I often compare home marketing to automotive marketing, not because I was raised in Detroit and am somewhat of a motor head, but because these are two very big ticket items that have been developed and marketed in very different ways. You may think that auto companies are huge corporate conglomerates, and builders are mostly small, local companies selling a home or two, but the major builders certainly are not small concerns. A major builder selling 50,000 homes at $250,000 each would generate the same total income as a small auto company selling 500,000 cars at $25,000 each. Yet, there has been much more product research, development, testing, and marketing on cars, SUVs or trucks than on homes.
To “drive” this comparison home consider the following: Compare the specifications on a $140,000 (adjusted for inflation) 30 year old Ferrari 308 which was state of the art in 1980, and even the most basic car, for example a Hyundai Genesis Coupe. The two passenger 300 horsepower Ferrari would do 0-60 in 6.8 seconds with a top speed of 142 HPH, slower than the $25,000 Hyundai ‘s 0-60 in 5.5 seconds, top speed at 149 MPH. The Hyundai would actually make that hairpin turn with a computer assisted 0.90g lateral acceleration, while the Ferrari would slide into the roadside ditch at only 0.81g.
And the list goes on. The Hyundai adds 10 more highway MPG to the Ferrari’s 16 MPG. Watch out for deer? At an emergency stop from 60 MPH the Hyundai takes only 111 feet, a whopping 42 feet less than the Ferrari which plows right through Bambi. After adjusting for inflation, the specifications of the Hyundai blow past the Ferrari for 80% less money. Reliability? Not even close. The Ferrari 308 owner will be on a first name basis with his or her mechanic, and probably even know his family.
So… while it seems stagnant at times, the auto industry has still made tremendous progress. From a style, materials, and overall design standpoint, any of today’s cars and trucks render those built in the early 1980s obsolete. The industry offers an astonishingly better product than it did twenty-five years ago. This is despite a few moments when auto manufacturers lost their way. Remember 1981 — a recession with car showrooms in shambles and the government rescuing Chrysler — and Lee Iacocca touting the “K” Car? My, auto makers have come a long way!
Now let’s compare the 1980 suburban single family home to the 2006 (the height of the housing market) suburban single family home.
From National Association of Home Builders data we see that the average 1980 house was just over $76,000 and averaged about 1,800 square feet. Adjusted for inflation, that 1980 home would be approximately $190,000 in 2006 dollars. This equates to approximately $105 a square foot. The 1980s were also the age of large sprawling suburban lots; 10,000 sq.ft would have been considered, in some areas, too small. Suburban densities of two units per acre were typical in the north, with higher densities in the three to four unit per acre range as one traveled south. The 1980’s home price included a spacious lot.
Fast forward through 26 years (of evolution?). Homes gradually increased in size to an average of 2,414 sq.ft. (again, NAHB data). The typical home in 2006 cost $264,000, or $109 a square foot. Essentially, the home built at the peak of the market cost only slightly more than the home built in 1980. Lot areas generally have come down in size. In the south where densities were already higher, the lot size reduction was minimal, but in the north that 1980 10,000 sq.ft. lot that was once considered small would today be considered quite large.
The 1980s home would have been built to a lower standard with little in energy conservation; it was wasteful. The home built 25 years later — at the height of the market in 2006 — would have been built to much higher standards, both in construction and in energy efficiency.
Today's consumer may favor the older, 1980s suburban home. It is likely built in an area with mature landscaping, local conveniences, and established schools, and it is probably located closer to town (employment), on a larger lot. Yes the home is slightly older, but not significantly visually different than the more recent home, at least to the naked eye. The transition from the previous three decades, 1950 to 1980, was drastic. But it was not so in the past 30 years.
The new suburban home in today’s market is typically on the outer edge of urbanization. The confidence level that services and schools will be developed in a timely manner is much lower. There simply has not been a significant change in housing during the past three decades. The garage-forward 1980s home that proudly displays massive garage doors that define the streetscape is similar to the suburban homes built today, except the home built today might also include the obligatory porch sitting next to the garage.
Three decades ago Chrysler responded to market changes with the K car, a cheap car that was commercially successful. Notice how many K cars you see on the road today? Longevity, reliability and quality were not its strong points. Cars are temporary. They are disposable and recyclable. Today's home builders are largely responding to the housing market with a K car attitude of scrimping that will only make the homes built on yesterday’s developments seem even more attractive.
But housing stock cannot survive on temporary solutions that respond to short trends. The lot that is sold today is likely to be around for many centuries. The home will likely be remodeled over time, but its foundation may last as long as the lot. There are no junk yards for houses...well there are, and they're called slums.
Builders rely on suppliers to develop products that improve the housing stock. For example, the vinyl cladding era of the 1980s has been (somewhat) replaced by more attractive concrete based products and wood alternatives. The problem is that these vinyl alternatives are often more expensive – in some cases, much more.
It’s time for builders to respond by following the automotive industry. That means offering enough of a design revolution to attract new customers. Investing in research and development at a time when banks turn away builders and developers might seem an impossible task. As a design and technology company, we know that first hand. We have a huge investment in future technologies that will not be available until the beginning of 2010.
Before the recession, we typically invested 10% of our gross income (designing new developments) in new technologies. Planning and architecture is not exactly a thriving industry today. Banks are not interested in funding anything related to land development, sustainability, or software. To keep development on track, our investment now represents over 50% of our total income.
Getting through this period has been tough, but at the end of the day we will have a revolutionary product with a new range of services that will benefit development-related industries. Architects can respond to a down market by investing their down time in experimentation and development of better design methods to increase the value of housing, instead of sitting around waiting for a client to call.
During this past decade people got used to making a new home purchase to supplement their income, assuming that home values would rise several thousands of dollars annually. Those days are gone. Give consumers a new reason to buy: a better product. When future housing customers have the opportunity to significantly increase their living standards by purchasing new homes vs. staying where they are, they will want to buy new again.
Rick Harrison is President of Rick Harrison Site Design Studio and author of Prefurbia: Reinventing The Suburbs From Disdainable To Sustainable. His website is rhsdplanning.com.
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