We don’t blame anyone for wanting to leave a large city to move to a sprawling home with a suburban lawn and garden. That’s our favorite place to live, too! The big city has its allure, of course. There are plenty of things to do, job opportunities, public transportation opportunities, museums, parks, and shows to enjoy. Or there were, at least, before COVID-19 became a factor.
But in 2020, there are plenty of reasons folks may decide to pack up and head for greener, larger pastures in a rural or suburban home. We are seeing a large exodus out of some of the large cities and record interest in new single family home construction around the country.
Suburban and rural areas are drawing buyers
COVID-19 is changing what people want in their homes and lifestyles. Many people no longer have to be close to work because so many companies are mandating or encouraging working from home. This frees a lot of people up to live far away from work for the first time.
People want to leave crowded areas to have more space and more privacy. They want to be able to have a private living space outdoors, go for walks in an uncrowded neighborhood, or on trails. They want a backyard with a basketball goal, a pool, or a swing set for the kids. They want more space in their homes and more rooms for office space, online meetings, home gyms, outdoor living spaces, and home learning centers. And if they could find a great place on a pond or lake, even better!
Another thing people want more of is multi-generational living—space for extended family in their homes. Basement apartments, backyard cottages, mother-in-law suites, etc... They want to help safely house elderly family members who don't want to go to nursing homes because of COVID and provide for young adults who are facing a difficult job market.
Is it a buyer’s or seller’s market right now?
The current real estate market is in a very unique place. Before COVID-19, it was more of a sellers’ market in many areas. Millennials were looking for their first homes to snag their piece of the American Dream. Mortgage rates were historically low which made buying a house possible for more people than ever. Then the virus hit.
Experts weren’t sure exactly what would happen. Many were surprised when the housing market continued to thrive. The Millennials are still out there looking for homes and mortgage rates are still insanely low—3.03% at the moment.
Some markets where people are leaving cities have great deals and better entry-level pricing than they’ve had in years. This is the perfect opportunity for new buyers who are normally priced-out of the real estate market.
A few things are different now, though. There is a growing demand for homes away from big cities but not enough supply in many markets across the country. Sellers, who live in their homes, are reluctant to show their homes in person because of the virus. Many are not putting their houses on the market, even if they would like to. This is driving inventory down at the same time as there is an increase in demand for homes. This drives the prices of the remaining homes for sale up.
Another reason the inventory is low is that many Baby Boomers are holding their houses when normally they may have opted to move to nursing homes. The nursing home situation with COVID-19 in the picture this year hasn’t been a very attractive option for many people. Lots of people around retirement age are staying in their homes longer which keeps their homes from going on the market. This also helps to drive prices higher.
The pent up demand for homes plus lower inventory has caused a seller’s market in many areas. The suburbs, the South, more rural areas, and small towns around the country seem to be selling homes very quickly. Some markets even see multiple offers on homes their first day on the market. We are seeing that right here in Lexington, South Carolina. But it is also happening in other places across the nation, as well.
Realtor.com reports “Buyer Demand Drives Home Prices Up 8.5% in July.” National inventory is down by over 32 percent. Large markets have seen an even greater drop in inventory of 34.8%.
The market value of homes in many areas is increasing because buyers are fighting over the smaller number of homes available. In April and May, many builders faced a slump during quarantine, but this summer home builders are experiencing all-time record high demand for single family homes. We expect this to continue for some time.
New home construction is riding a tidal wave of interest around the country.
What is a buyer’s market?
A buyer’s market favors people who want to buy houses. When we have a buyer’s market, there are many houses for sale and a lot of variety for buyers to choose from but not as many people buying houses. The prices are driven down because sellers want to attract buyers and it is harder for sellers to sell quickly so they have to lower their prices to compete.
Buyers can take their time looking around at all of the many options and can often negotiate the prices downward in their favor. This is happening in some areas now. The buyers are the winners because housing prices have dropped and inventory exceeds demand, like in some of the bigger cities.
What is a seller’s market?
When we have a seller’s market, there is not a lot of inventory of houses on the market and at the same time there is a great demand for homes. Buyers have to move very quickly to find a good house before another buyer snags it.
The prices in a seller’s market tend to go higher because many buyers are competing for a smaller number of properties. Sometimes, there are even bidding wars. The seller benefits from this scenario, but it is difficult for buyers.
In many areas of the country, it is a seller’s market at this time. Because of the low housing inventory and increasing prices, new construction is increasing greatly.
People want bigger, more remote homes. One of the best sources for new homes is construction. As reported by the Washington Post, “Sales of newly built houses rose nearly 13 percent year-over-year in May, growing at a rate for that month not seen in more than a decade, according to the Census Bureau.”
Home showings are continuing in person with face masks and hand sanitizer for pre-existing homes. But with new construction, people like that they don’t have to visit other people’s living quarters.
New construction makes COVID-19 seem like less of a threat. Buyers can also choose the type of home they want and even customize it this way to get their dream home. These options are especially important right now with the way people’s lifestyles and needs are changing this year.
According to the Washington Post:
Katie Day, a Houston-based real estate agent with Coldwell Banker, said she expects more homeowners to enter the market later this year to finally chase the housing aesthetics the pandemic has advanced as priorities.
“Probably toward the latter part of this year and into 2021, we will see more preference changes with people wanting to have a bigger home or wanting additional amenities in their house,” Day said.
Will the housing market crash in 2020?
Many experts expect the market to continue a V-shaped or W-shaped recovery if there is a second wave of the virus. A V-shaped recovery means that the market goes down quickly due to lockdown in March of this year then zooms up rapidly once things open back up. A W-shaped recovery means it begins to go back up but then dips down again, perhaps due to more lockdowns during a second wave, then goes back up.
Of course, if COVID-19 improves or there is a vaccine soon, people may have more confidence to buy and sell their homes. If there are no lockdowns, people are working, and interest rates remain low, the market may do quite well and pick up where it left off in March. Or it may even exceed the rate of growth because of all the new demand and developments.
Even if COVID-19 stays with us for a while, the types of homes people want may be different from before, which may help spur new home starts. And there will continue to be a level of demand from Millennials, as well. People may embrace wearing masks, using hand sanitizer, and adapt to a new normal and we all may just adapt and carry on with work and business. We believe some of the new lifestyle changes we have seen since March may become permanent. People may continue to want more office space, workout space, outdoor living areas, and learning areas at home.
Things sometimes get bumpy around election time every four years but then often settle down. This year, we may see an impact in October and November, but with COVID, nothing is completely normal. According to Forbes:
In a recent study that analyzed the last 13 presidential election years, which stretch back to the 1980s, Meyers Research, a housing consultancy firm, found out that new home sales record a drop in median sale activity of 15% from October to November, when the nation chooses its president. In the year following the election, the traditional seasonal decline in the sales of new construction abodes is only 8%.
Barring some unforeseen circumstances, if things resume some semblance of normalcy, we expect many consumers to still be interested in buying homes through the year and into 2021.
Nasdaq.com says: "Homebuilder sentiment hit a record high in August, signaling that the worst of the economic downturn is probably over."
Time will tell, but it will be interesting to see how 2020 plays out. We are very optimistic about the future of the housing market as we continue to build people’s dream homes for them in the greater Columbia, SC area. Interest in custom homes and new home building in our area is sky high. The main limitation is the supply of lumber, which is struggling to keep up with demand.
We expect to continue to see increasing interest in people desiring to build gorgeous new custom homes in our beautiful state and other suburban and rural areas around the country.
Are you looking for a home in the suburbs of Lexington, SC?
We’d love to help you build your perfect dream home!
Please contact us today to schedule an appointment.
Our homebuilding areas include places like:
Lexington, Irmo, Ballentine, Chapin, Columbia, Blythewood, West Columbia, Forest Acres, Pinewood, the Lake Murray area, and more.
Builder Confidence Matches All-Time High on Record Traffic by National Association of Home Builders
Homebuilder Sentiment Hits New High by Nasdaq.com
Homebuilders See Surge in Sales by www.magazine.realtor.com
Millennial New Homeownership Delayed by Not Denied by www.blog.firstam.com
Uncertainty Shrouds the Housing Market Through 2020 by www.washingtonpost.com
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