Continued Growth Expected
in Green Home Building
Keeping up with trends in green home building? Recent report shows market optimism among builders.
July 11, 2014
Continued Growth Expected in Green Home Building
McGraw Hill Construction released its Green Multifamily & Single-Family Homes: Growth in a Recovering Market, which draws on survey information from NAHB’s builder and remodeler members.
The reports reviews green market trends between 2006 and 2011, and shares predictions for 2014-2018 activity. Key findings from the report include:
Green Market Growth
- Most impressively, McGraw Hill reports the overall green single-family home market will double between 2013 and 2016 — going from $37 billion (27% of market) to $80-101 billion (26-33% of market). This is a big indicator of steadily growing consumer interest and demand for the comfort and efficiency of green homes.
- The multifamily sector was one of the first sectors to recover from the 2009 downturn and experienced dramatic growth between 2009 and 2013. In the coming years, however, survey findings project multifamily sector growth and green multifamily will be slower than in recent years.
- Demographics is a key driver in the shift away from multifamily. Generation Y consumers (20-30 year olds), who have driven green demand in the multifamily rental sector in recent years, will start becoming homebuyers. This emerging market opens a wide door of opportunity for single-family builders to refine marketing materials to appeal to the preferences of younger consumers.
- The report states that 62% of single-family home builders say they are building more than 15% of their projects green. By 2018, that percentage is expected to rise to 84%.
- This market expansion will mean a split in the market — green home building firms who have honed their approach throughout the recession will be met with an influx of builders with less green experience.
- Also, more single-family builders will dedicate their business to green construction exclusively. Firms “dedicated to green” (doing more than 90% of their projects green) are expected to double (to 38%) by 2018.
- For single-family builders, dedication to high quality and consumer demand are key drivers toward green home construction.
- The patterns for growth in multifamily are very different than those observed for single-family. There has been a shift toward moderate green activity in the multifamily sector. Fifty-four percent (54%) of multifamily builders report they are doing more than 15% of their projects green, and growth is anticipated—up to 79% by 2018. There has been a more gradual shift observed by multifamily firms dedicated to green.
- Multifamily builders are driven more by factors that impact the cost of building green, including the availability of government or utility incentives, as well as enhancing their competitive position and corporate image.
- Of the survey respondents, the number remodeling firms dedicated to green practices (i.e., 90% or more of their projects are green) are expected to more than double between 2013 and 2018—from 9% to 25%. Because remodelers are typically more driven by specific customer demands than new home builders, this influx reveals strong consumer preference toward green. Homeowners expecting to remain in their homes may seek reduced operating costs and increased comfort.
- Green renovations offer an opportunity for older homes to be more competitive in the market even as green and energy efficiency is becoming the “norm.”
Consumer Awareness & Preferences
- Home builders and remodelers in both the single-family and multifamily sectors report that consumers are recognizing the value of green. Forty-seven percent (47%) of single-family builders/remodelers surveyed and 59% of multifamily builders/remodelers find that green homes are easier to market than traditional homes.
- “Lower Energy Use,” “Save Money,” and “Better Health” were cited as the primary reasons why customers request green homes.
- Consumers are even willing to pay a price-premium for green construction, according to 73% of single-family builders and 68% of multifamily builders surveyed — study findings revealed an 8% cost premium for new homes and 9% for remodeling, on average.
What this Means for You
- Builders and remodelers with more experience in the green home building market should explore ways to further distinguish yourself — more and more "newbies" will soon be entering the market hoping to capitalize on growing consumer interest in green homes. If you are not currently having your homes certified to a nationally-recognized, third-party program, like NGBS Green, consider incorporating that into your SOP. Green certification offers your prospective homebuyers/renters a credible, objective verification of your green practices.
- If you are not already marketing the benefits of the green homes you build, and not just the home features, adjust your sales messages to better appeal to consumer preferences. Craft your messaging to be more specific to consumer-specified preferences — energy performance, affordability, and comfort. Check out Home Innovation’s ready-made green home marketing materials, which are available for NGBS Green Partners to download and use.
- If you are a building product manufacturer, make it easier for home building professionals to identify green products within your product line and understand the environmental performance information that may be required for green home certification. Third-party product labels/certifications will become even more valuable as new builders/remodelers work to learn green construction techniques. Consider participating in the NGBS Green Certified Product program to make the specific connection between your product's green attributes and points within the National Green Building Standard.