Nothing To Be Afraid Of

Despite a lagging economy, the current landscape of the housing market is anything but scary

By Brian Alvarado

So here we are in October, nearly seven months since the start of the pandemic, and the word “normal” being outside of quotation marks seems to be nonexistent. While many hoped that a bounce back would be in full effect by this time, it seems that going back to “normal” is at least one, maybe even two years away.

And while Halloween later this month will have to be compromised to observe social distancing recommendations from the CDC, the housing industry has almost acted as our saving grace during this nightmare.

While many experts had predicted a downturn that would negatively impact all sectors, economists have been surprised at the encouraging data that has come from the unexpectedly active housing market, week in and week out.

The Writing is On the Wall

While many experts had predicted a downturn that would negatively impact all sectors, economists have been surprised at the encouraging data that has come from the unexpectedly active housing market, week in and week out.

According to the most recent Pending Home Sales Index from the National Association of Realtors (NAR), pending home sales jumped to 5.9% in July. This continues a streak of three consecutive months where that figure has grown. Looking into annual home price, CoreLogic’s Home Price Index report revealed that home prices jumped 5.5% year-over-year in July 2020, up 1.2% compared to last month.

Additionally, builder confidence in the market for newly built single-family homes spiked 5% to 83, an all-time high according to the latest National Association of Home Builders/Wells Fargo Housing Market Index. This comes after July’s reading of 78 had set a previous high, matching that of December 1998.

Most recently, the National Association of Realtors reported that existing home sales increased 2.3% to an adjusted annualized rate of 6 million units, a 14-year high. This is the highest sales pace since December of 2006, before the Great Recession.

Another stat that jumps out is a recent report that came from Redfin, which revealed that 54.4% of its home offers experienced fierce bidding wars. This was the fourth consecutive month where more than half of Redfin’s home offers saw competition.

The numbers are plain to see—housing is on fire right now. As the “home” takes on new meaning amid the pandemic, the trails of encouraging data are reason for building industry professionals to not be scared off by the pandemic’s effects on the economy.

Health and Hipsturbia

Considering a robust housing recovery thus far, our industry must also take into account that while homebuyers are still entering the market, they’re doing so for specific reasons, whether it’s to take advantage of record-low mortgage rates or first-time buyers finally ready for that big purchase.

One of those motives for buyers to enter the housing market today is the search for healthy, high-performance homes amid the pandemic. Building for wellness used to be an added perk, but now, it’s turning into the standard for homebuilders across the country as consumers are making this subject a priority.

According to the “America At Home Study” conducted by Nancy Keenan of Dahlin Group, Teri Slavik-Tsuyuki of tsk ink LLC and Belinda Sward of Strategic Solutions Alliance, noted that the importance of health and wellness amid the pandemic have spurred a change in focus for home features and community amenities.

In the study, which was a survey of 3,001 consumers ages 25 to 74 years old, more than half of the respondents said they wanted germ-resistant countertops and flooring, greater tech/energy-efficiency, more storage for food and water and touch-free faucets, appliances and smart toilets.

Another trend that is gaining more traction as we navigate through the pandemic is that of “hipsturbia,” where households migrate away from urban communities and into more suburban areas in search of more affordable prices.

PricewaterhouseCoopers identified “hipsturbia” as an emerging trend of 2020, and the pandemic has only intensified it.

In a report by Marcus & Millichap, many people working from home and doing their shopping and schooling online is causing homeowners to rethink their current situations.

“The ability to work remotely has diminished the value of a short commute in the home-search equation, making lower-cost suburban locations more favorable,” reads the report.

Though 2020 has been disappointing in many aspects, the housing market has displayed its resilience. In retrospect, builders should take a negative and turn it into a positive, because let’s face it, who would’ve thought the market would’ve been this hot if a pandemic didn’t happen.

Stay-at-home orders have caused households to think twice about their current living situations and mortgage rates might not be as low as they are today. Taking all the data into consideration, building professionals must capitalize on the upward trajectory of the housing market and consider the new needs and wants of the typical homebuyer. The light is at the end of the tunnel and there’s nothing to be afraid of.

Brian Alvarado is the editor of Builder and Developer Magazine. He can be reached at brian@builder.media.

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