The pandemic is challenging families financially in every state of the union. Yet there’s one sector of the consumer economy that’s enjoying unprecedented demand: homebuilding.
Take the case of LGI Homes, which builds in 18 states and ranks 10th in size among U.S. homebuilders.
“The demand for affordable entry-level homes has never been stronger. That’s why we’re positive about the long-term outlook for homeownership in all our markets,” says Eric Lipar, the company’s CEO.
What accounts for the surge in demand for new homes? Ivy Zelman, a veteran investment analyst who tracks homebuilder stocks, says the key factor is demographic.
“Many more millennials are now aging into single-family shelters and starting families,” according to Zelman. She also cites low mortgage rates and a severe shortage of available properties as leading reasons for the imbalance between home supply and demand.
“The market is starved for inventory, causing prices to keep rising,“ says Danielle Hale, the chief economist at Realtor.com, the home listing company.
Of course, countless families are struggling to pay their bills and won’t be in a position to buy their first property or a trade-up place anytime soon. But among those who remain fully employed, a number are now actively seeking larger and better outfitted houses, according to research from Zillow, the national real estate company.
Zillow surveys show that numerous home purchasers are eager for more square footage and sizable, enclosed yards.
The desire for many luxury home features is growing out of the experience of families during the pandemic, says Katie Detwiler, the chief experience officer for Berks Homes, a Pennsylvania-based builder.
In 2021, many new home buyers wish to break out of their old cooking habits and start new adventures in the kitchen.
“We’ve seen an increase in requests for gourmet kitchens. This includes bigger cabinets and island additions, so homeowners have the space they need to cook their gourmet meals,” Detwiler says.
Those shopping for new homes also desire smart home technology, including touchless appliances and self-cleaning toilets. In addition, they want dedicated spaces for one or two home offices -- what builders call “Zoom rooms.”
Yet personal finance specialists strongly advise new home buyers to ensure they balance their desires for extra space and fancy features against the need to live in a convenient location.
“OK, so maybe your employer has given its blessing to a full-time work-from-home schedule until the pandemic is over. But after that, the company might insist you go into the office at least a couple of days each week. If that happens, you’ll regret living 200 miles from work,” says Eric Tyson, the co-author of “Homebuying for Dummies.”
Here are a few pointers for new home buyers:
-- Look for a locale where property values will likely rise.
James W. Hughes, an expert on housing demographics, isn’t predicting a drop in real estate values anytime soon. But in the aftermath of such a decline, he says the recovery would come earliest in areas long popular with families who have school-age children, a large segment of the suburban home-buying market.
The first neighborhoods to bounce back from the downturn of 2008 were those that remained popular throughout the recessionary period, says Hughes, a professor at Rutgers University.
-- Choose a community with an excellent elementary school.
“Even more than the middle or high school, an excellent elementary is something families seek out when they’re moving,” he says.
How can you be sure the house you purchase will be served by a high-performing elementary? Real estate agents are reluctant to characterize schools with descriptive adjectives. But they can quickly assemble reams of statistics, such as test scores, that will let you compare one school to another. Or you can find these data yourself by going to the local school system’s website.
-- Make sure the new home you buy is solidly built.
Abraham Tieh, a longtime Texas real estate broker, notes that the homebuilding industry is dominated by many small to mid-sized entrepreneurial companies. And these firms vary widely in the quality of their workmanship.
There’s no reason to accept second-class construction when you choose your new suburban house. But how can you identify subdivisions where the builders take extra care? One way is to closely examine the interior detailing in a house as one indication of its construction quality.
“You can’t see behind the walls of a house that’s already built. However, you can see if the cabinetry and wood trim were well finished. Also, you can judge whether the builder used long-lasting roofing materials or the cheapest available shingles,” says Tieh, a past president of the National Association of Exclusive Buyer Agents (naeba.org).
“People already living in the neighborhood will tell you straight out if there have been lots of problems with the builder or if major construction flaws have surfaced,” Tieh says.
While you’re at it, he says you should survey the neighbors on the energy efficiency of their homes. For instance, ask them how much they typically pay monthly for gas and electric service and whether their homes were outfitted with airtight, energy-efficient windows.
“Utility costs should be of critical concern to anyone moving into a very large home,” Tieh says.
(To contact Ellen James Martin, email her at email@example.com.)