The Light | John Burns Real Estate Consulting

The Light

The mission of John Burns Real Estate Consulting is “to help executives make informed housing industry investment decisions.” And despite the uncertainty in the global economy today, a recovery will be in our future. In this newsletter, we choose to focus on the positive, and each week we will offer The Light, or a potential strategy / competitive advantage in the housing industry arising from the turmoil caused by the COVID-19 pandemic. Subscribe to our newsletter to receive all upcoming releases every Friday.

Recent Releases

The Light: The Great Regional Debates. Round 3: Texas

Everything is bigger in Texas. The state continues to benefit from in-migration, driven by its relative affordability (including no state income tax) and vast supply of suburban and exurban housing.

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The Light: The Great American Move Accelerates

Never before have space and location been more important. The housing industry continues to benefit from The Great American Move. We continue to track the acceleration of movements to exurban communities—those in the affordable West and South.

Many growing families rely on 20-foot moving trucks when moving to a larger home, ideal for 2–3-bedroom homes or large apartments. We just updated our analysis of U-Haul rental rates between cities, which gives us insight into migration patterns.

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The Light: The Great Regional Debates. Round 2: The West

In the last edition, we launched the first Great Regional Debate, which showcased key opportunities for housing market success in Florida and the Southeast. In this release, we highlight some of the key markets in the West.

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The Light: The Great Regional Debates. Topic #1: Florida or the Southeast?

For the next two editions of the Light, we will highlight various regions of the US and showcase the opportunities (and some risks) for each as we continue to navigate the pandemic.

We start with Florida vs. the Southeast. While both Florida and the Southeast offer affordability, sunshine, and strong population growth, these two regions offer distinctively different investment potential.

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The Light: The Active Adult Buyer Is Back!

With the national housing market surging, active adults have decided it is time to participate again. As discretionary buyers, they’ve had time to “restart” their purchasing process, and many of our developer and builder clients report that with proper health precautions in place, they’ve been willing to do so. In many age-qualified communities across the nation, home sales were particularly strong in August and September.

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The Light: Timing is Everything

Job losses and unemployment claims put many apartment renters out of work, but extended eviction moratoriums and government stimulus have helped them keep their homes. These factors have resulted in our revised 2020 forecast for stable rents in many MSAs. Multifamily construction in many markets surged over the last few years (in many cases a response to affordability challenges), and capital markets and banks are still backing new construction. Interest rates are at historic lows, drawing renters into homeownership. We believe there are suburban and urban opportunities for construction and investment in the apartment sector. It all depends on timing.

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The Light: 10 Big Real Estate Ideas

This edition marks our 25th consecutive issue of The Light. We looked back at all of our posts and picked the top ten housing market trends from the last six months. Which ones are most important to you?

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The Light: The Great American Land Rush

Demand for housing is frenzied. Meritage Homes CEO Steve Hilton described it best on our recent New Home Insights podcast as the strongest housing market he’s experienced in his 35 years with the company. Builders and developers are in desperate search of lots and land, and in our 2Q2020 land survey 60% of brokers rated the national land market as Hot or On Fire.

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The Light: YOLO! Second-Home Boom

Demand for second homes in drive-to destinations is surging. Nationwide, these convenient locations are benefiting from a rise in the YOLO (you only live once) mindset as people across the country look to get away and enjoy life as safely as possible during the pandemic. Developers and builders can take advantage of the boom by understanding second-home buyer preferences and a renewed focus on lifestyle in their communities.

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The Light: Disneyworld… or a New Home?

Many families missed their annual Disneyworld vacation this year due to the pandemic. But what many of them did not miss was the opportunity to buy a home, taking advantage of the lowest mortgage rates in history. A 7-day Disneyworld vacation would have cost a family of four approximately $8,100 this summer, which is about the same as the down payment for many entry-level new homes financed with an FHA loan. And with incredibly low mortgage rates, monthly payments for some new homes range from only $1,400 to $1,900—similar to rental rates for much smaller spaces.

The booming demand for entry-level homes is not only driven by affordability. Today’s buyers are motivated by safety, control, a great place to live, and of course FOMO on the opportunity to own a home.

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The Light: Your Kids Live at Home Too

While the pandemic will subside and kids will return to school, most parents will never look at a new home in the same way. The previous focus on kitchens and master bedrooms will remain, but buyers will also be seeking functional spaces for their children and environments that let working parents coexist with their active kids. We highlight some clever design elements to help make the experience more valuable for everyone.

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The Light: Market Opportunitites

Despite the tremendous economic distress caused by COVID-19, our clients continue to find strong renter and home buyer demand for newly built homes across the country. In this release, we highlight the markets and real estate segments where we are consulting most frequently.

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The Light: Remember the Healthy Amenities

So much of today’s dialogue about housing relates to making the home a place of comfort and safety. The same is true for the community. As we continue to assess master plans across the country, we’ve noted the amenities that promote outdoor health and wellness are the most used.

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The Light: Retail—Reimagine, Reuse, and Recycle

The devastation wrought by retail closures will bring opportunities for redevelopment. Our consulting group was already considering new, residential options for dated retail spaces, which often feature desirable locations, close to employment, transportation, and services. Historically low mortgage rates will provide a huge boost to residential as a reuse for retail.

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The Light: Giving Back

Each week we strive to find new opportunities in the housing industry. In this edition of the Light, we choose to highlight instances of “inspirational wins,” when, against the backdrop of challenging circumstances, people demonstrate what is most important.

Our friends in the housing industry continue to inspire us as they mobilize during these trying times to help those most in need.

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The Light: The New American Home Buyer

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 ~21% of all new home inventory in the country.

Just who is purchasing a home during the pandemic?

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The Light: Celebrating the American Home

As we celebrate our country this year, we consider and appreciate our role in helping our clients create and finance highly desirable and inspirational places to live. Now, perhaps more than ever, the home is playing an important part in the realization of the American Dream.

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The Light: The Fourth Tee

We believe the nation is about to tee off on the fourth hole of the housing market recovery. The fourth hole represents a stage in the game where players may have started to gain confidence with a few good shots. It also represents a point on the course where players must settle down, implement the right strategies, and consider the future.

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The Light: Virtual Empathy

New home marketing will never be the same. The home is more of a place of refuge and safety than ever before. For many more, the home is also now their office. Here are some marketing tactics we see working.

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The Light: The Housing Rally

Stay-at-home orders first generated a jump in DIY projects and are now resulting in a surge in new home purchases and remodeling projects involving contractors.

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The Light: Home Buyers on the Move

As the world reopens, the Great American Move that we projected on May 8 has begun! The housing industry is benefiting from the movement, and this release of The Light highlights some of the opportunities.

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The Light: Renters Need Their Space

“Space” in home and community design has never been more important. People need space for health reasons, and people need space and privacy to work from home. Working from home will be a significant shift that stays with us for years.

With record low mortgage rates, the need for more space is one reason that new home sales have already finished their V recovery. To succeed during lease-up, the more than 400,000 apartment units currently in some stage of construction also need to capitalize on tenants’ need for space.

A few weeks ago we asked, “Does it take a pandemic to get millennials to buy?” In this release we ask, “What does it take to get people to rent?” We highlight two opportunities for new apartment construction, both of which were already trending before COVID-19 hit.

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The Light: Tell Me a Story

Once upon a time, a pandemic known as COVID-19 wreaked havoc on the world. Real estate developers—the people who create the wonderful communities we live in and who employ hundreds of thousands of great people—successfully raised the money they needed to keep their businesses going by learning to  “tell a story” about why their development would be successful in a post-COVID-19 world.

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The Light: Reinventing Community

Successful master-planned community developers are evolving their marketing messages to allow for more comfortable, socially distant interactions for future buyers, while they foster the sense of community that is special to their existing residents. These developers are also at the forefront of community service with a focus on neighbors and first responders in need.

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The Light: The Great American Move

As states, cities, and counties around the country slowly reopen, we predict The Great American Move. For safety reasons, financial prospects, life change improvements, personal comfort, and employment, we expect a surge in household and business relocations over the next few months that will provide new, strategic opportunities for the real estate market.

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The Light: Does It Take a Pandemic to Get Millennials to Buy?

After four weeks of plunging new home sales, transactions have roughly doubled in the last two. The jump in demand has largely been driven by Sharers (31–40-year-olds), a term we developed in our book Big Shifts Ahead to describe the older millennials born in the 1980s. The buyers are mostly couples and individuals who:

  • Have been wanting to buy for some time
  • Are cooped up in a living situation they don’t like
  • Have little fear of losing their job soon
  • Are more focused on low payments than on future price appreciation

The headlines would have you think that few people are in that situation, but numerous builders confirmed during their earnings calls this week that they are seeing the opposite. While the size of this pent-up demand is hard to determine, here is where we see the opportunities for builders to target and adjust to the buyer.

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The Light: Geographic Opportunities

While shelter-in-place is common among most markets, they each have very different housing market fundamentals.

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The Light: The Future of (Re)Development

In our latest release, we explore the increased importance of thoughtful development and redevelopment in housing. The concepts of safety, security, and convenience will play an increasing role in where people want to live.

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The Light: Opportunities Ahead

See what our experts have to say on geographic opportunities and land prices as we continue to focus on positive strategies for the future.

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The Light: 5 Key Consumer Shifts

Recently, we connected with more than 90 real estate professionals in more than 45 metro areas to understand what buyers were feeling, thinking, and saying about new home purchases. In this release, we focus on the positive and how understanding current conditions can provide strategic insight into consumer preferences when the recovery begins.

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The Light: The Apartment Industry

Our first release for The Light focuses on the market landscape of apartments. Here are the conditions from which we anticipate opportunities will arise.

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Ken Perlman If you have any questions, please contact Ken Perlman, Managing Principal, at (858) 281-7214 or by email.
Lesley Deutch If you have any questions, please contact Lesley Deutch, Managing Principal, at (561) 998-5814 or by email.