3 characteristics of the new homebuyer and realizing the American Dream
By Lesley Deutch and Ken Perlman
New home construction is perhaps the brightest spot in the economy right now. Thanks to The Great American Move, low mortgage rates, and a hyperawareness about living environment, new home sales in June exceeded those in the same month last year by 55%, according to our survey that captures approximately 21% of all new home inventory in the country.
Just who is purchasing a home during the pandemic? We found three fascinating characteristics of the new American homebuyer:
1. They prefer suburban.
We highlighted the suburban shift in previous editions of the Light, but the trend is accelerating faster than anyone could have predicted. The need for more space is driving suburban migration, along with thousands of young adults moving in with their parents. More than 1.12 million 23 to 30-year-olds moved “back home” since February, increasing the need for more space and influencing demand in the housing market.
2. They are serious!
Our builder clients report extremely high-quality traffic. The most knowledgeable, tech-savvy, and pre-qualified buyers ever are making appointments and showing up ready to buy. Traffic conversion rates are probably at an all-time high.
3. They are impatient!
As buyers swoop in to purchase, they are choosing ready-to-move-in inventory over to-be-built homes, even in the luxury segment. There were just 1.5 units of unsold inventory per community in June — a 20% year-over-year decline. The surge in sales creates all sorts of opportunity for industry players, especially land developers, as the number of actively selling subdivisions is 5% lower than one year ago. We think price appreciation will increase if interest rates stay low, and the government continues to stimulate the economy.
Celebrating the American Home
Now, perhaps more than ever, the home is playing an important part in the realization of the American Dream.
The concept of American Dream has evolved over time:
• In 1931, James Truslow Adams coined the phrase, encapsulating the idea that each person would have the opportunity to reach the goals of which he or she was “innately capable.”
- In 1944, FDR evolved Adams’ concept by proposing the Economic Bill of Rights, which included “the right of every family to a decent home.”
- Many subsequent leaders have reinforced home ownership and quality, affordable rental housing as part of realizing the American Dream.
- Today’s societal debates highlight that the American Dream has not yet been fully realized by many.
- Let’s switch gears and identify buyers as first-time, move-up, and move-down. Each of these buyers has fundamental needs as well as aspirations for their homes that include some features they can afford and others they may or may not be able to.
Certain fundamentals represent the basic tenets of housing for each stage in life, especially safety and security. New homes must include work-from-home spaces, great laundry rooms, full guest bathrooms, and connections to the outdoors.
- For first-time buyers or renters, interior spaces are increasingly dual purpose (sliders that create niches for unique uses), while outdoor spaces such as side yards
or front porches can be small but must be functional enough to temporarily escape the indoors.
For the move-up buyer, defined rooms that reduce noise from multiple, concurrent activities are essential.
- • The move-down buyers seek low maintenance, first floor primary suites, storage spaces, and universal design that provide the opportunity to adjust the home to age in place. Aspirational items evolve the fundamental. concept of quality housing to the concept of luxury that is often associated with the American Dream today.
- • Aspirational first-time buyers want more than just quality housing. Expand balconies and usable patios as much as possible for this group and emphasize clean air, natural light, and easy-to-maintain materials. Add efficient storage spaces for bicycles or other recreational gear to differentiate small homes from competitors.
- • Move-up buyers leading more hectic lives (possibly with multiple generations in the home) aspire to drop zones for neatness and cleanliness, 3-car garages (more storage) and multigenerational options as they balance having older children return home and possibly aging parents join the home.
- • Move-down buyers aspire to have guest rooms for visitors, flex spaces that can be used as an in-home office or hobby rooms, and great entertainment spaces including transitional indoor/outdoor spaces like covered patios. And of course, move-down buyers love anything that helps them spoil their pets.
As we continue into 2020, we think about what home means to us. And while the philosophies behind such words can spur debate, we believe home means a place where each person feels safe and secure in whatever form that takes, whether as an owner or a renter. Never has this seemed more important.