Housing Economy...The Growth of New Homes
Each year economists check on the pulse of the housing market by looking at which trends are on the rise. In 2019 we’re expecting to see a continued rise in new construction projects across Hampton Roads stemming from increased confidence in credit approvals as well as solid growth in wages for American workers.
Let’s talk about inventory for a moment: as resale inventory becomes scarce more buyers are turning to new homes for as a way of escaping the “What If’s?” of a competitive market. The ability to customize a home for their lifestyle, move in to a home that’s covered with top-to-bottom warranties, and invest in themselves are all part of the draw of new home communities. Many Millennials are waiting longer to purchase their first home as well, and in lieu of purchasing a starter home, their first home buying experience tends to play out more like a second or third home purchase.
There’s also the aspect of slowed equity growth. In response to the market crash in 2008 home equity has grown steadily, but not at the accelerated rates we saw around the turn of the millennium. This has made purchasing a new construction home more affordable than ever. Add in the fact that most Millenial and Boomer households rely on dual income, increasing the purchasing power, and you’ve got a recipe for a new home boom. Builders are already feeling the pressure as more and more consumers turn to new home communities while the resale market shrinks. The key to capturing this huge market of young professionals will be listening to their needs and wants when planning developments. Jody Kahn, a senior VP at a large real estate consulting firm says “There’s this feeling that here’s a less-taped segment that’s going to be growing, and we need to get ourselves in the mainstream of that activity.”
So what does that mean? Millennials are eschewing the traditional checkboxes, such as square footage, bedroom count, and school districts – likely a by-product of their delay in having children. NorthshoreFireplace, partnering with top agent James DeMarco, compiled a list of what features Millennials value most. Leading the list were items such as modern appliances, large master bedrooms, and smart/energy efficient customizations. Defining their personal space is extremely important as the generation carries a “work hard, play hard” mentality. Interior also ranked far above exterior in terms of desired features. This is an especially important advantage that new construction carries. With land becoming a premium, lot sizes are falling, which is something Millennials just don’t value the way previous generations did. If builders can capitalize on this not only will they drive costs down but also they’re likely to attract more potential first time home-buyers.
In the end it comes down to one thing: planning. By keeping a close watch on the trends of the market, factoring the fluctuating costs of raw materials, and predicting the inventory available 12, 18, 24, and 36 months out will keep new construction on an upward tick. Create homes that are attractive to your demographic, don’t try and do it all. If you want the Boomers looking to retire and purchase their ‘Forever Nest’ focus on tranquility, privacy, conveniences inside the home, and luxury outdoors. Imagine the grandkids visiting, the convergence of families over the holidays, and structure your community around it. If it’s the tidal wave of Millennials you’re after then scale it back, find ways to market via social media, implement technology into your homes so that it’s seamless. Community is key, create social events, meet them at their dinner table instead of attempting to bring them to yours.
TREG’s New Home division is committed to serving clients at the highest level, regardless of their needs, and pairing them with the right builders, right communities, and right homes for their lifestyle. If you want to work with the local pros then there’s one clear choice, we’re a Hampton Roads Original® and we love where we live. Contact us today to see how we can help you make your New Home dreams a reality!