home building, BUILDER convened a roundtable of builders, with sponsorship from Andersen Windows and Doors, earlier this year in Park City, Utah. A survey examining attitudes toward design in home building preceded the roundtable. We surveyed 448 architects, 217 remodelers, 354 builders (custom, semi-custom, and production), and 150 consumers to capture trends and opinions.
That survey confirmed that builders have noticed society's newfound obsession with design, too. The vast majority—88 percent—of builders surveyed said that their customers are more design conscious than buyers five years ago. What's more, 89 percent of the builders said good design positively influences their sales rates, and 93 percent said buyers will pay more for a well designed home.
Even more encouraging from a builder's standpoint: The NAHB reports that home features that were considered luxurious 30 years ago, such as two bathrooms and garage space for at least two cars, have become almost standard in new homes. Increasingly, buyers want 9-foot ceilings and granite countertops.
So, this should be a slam dunk, right? Design-conscious buyers willing to spend more seems like a winning combination. Except when the real world—the budget—creeps in, and home buyers have to balance competing priorities. Sixty percent of consumers surveyed said they value overall square footage more than architectural design in a home.
The debate over design versus space continues among builders. They disagree about how much good design adds to building costs, and beyond the survey results, it's unclear how much it adds to the bottom line. Blazing a trail with design could help builders maximize both customer satisfaction and their margins, or it could cost them.
“There's a lot of risk in being on the front edge with design,” says Brian Bailey, president of Austin, Texas–based Brian A. Bailey Homes. Despite building primarily custom homes, there have been times when his company has ventured too far out in front of other builders. Customers liked the designs, but they weren't ready to pay for them in their homes. “We spend a lot of time thinking about whether a design is something the market will accept and whether it's cost effective,” he says.
Eric Brown, regional manager for Engle Homes' Artisan home collection, sees little incentive for builders in high-volume areas to get more creative. “When you're selling 50,000 homes a year, like in Phoenix, builders aren't pushed much to improve design,” says the Phoenix-based builder.
He is encouraged by a few trends, though. Some cities and master plan developers are directing builders to incorporate better design, says Brown, who sits on Phoenix's design review committee. They want front porches, fewer garage-dominant street scenes, and better designed open space. If citizens can't stop new development, Brown says, they at least want it to be better designed.
Brown thinks some builders will respond to others' successes by improving their own designs. “I don't think anyone wants to be left behind and thought of as a boring builder,” he says. “When they start to see people succeed, they want to follow.”
Building It In Even builders sold on the need to add more design details must decide for themselves what good design is and how best to incorporate it. Many builders shop the competition to pick up on new trends and find ideas they can adapt to their own product lines.
Tim Whitten, executive vice president of Rottlund Homes, disagrees with that approach, however. “I don't want to take ideas from the competition,” he says, adding that he wants to avoid the possibility of infringing on others' copyrighted designs. Rottlund relies heavily on its salespeople's feedback from customers to help identify burgeoning design trends—and to keep the company from following fads.
It probably helps, too, that Whitten is an architect. He does the concept design for all of Rottlund's products, about 80 percent of which are attached homes starting around $200,000. Few builders keep a stable of architects on staff; instead, they rely on CAD departments and contract with outside architects or firms. Still, 84 percent of the builders who responded to our survey reported that they build from new designs at least once a year.
Builders also turn to interior designers, landscapers, and pool designers for help in implementing their company's vision for design. “We do not do a house without an interior designer, period,” says Bailey, whose homes can take a year or more to design. Sarasota, Fla.–based builder Lee Wetherington's landscape architects and pool company feature prominently in the planning of his homes, which emphasize outdoor living.
Brown approaches design slightly differently. To him, a little thoughtfulness goes a long way. “Good design is simple little changes that make a huge difference,” he says, citing the example of coordinating the colors of doorknobs, faucets, and other fixtures in a home. He credits pairing coordinated packages with taller doors and a different stucco finish with helping to sell out a development of 38 single-family homes.
He doesn't include a landscaping package with his homes. Instead, Brown sets minimum standards and leaves it up to the buyers to make choices and finish the landscaping themselves. That's not because he's cheap or minimizes the importance of landscaping, which he says contributes much to a home's architecture. Instead, he says, homeowners try to outdo their neighbors, resulting in a much more interesting—and varied—street scene.
Whitten also believes in mixing it up. About three years ago, Rottlund began allowing home buyers to customize—within a predetermined set of options—the exteriors of their homes. They can choose a round column rather than a square one or add stone to the elevation. Not only does it allow the buyers to feel like they're personalizing their homes, over time, the neighborhood develops a personality through the subtle differences among the homes, he says.
“I think the fact that I am an architect puts me in the position to push design [further],” Whitten says. “But I also know design is just one of the elements needed to get to the end result.”
The Cost Factor The bottom line contributes largely to that end result, a house that sells. So, does good design cost more? And if it does, is it worth it?
“I have always said that you can get good design for just a few dollars a foot more,” Brown says. What's more, he believes that buyers will seek out builders offering more unique products.
Brown will include design elements even if the return isn't guaranteed because they'll improve the look of the house or the community. He recalls once popping out a home's elevation at closing time, at no extra cost to the buyer. “When you drove into the community, that was the first home you saw as you turned the corner, and I thought it could be done better,” he recalls. “It's not great for the bottom line in the short run, but it shows your commitment to design.”
Whitten agrees. Rottlund will detail certain parts of a development, near the pool area or on a circle, for example, more extensively, with the knowledge that the company will shoulder some of the costs for that design. “Buyers today are looking for the community first and the housing second,” he says.
He's quick to point out that good community design doesn't have to equal a higher cost. “There are ways to plan space and to promote the community feel with good planning as opposed to just throwing dollars at it.”
Whitten feels strongly that lower-priced homes can be well designed. Rottlund offers primarily attached homes, and Whitten says he would feel as if he isn't doing his job if the majority of his homes weren't designed well. It's true, he acknowledges, that a lower price point does limit some of the materials he can use. But “design is proportion and balance and scale—that has nothing to do with price,” he says. “It's easy to design when there's no limit to the budget and more challenging when there is, but it's much more rewarding.”
To Whitten, spending as much time designing lower-priced homes as he does on $1 million homes makes good business sense; he sells more at the lower price point. “If we make it feel like it is better quality than the competition and we sell 200 or 300 a year, it's a terrific investment.”
Chris Stuhmer, CEO of Las Vegas–based Christopher Homes, disputes Brown and Whitten's claim. Good, or more complicated, architecture adds at least 10 percent to a builder's cost, depending on the home's price point and location, he argues. To make a profit, he says, builders should be able to charge 20 percent more.
“But I don't know the customer out there who is willing to pay that much more for the architecture,” Stuhmer says. “If you tell them that the architecture is going to cost them 500 square feet in the home, they'll take the 500 square feet.”
Buying Power Lee Wetherington, CEO and president of Lee Wetherington Homes, doesn't see the debate in absolute terms. Buyers pay for what they value, he says. A growing family may value space more than upgraded cabinetry and countertops, while empty-nesters may opt for smaller bedrooms along with a larger pool and more tile through the house. “I think they have to make choices about what's most important to them,” he says.
One thing is certain, though: Regardless of price point, today's home buyers pay more attention to design. One-third of the builders surveyed reported that their customers are “much more” design conscious than they were five years ago.
Wetherington sees some of that trend in the choices his buyers make for their outdoor living areas. He now offers operable windows for verandas to keep rain and dirt out—standard screens let them in—an option that adds about $2,000 to the cost of a home (his average price point is about $475,000). Buyers take it every time, he says.
Baby boomers, especially, are upgrading their homes, Wetherington reports, seeing the cost as a good investment. “Put $30,000 into your swimming pool. Are you going to dive into your computer? You can enjoy the swimming pool,” he says.
One concern design- and value-minded buyers share, Wetherington says, is what home maintenance will cost. Part of good design, he says, is building with materials that minimize maintenance, even if it's a little more costly. “We don't do anything without thinking first about the warranty on it,” he says. “It costs more, but in the long run, it's worth it. The cheapest price you can pay is for the best.”
With sponsorship from Andersen Windows and Doors, earlier this year BUILDER embarked on a process to better understand design trends in home building. We surveyed 448 architects, 217 remodelers, 354 builders (custom, semi-custom, and production), and 150 consumers to capture trends and opinions. Some of those survey responses are found here in the story and its accompanying charts and graphs. We followed the survey process with a day-long roundtable about design at Andersen's show home in Park City, Utah, with six builders whose products varied across geography, type, and price point. The quotes in the article are taken from that roundtable and subsequent interviews. Readers can find a Power Point presentation of the survey results here.
Squaring Off Builders and consumers sometimes differ on where good design matters most.
Overcoming Obstacles Builders cite many challenges in implementing good design.
Paying Up Most builders believe customers will pay between 3 percent and 15 percent more for a well-designed home.
Who's Who BUILDER convened a panel of builders to discuss what design means to their businesses.
Panel participants included:
Nearly half—49 percent—of the builders we surveyed cited “meeting customer expectations” as a top design challenge. Communication breakdown often sets the stage for unhappy home buyers, says Brian Bailey, of Brian A. Bailey Homes in Austin, Texas.
Early in the building process, Bailey asks customers a series of questions designed to draw out their expectations about the process—how quickly they want the builder to return calls and what they believe to be a fair price for the home, for example—as well as their opinions on design, product, and finish.
His method helps the company weed out customers with a differing point of view on the process. If his questions reveal that the customer's expectations are unrealistic, Bailey walks away. “You are much better off not taking that job or that series of jobs than taking on that customer because you will lose money,” he says.
Lee Wetherington, of Lee Wetherington Homes in Sarasota, Fla., too, fires clients—about 10 each year. “We give them their money back,” he says. “Sometimes you just have to bite the bullet. It's not worth it.” He also ensures that his customers are well educated about the entire building process, from design to warranty, by giving each buyer a booklet he's written and by teaching them “the good, the bad, and the ugly about construction” at a day-long seminar.
Beyond educating the buyers, the structure moves clients through the process faster. “It can cost $60 to $90 a day to have a customer in your system,” Wetherington says, “so the sooner you can move them through, the more money you make.”
Eric Brown, of Engle Homes, provides his customers with a checklist about the realities of new construction that he says has prevented buyer surprises. Included on the list: “If your home is on a golf course, we do not guarantee your views. Trees may grow, trees may die” and “We guarantee your concrete floors will crack.”
The Need For Speed Of builders surveyed, 89 percent report that design is a major catalyst to moving their houses faster–an average of 75 percent faster.
Shiny And New More than 80 percent of all builders–including 81 percent of production builders–build a new design at least once a year.
What's “Custom Built?” Sometimes customers don't have as many choices as they might expect. Semi-custom builders seem more flexible than even some self-reported custom builders.
Convenience Vs. Cost Builders say design centers aren't the moneymakers some might expect.
For home buyers, there's no doubt that design centers are convenient. In a few hours time, they're able to make almost all the choices for their house without the hassle of driving from store to store. That's the primary reason for offering a design center, according to the builders in our roundtable.
“We do it not because we want to and we think it's a profit center,” says Chris Stuhmer of Christopher Homes. “We do it because we have to.” Sarasota, Fla., builder Lee Wetherington agrees. The level of sophistication of his buyers—his average price point is about $475,000—demands that he make the process easy on them, he says.
Everything in his design center is prepriced and nonnegotiable. Certain items—such as plumbing fixtures—are bundled, and the cost of individual pieces isn't revealed to buyers, Wetherington says. When some challenge the cost with the prices they may have found at retail shops such as Lowe's and The Home Depot, Wetherington says he counters with: “Did you think about getting them installed? Did you think about the warranty?”
The builders say their margins in the design centers come from items that can't be shopped, and they keep the markups low on refrigerators and the like. That strategy—and the overhead to manage it all—keeps profit from design centers low because the builders aren't buying big-ticket design items in bulk; they can't clear the same profits as a retail chain. Long-term, however, they say the strategy is a plus, because it maintains customer trust in the builder. “If you structure your pricing where your buyer believes you are charging them a fair price, that is going to reap you good customer satisfaction,” Wetherington says.
Learn more about markets featured in this article: Austin, TX.