Proactive, Preventative Steps To Lower Owners' New Home Costs
Ten Fed funds rate hikes and 15 months later, Federal Reserve chairman Jay Powell says the inflation fight – after a pause -- “has a long way to go.” More policy tightening and even higher rates are in store.
Consumers, nevertheless, have behaved buoyantly, beyond expectations. Further, the outlook of households tracks headily upward even as their expectations for inflation point down.
Still, the consumer behavior story is mixed. Clearly, the cost-of-living crisis is a fact of household life for most of us, even those who are undeterred in their determination that now is the moment to make the most consequential financial decision most of us ever make: buying a home. In news this week, homebuilder confidence – both present and forward-looking – rose to a milestone level it hadn’t seen in 11 months, and their production in permits and starts surged in May as well.
However, still, realities are that inflation has force consumers to cut spending and make harder choices about where to try to save, what not to buy, and how to make what they do purchase last longer.
CNBC correspondent Courtney Reagan writes this week:
The [new CNBC and Morning Consult] survey found 92% of Americans are pulling back, further evidence of what retailers like Walmart, Target, Home Depot, and Best Buy called out as cautious consumer spending shifts during the first quarter.
Shoppers continue to report inflation squeezing their finances, with concerns particularly heightened among middle-income Americans. Of the survey respondents, 92% of middle-income Americans — or those who make between $50,000 and $100,000 a year — reported being ‘somewhat’ or ‘very’ worried about higher prices.” – CNBC
Still, while a FOMO mindset seems to have clung on among homebuyers, their pocketbooks and monthly budgets rein them in. This is especially true among highly active home shoppers at the entry level and first-time buyer spectrum – whether it’s in the settlement process or in the first year or so in their ownership experience – who are pressed at every turn to find opportunities to save.
Homebuilders themselves are doing what they can on the value-engineering front. They’re laser-focused on designing, engineering, and building only what homebuyers value and discarding what they don’t. Still, many homebuyer prospects – continuing to battle a cost-of-living crisis on the household front – look for every opportunity to save money and mitigate their risk of having to pay a budget-breaking price later in the homeownership experience.
Those efforts often come to light in the throes of the purchase and closing process, according to Ben Sokoll, VP of Customer Support for Westwood Insurance Agency, a sponsor partner of The Builder’s Daily.
There are two distinct areas of savings opportunity – from the home insurance perspective – that emerge as patterns among buyers in the purchase journey,” says Westwood’s Sokoll. “One of them, I like to call ‘preventative maintenance’ measures they can take to save funds during the homeownership experience. An example? Purchasing a $2 gasket to maintain your water hose will save you money over time versus letting it leak. Those little things that you can do now can make a huge difference down the road. Another example: Maybe not painting part of the siding that may have chipped. You know that, exposed to the natural elements over time can create water damage behind there, which then impacts the structure of the house. And then the repair gets costly. The insured is still going to be held to a 1% to 2% deductible. Now you're looking at anywhere between $2,000 to $4,000 out of pocket. The insurance company may not even cover the repair because it doesn't meet the deductible.
“So that's probably one of the biggest benefits that I would say is just to look at the preventative pieces in order to save money down the road.”
A second category of monthly cost and total lifetime cost opportunities pertains to coverage choices and options buyers have as they determine the values and exposures they want to insure.
Various endorsements are offered through every single type of homeowners insurance policy,” Sokoll says. “One thing you'll see frequently looks at personal property. An owner's personal property may be listed at 60% to 70% of the replacement cost of the house. The question is, hypothetically, 'if your home’s replacement cost is $100,000, do you have $70,000 worth of personal property in your house?' Chances are probably not. That would be an area where an owner could look at bringing that down to 40% or 30% -- the real value of their personal property. By doing that, they're able to save money on a homeowners insurance policy and that savings is carried out through the life of the policy year over year.”
Nested within that first “preventative” maintenance category is an insurance application that’s emerging in more buyers’ journey and closing process conversations. This owes in large part to exponential advances in building technologies, increasingly inexpensive sensors, and smart mobile devices. Sokoll notes that one of the most frequent “loss” areas owner-residents experience in their homes results from a slow continuous undetected leak.
Over time,” says Sokoll, “leaking water piles up and it creates damage within the house, and then it expands. So, related to those preventative measures I spoke of that have insurance implications, in a lot of the new newer homes you have the ability now to add on a water or leak-detection sensor. This will indicate a water presence in the bathroom or a water presence in the kitchen. You can also install one at the main line in front of the house that will indicate that there’s a water leak in the house. You can shut that down either through Bluetooth or any type of technology application.”
Sokoll notes that – especially for second-home/vacation home residences – smart device control of heating, cooling, thermostats have become both preventative and active ways for owners to lower risk of loss and, in some cases, lower monthly insurance costs. Too, structural and engineering investments in such areas as “forever roofs.”
With a 100-year roof or a 50-year roof, the likelihood that you're going to experience a total loss is very slim in the event of a hailstorm,” Sokoll says. “On top of that you get a pretty good discount on your homeowners policy as well for having a 100-year roof or a 50-year roof, and more new homes, particularly in Southern states are offering the option.”