LOS ANGELES — Homebuilders say one of the biggest advantages of buying a newly built house is energy efficiency. However, some of the ways that builders make houses burn less cash might not be as recognizable to buyers as say, kitchen appliances, generous closets and bathroom amenities. So now some builders are boiling energy efficiency down to something every buyer understands: money.
Last week, Los Angeles-based builder KB Home started giving prospective homebuyers an estimate upfront of what their monthly gas and electric bill will be if they buy one of the company’s houses. The estimate label also will clearly show buyers where the house ranks on an energy efficiency scale.Houston-based McGuyer Homebuilders Inc. earlier this month began providing customers with estimates of what the annual heating and cooling portion of their utility bills will be on houses in the company’s Dallas market. If buyers end up paying more, McGuyer promises to reimburse them for the difference in the first two years.
The strategy comes as homebuilders grapple with fierce competition from existing houses on the market, particularly sharply discounted foreclosed properties. Sales of new houses, which make up a fraction of overall house sales, sank last year to the lowest level since at least 1963. New houses, many bristling with energy-efficient features, often are priced at a premium to older houses.That can be a deal-breaker for buyers expecting to see bargain-priced properties as the housing downturn enters its fifth year.
But builders are betting that breaking out utility bill savings in black and white will persuade buyers to consider a newly built house.
“It’s the biggest purchase decision that people are making at that time in their lives, and typically they have no idea what it’s going to cost to truly own the thing until they’ve been there for several months,” said Jeffrey Mezger, KB Home’s president and chief executive officer. “It’s a cost of homeownership that hasn’t been out there.”
The building industry has been good at explaining the technology inside a houseand behind the walls, but not at clearly showing buyers how it all translates to lower utility bills, said Nate Kredich, vice president of residential market development at the U.S. Green Building Council. This new approach by KB and other builders is similar to whatautomakers have done for years by advertising milesper-gallon performance, and it has helped make fuel-efficient cars more popular.
“The model is there,” Kredich said, “but homes are significantly more complex than automobiles.”
KB’s Energy Performance Guide draws its utility cost estimates from a house’s ranking on the Home Energy Rating System Index. Commonly called the HERS Index, this is regarded as an industry standard for calculating energy efficiency. The lower the score - which also is displayed on the label - the lower its projected energy costs.
A typical new house will garner a score of 100 on the index, while Energy Star qualified houses will typically rank about 85. Resale houses typically fare around 130 on the scale.
What does that mean in terms of dollars and cents? The difference between a score of 80 and 130 could amount to seeing your energy bill double, KB’s Mezger said.
A Department of Energy program that launched in 2009 has been issuing certificates to builders whose houses achieve a HERS score of 70 or less. The builders also get the right to display the department’s EnergySmart Home Scale label. Like KB’s, it features the house’s HERS score and an estimated average monthly energy bill.
The program has issued certificates on more some 5,500 houses, most of them newly built, said George James, the program’s project manager.
KB, which builds houses to order, said it will provide an initial HERS ranking and energy bill estimate when a buyer selects the type of house he wants to buy. An independent energy rater then inspects the house once it’s built, and the homebuyer will receive an updated estimate and HERS ranking.
The HERS rankings and monthly energy bill estimates can vary among KB’s houses, depending on size and the part of the country they’re in.
One 2,167-square-foot KB house in Jacksonville, Fla., got a HERS score of 74 and an estimated monthly energy bill of $100. A 1,550-square-foot house in Las Vegas ranked 66 on the HERS index, with its owners likely to pay out $89 a month in energy costs.
How a buyer uses a house can raise or lower the energy bill projections provided by KB. For example, leaving the lights on all day or setting a thermostat too high in the winter or too low in the summer will skew energy costs.
Business, Pages 44 on 02/20/2011