By: Bob Romano
Sales of newly built, single-family homes have surged 14.8% to a seasonally adjusted
annual rate of 504,000 units in April 2010 (the latest findings to date), as consumers rushed to beat the deadline for expiring home buyer tax credits,
according to data released by the U.S. Commerce Department. This was the strongest level of new-home buying activity since May 2008.
And single-family home builders are gearing up for continued demand. In fact, a
June 6 report from the Commerce Department said that spending on single-family home construction surged 3.4% in April 2010. Building permits for single-family homes in Georgia rose 30% during the first quarter of 2010, the Atlanta Journal-Constitution recently
reported.
Who is buying?
From our experience marketing and selling single-family homes across the metro area, it seems that
the growth in single-family home sales is being fueled by buyers from opposite ends of the buying spectrum: young families and baby boomers. Buyers in both demographics are looking for lifestyle changes. Young families are looking to become established in neighborhoods in which they plan to raise families. And many baby boomers are moving to downsize to homes with layouts that allow them to ‘age-in-place.’
What are they buying?
Buyers aren’t looking for the same high-end, one-of-a-kind features, as they have in years past. They’re prioritizing their needs,
focusing only on necessary interior features, and there has been more concentration on boxier houses that are less dependent on exterior features. Baby boomers are continuing to look for one-level living (master bedrooms on the main level).
Where are they buying?
Most single-family buyers continue to have their sights on the suburbs, which offer close-knit neighborhoods, convenient access to amenities and very attractive pricing. For instance,
NRT Development Advisors is working with
Stonecrest Homes on the development of several of the company’s fully appointed new homes in
Harmony on the Lakes – Palisades in Cherokee County. These new construction homes start in the mid $200’s. Another new home development with affordable pricing is
Millside Manor located in the highly sought after Hamilton Mill area. These homes start in the $160’s.
Smyrna is a hot area for buyers looking for restarts that are closer to the city. Many new construction cluster homes and townhomes in the area are selling for $290,000 to $400,000, much less than the original pre-construction prices. One such development is
Vintage Square, a community of three-story townhomes starting at $294,900.
Why are they buying?
NAR president Vicki Cox Golder recently
said that buyers are taking a long-term view toward homeownership. “The typical buyer plans to stay in their home for 10 years, so we’ve put the flipping mentality behind us and most people see housing for what it is — shelter that provides social benefits and is also a good long-term investment.”
In the past two years, a majority of buyers endured reverse sticker shock when it came time to sell their current homes in advance of buying new homes, as their homes were valued at much less than anticipated (and, often, lower than what was owed). But recently, buyers have experienced a paradigm shift and instead of seeing the process as two transactions – selling one home and then buying another – they’re seeing this as one complete transaction that balances out, making it not too different than home transactions that took place during the last decade (or in the future, when prices rise again). For instance, while a buyer may lose 30% or so of an investment in an existing home (due to current selling prices), he immediately gains 40% or more in equity in a new home purchase.
How to attract them?
There is good reason to expect this buying momentum to continue. Bob Jones, chairman of the National Association of Home Builders (NAHB) and a home builder from Bloomfield Hills, Mich.,
said, “Now that the [tax incentive] program is over, other great buying incentives continue – including exceptionally favorable mortgage rates, very attractive home prices and the steadily improving economy.”
But, the recession has caused many home buyers to be very conservative and savvy when making selections, so positioning is more important than ever. We’ve found that pricing and location continues to trump everything, so be sure to keep these messages priority in your sales strategy.
Recognize that
new construction single-family homes are competing with two- to three-year old resales that are located in established neighborhoods, outfitted with the latest ‘bells and whistles’ and priced to sell. Atlanta experienced a 6% increase in existing single-family home sales in April 2010 over the previous year,
according to SmartNumbers, and sales of these homes are likely to increase as more single-family foreclosures come on board from banks in the coming months. Therefore, it’s wise to
price new construction homes at or below resale price.
And school zones also continue to be a big play in home sales, as young families are buying with children in mind and baby boomers are cognizant of school districts for resale value. While many buyers are hesitant to budge on their desired number of bedrooms and baths, young families will trade size for location.
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