Key Highlights
- Home sales halted at the end of March BUT
- Mid April sales volume began to climb
- New home builders at the head of the pack during collapse and now at head of the pack in demand
COVID-19 and its economic shutdown halted home sales by mid/end of March. Sales of newly built homes were the most severely effected, falling -85% from normal spring buying activity by the fourth week of March.
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Then, April arrived and sales of newly built homes began to rise, according to John Burns Real Estate Consulting, a firm that tracks hundreds of builders across the country. Devyn Bachman, manager of research at Burns Consulting, said, “We’re still down roughly -65%, but more positive news is coming out of the new home market, particularly for builders who are targeting the first time and entry level buyers.”
The source of demand for newly built homes is a young, two-income couple who has two secure employment situations and who has been renting. New, entry-level homes are “…safe, clean and easy to show at this point,” said Bachman. “Lots of the builders have set up virtual tours on their websites, the sales agents are setting appointments for consumers to come in and tour models in a safe distance manner. They’re actually able to show the new home, whereas in several markets it’s very difficult to see resale listings at this point.”
Other factors favoring newly built homes include…
- actually twice the supply of existing homes as sellers pulled their listings from the market as the pandemic took hold
- builders can easily incentivize their homes with supplemental amenities and finishing touches
- some builders are incentivizing agents with increased commissions to drive demand
- most large builders have in-house mortgage services
- more space than urban apartments so former renters, now owners can have separate home offices, basements for exercise gear and/or back yards for private outside time
- first-time buyers like home locations that have walk-able neighborhoods with proximity to shops and restaurants
- remote working likely here to stay at least part time so owners won’t “need” to be as close to office/job site as pre-COVID days
Two key selling points for newly constructed homes that particularly appeal to first-time buyers are health and price. Many potential buyers are now “germophobic,” thanks to the COVID lockdown. New houses come with fewer germs inside them and fewer people with germs around them. And homebuilders are business people who are motivated to make a deal… Home buyers like to think they are getting a deal.
Bachman of Burns Consulting said, “I do think consumers are hungry for a deal especially the first-time buyers. If you’re working on a quick move-in or one of the speculative inventory sales, you might be able to get some sort of discount in the new home market at this point, which is very attractive to that group.”
Thanks to CNBC’s Diana Olick.
Also read: Podcast: When Will Things Feel ‘Normal’ Again? | Return Of The Housing Boom Ahead?, Best Real Estate Podcasts According to The Motley Fool, How Has Covid-19 Already Impacted the Real Estate Market?
