by Greg Logan, RCLCO
New home sales activity in January and February of this year quickly surpassed levels experienced in late 2019, and despite a brief pause due to the coronavirus shutdowns in March and April, the resumption of strong new home sales over the summer represent some of the strongest new home sales activity since the mid-2000s. RCLCO’s mid-year report on the Top-Selling Master-Planned Communities shows MPC’s having some of their best years in terms of sales ever. It’s hard to say exactly how much of this activity is related to a Covid-19 induced “flight to the suburbs” versus trends that were already underway, but there is evidence that the pandemic and the associated economic turbulence have had both short term and potentially longer-term influences on the housing market.
More recently the impact of housing preferences influenced by the coronavirus appears to have at least temporarily accelerated growth in the suburbs that was already being driven by historically low-interest rates and long-term demographic shifts.
For many home buyers the pandemic has created economic and lifestyle changes that have influenced people to make moves sooner than they otherwise may have:
Working and learning remotely.
Not being able to capitalize on urban amenities due to partial or complete shutdowns, and the need for social distancing, have made living in urban areas temporarily less important for many people.
Having the home transformed from a place they spend some of their time, to a place they most of their time, with a greater need for home offices, homeschooling, home exercise, etc. has accelerated many households’ desires for more space or at least differently configured space.
Tight resale and new home inventories are keeping prices high, impacting for-sale housing affordability, and many households seeking more space are reportedly finding the suburbs (and exurbs) are where they can afford that new or resale house.
Working from home means commute times are a less significant factor, it’s been reported that people are looking further out from job centers for more space and greater affordability.
The growing demand for single-family rental housing, filling in some of the affordable housing gap, is likely a long-term trend. While monthly costs to rent versus own may not make single-family rental homes appear that much more affordable than their for-sale counterparts, the fact that they don’t require tying up significant savings in a down payment is a big deal for many households.
Builders are responding to the current housing boom with new home layouts better suited for households living through a pandemic. New homes that better accommodate working from home, with built-in desks, better noise insulation, enhanced lighting, pre-wired Wi-Fi, built-in USB chargers, exterior entrances, and dual office set-ups are increasingly common. Home learning is also being better incorporated into new home designs, with “learn-in” kids’ bedrooms, school room loft designs, and basement study halls being offered as options. While many gyms remain shut down or only partially open, builders are offering dedicated space for at-home workouts, in the house, garage, or basement. Some plans offer larger pantry spaces to reflect the fact that households want to keep more provisions on hand than in the past. Outdoor environments for socially distanced gatherings, such as extended screened decks, enhanced patios, and porches are similarly attractive options.
Although we’re obviously concerned about rising Covid-19 cases nationally and the potential for temporary shutdowns in the next several months, underlying economic and demographic fundamentals have indicated that we should expect a strong 2021 new home market as long as interest rates remain low, and home prices stay in reach of homebuyers.