Reflecting on Housing in 2020

Building professionals should take an optimistic approach when looking back at 2020

By Brian Alvarado

December is here and 2020 is coming to a close. As much as the world wants to forget this past year, 2020 will live in infamy for years to come. However, it’s important for our industry to take this year as a lesson and view the glass as half full, rather than half empty.

Despite all the negative that happened in 2020, the data that’s been uncovered will help our industry be successful in the long run.

Despite all the negative that happened in 2020, the data that’s been uncovered will help our industry be successful in the long run.

The Housing Surge Continues

It’s been a prolonged narrative since the pandemic began in spring — the housing sector has been a bright spot during this time of economic downturn. While many other sectors suffered major blows as a result of shutdowns and stay-at-home orders, the housing market remained active — home prices began to spike and demand shot through the roof, causing bidding wars and the need for more inventory.

In a previous article by MetroIntelligence’s Patrick Duffy, builders were feeling optimistic about where the market was going.

“Builders are certainly bullish about the near future, with their confidence levels on NAHB’s (National Association of Home Builders) Housing Market Index rising to another high of 85, the first time that the index has been above 80 for two consecutive months or more,” Duffy said.

Another reason for an active housing market is the low mortgage rates, which buyers are taking advantage of. According to Freddie Mac, 30-year fixed mortgage rates dipped to 2.78% at the beginning of November. This is the twelfth time that mortgage rates hit a record low since the beginning of 2020.

Buyer desires are changing

Additionally, the pandemic helped paint a better picture of what trends would be emerging and which ones would become permanent for years to come. In another article from last month’s issue, NAHB Chief Economist Robert Dietz talked about some trends that have emerged because of the pandemic.

“Whether due to the need for home office, schooling or exercise space, the demand for residential space has grown in 2020,” Dietz said. “This is boosting demand for remodeling and increasing demand for larger, newly built housing, particularly in the single-family sector.”

Dietz also explained that construction data tracked in the NAHB Home Building Geography Index proved that lower density markets saw greater growth during the challenging second quarter, playing into the trend of “hipsturbia” that was already prevalent pre-pandemic.

Buyers are not only looking to go bigger in less dense areas, but they are looking for more flexible, multifunctional spaces.

In the America At Home Study that was published in Builder and Developer’s August issue, more than 30% of the survey respondents said they wanted space with flexible walls.

A New Era

One shift in 2020 had to do with the fact that millennials are now the largest cohort of homebuyers at 37%, according to the National Association of Realtors, and builders need to cater to their preferences to succeed. One of those preferences is the need for technology.

In 2019, Cox Communications conducted a survey of 604 millennials and Gen Xers who were planning on buying a home within two years that found that technology compatibility would be a pivotal factor in their decision to purchase a brand new home as opposed to resale. The survey revealed that 75% of millennials want high-speed broadband internet for remote work, online classes and high-definition movie streaming.

Furthermore, 56% of the millennial participants sought wireless connectivity in common areas like outdoor gathering spaces, clubhouses or near pools. Lastly, 54% of millennials wanted built-in, ready-to-use smart devices that can be controlled through a mobile app. Mind you, all this data was collected pre-pandemic, and these figures could’ve been more emphasized after the beginning of the pandemic.

Build-For-Rent is Booming

One stand out area of the housing surge has been the single-family rental (SFR) space, which experts at John Burns Real Estate Consulting (JBREC) say in a recent article has “garnered more interest” than any other real estate asset class.

In the Burns Single Family Rent Index, single-family rents were up nearly 4% in August compared to the year prior, surpassing the 3.4% historical average dating back to the mid ‘80s. Also, none of the 63 markets that were tracked experienced a year-over-year rent decline.

While many millennials are beginning to make life-changing decisions such as home purchases, JBREC found that much of those renting were doing so by choice despite having relatively high incomes.

Now that 2021 is just a month away, 2020 can be viewed as a lesson for all. As our industry continues to navigate toward the light at the end of the tunnel, it’s important for builders to start mapping out the blueprint for success in the long run.

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

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