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.
Affordability has improved dramatically because of low mortgage rates and builder financing incentives. Consider these examples from across the country that can be purchased with a “Disneyworld vacation” down payment.
Safety and Security
From Atlanta to Phoenix, we hear a consistent theme of safety and security as the underlying reason to buy a new home. Buyers are leaving high-density areas and finding monthly payments that are equal to or in some cases, less than their rental. Many of these communities come with a gated entry and a common amenity like a pool or playground which can add to the allure.
Homeowners have control over how they design their spaces, more control (than renters) over who they come in contact with each day, and a greater sense of control over their financial futures. In a world that seems increasingly chaotic, controlling one’s own environment appears to be more attractive to buyers than ever.
Builders report a strong “fear of missing out” from younger buyers, who see their friends and families take advantage of some of the best housing market conditions ever and are worried prices may rise quickly. We continue to hear words like “frenzy” and “waiting lists” describing the traffic at entry-level communities. Buyers who don’t qualify for mortgages are working closely with builders and mortgage companies on credit repair and pre-qualifications. Despite these hurdles, demand is outstripping supply, and the challenge for entry-level builders over the next year will be lot supply and inventory homes.
Note: Monthly payments are per builder websites or JBREC calculations.