Trends from NAHB Survey: Home Buyers Want Lower Water Bills

Three trends are highlighting the need for water saving/billable water reducing devices to be included in new homes - product differentiation, construction inflation/an increased demand for single family homes and a desire on the part of home buyers to invest in green products that pay for themselves.

First, the need for product differentiation on the part of home builders. Home builders are being faced with intense pricing competition as they are being buffeted by the twin forces of higher costs and supply chain interruptions. Prior to factoring in the full impact of Covid-19 upon costs, the following article entitled “Inflation in Construction 2019” by Ed Zarenski pointed to the fact that construction inflation has been 3X the CPI.

CPI, the Consumer Price Index, tracks changes in the prices paid by urban consumers for a representative basket of goods and services, including food, transportation, medical care, apparel, recreation, housing. The CPI is not related at all to construction and should not be used to adjust construction pricing. Historically, Construction Inflation is about double the CPI, but for the last 5 years construction inflation averages 3x the CPI. Producer Price Index (PPI) Material Inputs (which exclude labor) to new construction increased +4% in 2018 after a downward trend from +5% in 2011 led to decreased cost of -3% in 2015, the only negative cost for inputs in the past 20 years. Input costs to nonresidential structures in 2017+2018 average +4.3%, the highest in seven years. Infrastructure and industrial inputs were the highest, near 5%. But material inputs accounts for only a portion of the final cost of constructed buildings.

The follow up “Construction Inflation 2020” study did note that residential construction inflation for the next three years to be at 3.8%. Part of the modulated increase in costs may be due to a drop in lumber costs. This can be a volatile cost input, unlike the costs of items like granite and building HVAC systems which can be affected by supply chain interruptions.

Second, a November 21, 2019 article by Dana Anderson entitled “Millennials Still Want Single-Family Homes, Even if it Means a Long Commute” notes that “89% of homebuyers would prefer a single-family home with a backyard over a unit in a triplex, with a shorter commute.” Apart from seeking more backyard space and now physical distancing, this writer expects that families will begin to grow over the next coming months. As such there could be a CV-19 baby boom, and thus the need for more first time housing. To get ready for this boom, homebuilders could position themselves for a boom.

Finally, there is a predisposition for purchasing “Green Products”. However, the problem with many Green Products is that they do not pay for themselves. Tim Crockett from the Smart Valve Distributor SmartWaterValve.com notes:

The ideal water focused Green Product would be one that paid for itself and had a quick payback. The Smart Valve meets that need.

A June 16, 2020 NAHBNow article entitled “Top 5 Green Products and Systems Customers Are Asking About” by Michelle Diller echoes Mr. Crockett’s statement and cites the following statistics:

• 47% of Home Buyers list “Water Conserving Products and Systems” in their top 3 areas of interest.

• 54% of all builders are, in practice, incorporating Efficient Plumbing Techniques in their home building

This makes sense for the homebuyer because the Smart Valve both works and has a short payback. Consumers and builders generally see these as conflicting goals. The Dodge Data & Analytics report on Green Single Family and Multifamily Homes notes the following on page 42:

“Most builders and remodelers are influenced in their decisions about their level of green engagement by how they think consumers perceive green homes: Consumer perceptions of cost are the most influential (including the length of time in which consumers can see their return on investment for any green premium they’ve paid), but over two thirds are also influenced by consumer perceptions of performance and quality. These influences, though, end up competing with each other, since most builders/remodelers believe that consumers think that green homes are expensive and that they do not have a short return on investment, but they also think that consumers do believe that green homes perform better. They are evenly split about whether consumers perceive that green homes are of higher quality, though. Influencing any of these consumer perceptions would have an impact on the level of engagement with green among green home builders and remodelers.”

As also noted in the report “Builders believe that performance is one of the top factors influencing consumer decisions to invest in green homes.” The Smart Valve performs - with generally paybacks ranging from one to five years.

With the Smart Valve, homebuilders have a unique opportunity to differentiate themselves from their competitors, to meet single family home demand and to offer a product that actually conserves our natural resources and conserves the home buyers pocketbook.