Is the HGTV Effect Helping Homebuilders?

ORANGE COUNTY, CA-Recent data from the National Association of Homebuilders shows that demand for new homes is increasing in several regions across the country, while sales of existing homes on the market remain stagnant. According to a spokesperson from Boise, ID-based Coleman Homes, this trend toward new home buying is indicative of buyers' lack of excitement with preexisting inventory—possibly because older homes are less appealing to more discerning buyers.

Part of what is making buyers more discerning could be what has been dubbed “the HGTV effect,” which reflects the fact that consumers are used to seeing expertly staged homes on HGTV that showcase everything from stainless-steel appliances to gorgeous granite countertops. In fact, the impact of new homes being showcased by experts on TV may be creating a trend in pickier home buyers who prefer newer homes to older inventory.

“Basically, it isn't anything new,” Thomas Coleman, president of Coleman Homes, tells GlobeSt.com. “It's seen in every industry out there, the rise in how well-informed consumers are. The home industry has been a little late to the party because all the parties involved in building a home have been on the sidelines due to the recession.”

Coleman maintains that between HGTV, websites like Pinterest and room apps, consumers now know what the new products are as soon as they come out—sometimes even before they come out. “It's changed the dynamic of consumers looking at products they want to put in their house, and it's taking homebuilding to a whole different custom level.”

Personalization of the home is one of the top priorities of home buyers today, Nick Lehnert, head of KTGY Group Inc., Architecture + Planning's R&D Studio and Idea Lab, tells GlobeSt.com. “However, let's apply the 'HGTV effect' to the architecture/structure of the house. Each consumer will 'live' in the interior space of a home differently; home buyers want to be able to personalize how they live in their home. So KTGY has introduced expandable rooms and 'I.D.E.A. spaces' (innovative design-enhancing activities) into its designs that enhance or expand the utility of the space in different directions based upon the homeowners' specific needs or wants. This goes far behind a homebuilder's spec of how many bedrooms a homebuyer wants.”

Most older homes for sale don't have cutting-edge design elements, and it may not be reasonable to remodel them to include these elements, says Coleman. But the bigger trend is that consumers want to choose their own design elements from the start, which may be easier to do in a brand-new home than an existing one.

Once the realm of the well-off set, customizing a home is now available to those with more stringent budgets. Coleman is building a showroom in which home buyers can utilize professional designers to customize their new home before it's built—everything from climate control to where the electrical outlets are placed to the countertops and flooring—and Coleman sells homes from the $100,000 to $400,000 range. People buying in this bracket “haven't had this option before,” says Coleman.

Still, the desire for new homes doesn't mean that distressed homes don't have an eager market. “A slow economy and tight financing mean that most consumers are willing to put aside their preferences to get a much lower price on an existing home—particularly distressed homes in foreclosure that we show on average sell for 30% below the average price of a non-distressed home,” Daren Blomquist, VP of RealtyTrac, an Irvine-based provider of real estate and foreclosure data, tells GlobeSt.com. “Demand is still very strong for these distressed homes, where multiple offers and bidding wars are not uncommon. These bidding wars are starting to push the price of distressed homes and all existing homes higher, and over the next year the gap between the price of an existing home and new home should continue to shrink—which will likely push more homeowners to consider buying a new home rather than an existing home.”

For now, though, the majority of real estate consumers are viewing the home-improvement shows and Pinterest more voyeuristically than practically, adds Blomquist, “although many of these shows and Pinterest provide economical ways to make an existing home look better rather than advocating starting from scratch with a brand-new home.”

As GlobeSt.com reported earlier this month, bidding wars among homebuyers were most heated last month in major California markets, according to a report from Redfin, a real estate brokerage that represents people buying and selling homes. The report ranks Orange County as the most competitive market in the country, followed by San Francisco, San Diego and Los Angeles.