National Housing Market Outlook

Sustainable and Healthy Profits

Mikaela Arroyo photo

Mikaela Arroyo

November 4, 2021

According to three experts who just spoke on our monthly New Home Trends Institute webinar, increasing profitability through healthy and sustainable building requires three things:

  1. Location: You have to be in the right communities and price ranges where consumers will pay a premium. At affordable price points, you need to be building in scale.

  2. Features: Only include the features buyers will pay for, with a particular focus on the ones that play double duty supporting both health and energy efficiency for savings.

  3. Marketing: You have to make a significant investment in brand building, and then push the right buttons to make people want to buy it (hint: it isn’t educational displays in your model). Having a brand known for sustainable building can pay off in many ways, including more opportunities to buy land and easier entitlements with the local municipality.

Keep reading for more detail, including one truth and one surprising myth.

The New Home Trends Institute panelists were:

  • Eric Sung, Director of Design of Thrive Home Builders (a nationally recognized authority in energy efficient and healthy homes)
  • Anthony Antolino, Chief Commercial Officer of Delos (a global wellness leader and creator of products like DARWIN)
  • Ian Schnack, National Director, Product Design of Meritage Homes (a large, national homebuilder with some of the best profit margins in the business)

Our key takeaways follow.

Profitability of sustainable and healthy building depends on your company brand and scale.

While direct costs are higher, both Thrive and Meritage have found that—depending on the market and buyer—they can achieve a premium for the “brand promise” of building a better home. There are nuances that matter:

  • When moving to entry-level homes, Meritage found that benefits of scale made it work, allowing them to deliver at a lower price point without compromising their brand promise.
  • Delos finds that in some markets the benefit is getting a premium, in others it is selling homes faster. Some builders even consider it a marketing expense and cover the cost in that way.
  • Thrive’s steadfast reputation means that cities (who often have carbon goals) want Thrive in the community. This has given them the ability to pick and choose where they build, selecting places where they can get a premium without competing with code builders.

Profitability of sustainable and healthy building depends on including the right features.

In the world of health and sustainability, there are two things that resonate with homeowners far more than others. One they will pay for right now, and one is a growing expectation.

  • Expectation: Air quality is the largest requirement for a healthy/sustainable home, but is more of an expectation than an upgrade. All three of our panelists subscribe to the “build tight, ventilate right” philosophy as the starting point for both health and sustainability.
  • Upgrade: Buyers are more likely to pay for the things that they touch and feel every day, which means they will pay for solid surfaces that are easier to clean. Meritage finds that in move-up homes (where buyers are given the choice), there is a pivot from carpet to solid surfaces, like faux wood tile in the West or hardwood in the South.

Profitability of sustainable and healthy building depends on selling it right.

There are two commonly held beliefs around marketing health and sustainability, one is true and one is false.

  • The truth: The pandemic has accelerated demand for indoor air quality improvements.

Delos cites astronomical growth in demand for their products, as the aerosolized nature of COVID evaporated the learning curve around the importance of what we breathe.

  • The myth: Buyers need to be educated on the value proposition when touring the home.

In reality, Thrive has found that educational displays in model homes do not resonate. There is too much information that is too technical to hold interest. Most buyers have already visited the website and are now touring the home to find if they emotionally connect to the space. The building science brochures matter later when the buyer wants to reconfirm their purchase decision. On the rare occasion someone wants to learn more, there are sales representatives who can fill them in.

If you are interested in learning more from our consultants about local market differentiation, our DesignLens™ Director about product examples, or our monthly consumer surveys and NHTI councils, please fill out this form, and one of our team members will get back to you soon.

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About The Author

Mikaela Arroyo photo
Mikaela Arroyo
Vice President, NHTI | Chief of Staff
Mikaela leads trend research for the New Home Trends Institute, conducting monthly surveys of consumers and industry professionals to better understand housing pain points and desires. As Chief of Staff to the CEO, Mikaela strategizes and supports the daily operations of the company, focusing on business initiatives.

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