Buyers paid between $700,000 and $850,000 for 2,000-square-foot, energy-efficient units in The Galleries at Turney in Phoenix. Meanwhile, nearby homes that were not built with environmental principles sold for less, even though they had more space and swimming pools.
(Photos by Matt York/Associated Press)
Sales of low-energy homes stall
Green units still appealing, but buyers deterred by cost
Buyers paid between $700,000 and $850,000 for 2,000-square-foot, energy-efficient units in The Galleries at Turney in Phoenix. Meanwhile, nearby homes that were not built with environmental principles sold for less, even though they had more space and swimming pools.
(Photos by Matt York/Associated Press)
PHOENIX - Home builders slapped on solar panels and added other ecofriendly enhancements as energy prices soared last year, hoping greener homes would lure reluctant buyers.
But since July, the cost of oil has plunged from $147 a barrel to about $36, while home prices continued to fall. Together, these headwinds have stalled low-energy housing developments around the country.
"The program doesn't necessarily pencil out at the moment," said Scott Kramer, a forward planner for Scottsdale, Ariz.-based Meritage Homes Corp., which builds homes in Texas, Arizona, California, Nevada, Colorado, and Florida.
"People don't seem to be willing to pay for it."
In 2007, Meritage packed $20,000 worth of solar panels, high performance insulation, low-leakage air ducts, and other systems in its first green community in Vacaville, Calif. The "Encore" homes promised to slash electric bills up to half, and buyers snapped them up even though Meritage offered them at a higher price than competitors.
Sales figures in July showed the Encore development sold 1.55 homes per week, compared with 0.88 per week for similar homes in the same city, Kramer said.
But that advantage disappeared in the second half of the year. Meritage and its closest competitor both sold about one home every two weeks according to sales data for November, and Meritage slashed prices that month. Though Meritage continues to build Encore homes in Vacaville, it's reevaluating whether to move forward with plans to start new green communities.
UBS analyst David Goldberg said most major builders will continue to invest in green developments. But they'll likely need to find cheaper ways of doing it. "If it cost more to put solar panels on there, are you still exploring it? I'd say, maybe not," Goldberg said. "But there are a lot of things you can do in communities that are environmentally friendly."
For example, builders could add Energy Star-rated appliances in homes that cut utility bills without adding much to the overall price tag.
The economy may have left consumers jittery, but those looking for new homes will still look for energy efficiencies.
"If it's a house that has leaky windows, and not enough insulation, I think people will pick up on that," said Elliott Pollack, a real estate consultant in Scottsdale.
Phoenix home builder Ed Gorman agrees.
"Everybody wants to be green, but nobody wants to pay for it," said Gorman, president of Modus Development. "But when you talk about putting money in our pocketbook, that's important to them."
Gorman's Galleries at Turney project, two rows of pricey, ultramodern town homes, sold out last year. His secret? The Galleries were equipped with a unique set of cooling systems that lock out Arizona's oppressive summer heat. "There's sex appeal in good design," Gorman said.
Buyers paid between $700,000 and $850,000 for the 2,000-square-foot units. Homes in the same neighborhood offered more space, backyards, and pools at almost half the cost, but none could compete with the Galleries' environmental design. The Galleries are all LEED certified and come with radiation-filtering windows, Energy Star-rated appliances, and sturdy, insulated walls made of fiber-reinforced cement. An outer layer of corrugated zinc reflects heat away from the building.
Gorman initially offered the town houses at 9 percent below their appraised value. But he didn't have to slash prices any further.
So Gorman jumped back in last year with plans for another chic, super-green development around a Scottsdale golf course. But the credit crunch forced him to build apartments instead.
Shea Homes, one of the nation's largest private builders, also is putting off more green projects after some initial success with its Trilogy communities in Washington, California, Arizona, and Florida. Shea offered dual-pane windows, high-tech ventilation systems, high-performance insulation, and other enhancements. In August, it added 3-kilowatt solar panels free of charge.
The move helped Shea expand its market share early last year, said Rick Andreen, president of Shea Homes Active Lifestyle Communities. From January to August, for example, Shea sold 1.8 homes per week at the Trilogy Victoria Gardens community in Deland, Fla., compared with 0.5 home sales per week for the competition.
Since then, sales have flattened to about one home per week at Victoria Gardens, reflecting a national drop in home sales, Andreen said.
© Copyright 2009 Globe Newspaper Company.
