New Homes and Changing Times
While nearly every industry in the world has been affected by the global pandemic in the last year, the home building industry has been impacted in a unique way. An increased demand for new homes has been fueled by record low interest rates, record low existing inventory, and a significant shift in buyer preferences after being pent up in their homes for the better part of the last year. At the same time, the industry is still feeling immense repercussions from COVID-related supply chain issues and cost and labor increases. So the question remains – how will builders be able to keep up with this demand in 2021?
Expectations Moving Forward
Despite the significant rise in cost and unreliability of building materials, labor and other supply chain factors, consumer purchase demand remains strong, and will likely continue to be. Part of the increased demand in home construction is being fueled by a severe shortage of existing homes for sale in desired market areas, such as Indianapolis.
Of course, with the rise in demand and costs for builders, pricing for new homes has gone up. Yet, with such low interest rates, potential homeowners remain as motivated as ever. In fact, many area experts in the Central Indiana area predict 2021 will end with a 20% increase in building permits. This reinforces the trend seen in recent years. From 2019 to 2020, there was already a 24% increase in single family building permits. The demand for land and new homes is so substantial, builders and developers can’t replace lot options as fast as they have been selling them!
The pandemic created an increase in remote working situations and has left many realizing that their home isn’t as equipped for their needs and lifestyle as they thought. As a result, potential homebuyers are now looking for spaces with home office and study capabilities which weren’t previously a concern. Unfortunately, in many cases, they have also discovered their current homes are out of style, not as functional or simply not as enjoyable when spending more time in them. Luckily, for the homebuilding industry, the best way to get the perfect work-from-home space is for people to have one built to fit their needs.
The past year’s events have also created a trend of living further out from major metropolitan areas towards more green space and to have an opportunity for more comfortable, quiet remote working now that commuting is less frequent. More rural areas have also given many the chance to own more land or a bigger home in some less expensive areas.
The Increase in New Home Construction
Today’s new homebuyers often seek more elaborate, gourmet style kitchens with large islands, with farmhouse sinks and granite or quartz tops. A more spacious and private work-study, as well as an outdoor living space with paver patios and outdoor fireplaces are also a big interest. The limited number of existing homes on the market, coupled with the incredibly competitive and fast-moving offer stage for buying a home, are making it difficult for individuals to find a home that suites their needs and wishes.
As a result, they’re choosing the home perfect for them on paper and having it constructed by a reputable builder. This also allows buyers to work more with the timing of lease end dates and notification periods for those currently renting, providing a more flexible process than currently likely on an existing home purchase.
Overall, homebuilders and prospective homeowners have found themselves in some very unusual circumstances. BAGI is dedicated to staying on top of market changes, trends and legislative actions and assessing how we can best support our industry through this unique and demanding time.