Source: Builder Online
What impact does a public health pandemic have on new-home demand? The America at Home Study, conducted online in April of 3,001 consumers 25 to 74 years old with household incomes of $50,000 plus, asked renters whether COVID-19 has made them more or less likely to want to own versus rent a home. Almost half (46%) of current renters say they would now prefer to own versus rent, potentially representing 7.4 million households in the U.S. The majority of them are younger (millennials and Gen X groups combined), ranging in age from 25 to 44. This is a sizable shift since the NAHB’s first quarter 2020 Housing Trends Report indicated just 16% of millennials were looking to make their first home purchase in the next year.
Despite high unemployment rates and the subsequent anxiety and financial stress that often is expected around the idea of “home,” when asked to rank a series of phrases about what home means to them, “financial worry” was the second to lowest rated of a list of 10 choices, at just 23%. This additional demand from renters wanting to buy as a result of COVID-19 could be a silver lining for new-home building. Meeting this potential new demand starts with understanding who these buyers are and what they want.
Millennials between 25 and 34 were the largest single group (53%) more inclined to want to buy a home today, followed by older millennials and younger Gen X buyers 35 to 44 years old (47%). Together these two segments represent the largest group of potential home buyers in the nation. And while it’s easy to brush off expressed interest due to lack of financial ability, especially in younger buyers, the majority of those saying they want to buy have solid incomes, enabling them to purchase in many markets.
Household type and family formation are common predictors of new-home demand. The increased desire to buy a home was strongest among multigenerational families (60%), single parents (53%), couples with children (51%), and couples without children (47%). Only single buyers without children had a lower preference for owning versus renting overall. The sizable single parent buyer segment further reinforces the trend already underway toward building more attainable for-sale homes, but even more innovative design and floor plan solutions are needed to convert these renters into homeowners.
When asked what housing type they would prefer to own, not surprisingly the majority said single-family detached homes (79%). Expecting this, the study explored what trade-offs these buyers would be willing to make to improve their ability to purchase a home. Access to outdoor space was a lifeline for many during the experience of sheltering in place. In most regions of the country, other than in some dense urban centers, images of Americans on their porches and decks able to socialize at a distance with neighbors were in stark contrast to those of Europeans on tiny Juliet balconies with limited access to the outdoors.
The cost of land in most markets makes eliminating yards, or minimizing yard size, one way to bring down the cost of housing. Buyers understand this too. Giving up a yard, in exchange for having some form of small private outdoor space, topped the list of trade-offs with 51% of all buyers very interested and willing to accept this in order to improve their ability to buy a home.
Of all buyer groups surveyed, the older millennials and young Gen X buyers (35 to 44) were most willing to make concessions, perhaps indicating the strength of their desire to get out of a rental and own a home of their own. Some of the top factors they were “very interested in and willing to accept” to be able to buy a home were:
Households planning to continue to rent were clear in their product preferences. Single-family detached homes were the top choice at 40% overall and, not surprisingly, were preferred by 60% of couples with children, followed by 55% of singles with children, and 75% of multigenerational families. Built-for-rent single-family detached homes have continued to grow in popularity since the Great Recession. These insights by different household types indicate new opportunities both for smaller single-family rental homes to serve single parents, and larger homes, perhaps with dual owners’ suites to serve multigenerational families.
The attached product type most desired by renters was mid-rise apartments at 38%, followed by attached townhomes at 14%. High-rise apartments/condos and attached duplexes did not rate as well, both at 4%.
The America At Home Study shows there is a need for all types of housing product to meet the changing needs and preferences of Americans—owners and renters alike. By studying product preferences and community and lifestyle features from the buyer’s point of view, home builders and community developers can respond to this shifting market and create new ways to meet the demand of those who, after sheltering in place, are placing more importance on home than perhaps ever before.