The tankless hot-water heater was once reserved for luxury homes, where its super-efficient technology assured an unlimited supply of steamy water for those oversized tubs. But now the technology is drifting downstream. Centex Homes is installing compact, wall-mounted water heaters as standard on the $180,000 starter homes in its Fox Run community in Bakersfield, Calif. The Rinnai Continuum model the builder uses costs twice as much as a traditional 50-gallon hot-water tank, though some of those dollars are recouped through state energy credits. The higher cost is offset by easier installation for the builder and lower operating expenses for the buyer. “We see this as a benefit and as an amenity homeowners are going to want,” says Kathy Rhodes, director of construction services for the Central Valley division of Centex Homes in Visalia, Calif. “Going forward, we will add it to every home as we develop new plans,” she says.

The gas-fired system saves energy by flash-heating water only when it senses a demand from an open water source. “The real gain is in ownership costs,” says Ervin Cash, vice president of the water heater group for Rinnai Corp. in Atlanta. “In the last year and a half, we've introduced smaller models to bring energy efficiency to broader markets.” Rinnai says the water heater costs up to 70 percent less to operate each year than a traditional tank. The company trains licensed contractors to install the 45-pound box, which slips between studs and hooks into a water line, gas line, and vent pipe. It can be mounted outside or inside.

“Installation is a one-man job and the plumbing is unchanged, so we save time,” says Rhodes. It will be years before all of the builder's California homes are tankless. Meanwhile, 25 percent of the customers who purchase its existing homes are adding the hot-water technology to their shopping carts at more than $1,000 a pop.