Friend and colleague Scott Sedam sent me an e-mail saying that the scuttlebutt he'd heard in the industry is that Meritage is giving away the houses in Arizona that we call "game changing" in our story and video report headlined "Revolutionary Green."

"If they are doing this and making a fair profit, this is indeed a game-changer," Scott writes, then adds, "If they are losing money while doing it, nothing whatsoever has changed..."

It's a fair point, and something we talked about in our interviews with C.R. Herro of Meritage. He assured us that Meritage is making money on all of the houses we profiled, although the margins are skinny. How do you make money on houses that include $50,000 worth of energy-saving features and technology, but sell at prices starting under $200,000? Herro didn't answer directly, but hinted that the secret is in the price Meritage paid for the land (What a surprise!). Neither of the projects we visited was developed by Meritage. Obviously, the company picked up these lots for a song in the troubled Arizona market. It's also obvious that Meritage's pricing has to change when the bargain land disappears. But Herro insists that Meritage will never go back to building houses the old way, with 2x4 walls stuffed with fiberglass batt insulation, etc.

It seems to me that what Meritage is doing is smart: Rather than discounting again and again, and stripping down houses again and again (as the other public builders in Arizona are doing), it draws a line in the sand on pricing, which actually helps stop the downward spiral, and includes this technology as standard, which it needs to do to make it affordable. By delivering exceptional value and operational efficiency, the company is attempting to hook buyers on its product. Then, as the low-cost land disappears, its prices will rise, but by then buyers will be willing to pay for it.

It's an interesting approach, and it's also interesting that it seems to be working best at Verrado, an exclusive golf community in Buckeye, Ariz., where the buyers are move-ups and well-healed empty-nesters or snowbirds. Perhaps the more experience people have with homeownership, the more they understand the value proposition. I think our analogy to Toyota's Prius in the auto industry is appropriate. From what I know, the early Prius buyers, the ones who made that car a game-changer, were not buying their first car.