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? We found three fascinating characteristics of the new American home buyer:
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 23–30-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.
The outlook for the home building industry remains unclear, as rising COVID rates and uncertainty around government stimulus may result in another leg down for the economy. But we continue to see opportunities for home builders, land developers, and other industry participants despite the uncertainty.