issue: March 2008 APPLIANCE Magazine
What Consumers Want at Home in 2008
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Tim Somheil, Editor
Opportunities are there, and it helps to know what homebuyers are looking for.
Tim Somheil, Editor
2008 started off with another housing disappointment in the United States. New home sales were down 2.8% in January, according to the U.S. Commerce Department, to a seasonally adjusted annual rate of 588,000 units.
The National Association of Home Builders (NAHB) reports that its members are seeing heavier traffic in their model homes. However, NAHB chief economist David Seiders said, “This has yet to translate to any improvement in actual sales activity.”
Much appliance industry business is tied to sales of new homes, as well as sales of existing homes and remodeling, all of which are suffering. Millions of homes are still being built, sold, resold, and remodeled, of course, but the consumers behind those purchases are not quite the same as purchasers a year ago. In particular, they’re more conscious of energy efficiency than homebuyers have ever been.
New home consumer preferences were the subject of a presentation by Gopal Ahluwalia, staff vice president of research for NAHB’s Economics Group. He spoke on February 14 during the 2008 International Builders’ Show, presenting results from a consumer survey that targeted homeowners who purchased a home in the past three years or owners/renters planning to purchase during the next three years.
When respondents were asked to rate “items that would most influence your purchase decision,” 72% named energy-efficient features, the second-highest-ranking item under “living space” (79%). Fifth on the list was “high-quality appliances and fixtures” (54%).
In another survey question, “Equipment-based energy saving measures” was named a desirable or essential/must-have feature by 34% of respondents.
A full 50% said an electronic air cleaner was desirable or essential/must-have.
The most popular kitchen features, according to the survey: A built-in microwave was considered desirable or a must-have by 73% of respondents, and drinking water filtration was considered desirable or must-have by 69%.
When asked about trade-offs, an overwhelming number of respondents—91%—said they would choose an energy-efficient home with lower energy bills over a home that was 2–3% cheaper and did not have extra energy-efficiency features. NAHB even asked respondents to rank the amount they would be willing to pay upfront to save on utility costs. The result showed that 16% were willing to pay $11,000 or more; 51% would pay between $5000 and $10,999; and 32% were willing to pay less than $5000.
Respondents to the NAHB Consumer Preference Survey 2007 own a surprisingly high level of technology already, with 34% of respondents reporting that they currently have a security system and 57% responding that they would like to have it. A full 8% of respondents say they have a central vacuum system already; 49% say they would like to have it. 15% have a multizone HVAC system and 55% would like to have it. 19% report they currently have some kind of energy management and 61% would like to have it—more than any of the other features.
Another arm of NAHB, the 50+ Housing Council, was also at the Builders’ Show, presenting results from its Profile of the 50+ Housing Market. One finding of significance: Boomers don’t necessarily want smaller homes.
“Our data show that 55+ homebuyers may be ‘downsizing,’ but not by much,” said Paul Emrath, NAHB’s lead researcher on the study. “The average home in an active adult community still includes more than two bedrooms and more than 2000 sq ft of living space.”
“They’re still looking for new homes that are well designed and have many of the latest bells and whistles,” said Robert Tippets, immediate past chairman of the NAHB 50+ Housing Council and an active adult builder from Utah. “What they are ‘downsizing’ is the maintenance that comes with owning the typical home with the big yard.”
This growing consumer segment is also less adversely affected by current mortgage market troubles. Less than half of new homebuyers in an age-qualified active adult community needed to take out a mortgage. Of those who did, the study found, the loan-to-value ratio was under 50%.
“These consumers have substantial equity in their existing homes and greater accumulated wealth,” said Mark Stemen, senior vice president with K. Hovnanian’s active adult division in the mid-Atlantic and a member of NAHB’s 50+ Housing Council. “They are discretionary buyers and their purchases are very much driven by a desire for the lifestyle these types of communities offer.” Stemen also noted that this group is more likely to buy new or custom housing.
A Market of Opportunities
The U.S. economy is either teetering on the edge of recession or has already slipped into it, depending on who you ask. There’s no doubt that 2008 is going to challenge appliance producers in North America. Despite the economic climate, some appliance buyer segments are growing. The homebuyers who are more willing to pay a premium for energy efficiency, and the boomers looking for full-sized homes with downsized maintenance requirements, both represent appliance industry opportunities.