By Meghan Hall
Homeowners and prospective home buyers have been carefully watching the market in recent months, evaluating whether or not now—or later—would be the best time to dip their toes into the market. Since the emergence of COVID-19, national inventory has declined by 15.3 percent year-over-year, while homes are sitting on the market longer, according to a May report issued by Realtor.com. However, the current pandemic and ensuing shelter-in-place orders have many thinking about their next spot—one with more space—as cabin fever continues to mount. For those at John Burns Real Estate Consulting an independent research services firm that focuses on the housing industry, the residential market will see several COVID-19 driven changes, including an array of new buyers, many of whom will set their sights on what John Burns Real Estate has deemed “Surban” environments.
“The impact [of COVID-19] on residential is a huge topic,” stated Ken Perlman, principal at John Burns Real Estate Consulting. “I don’t think there is going to be this massive flight out of world cities like New York, San Francisco or Chicago. The fact of the matter is, that’s where the job bases are; that’s where a lot of the culture is, and young people in particular gravitate towards those cities.”
People will increasingly crave “surban” environments, a term coined by John Burns Real Estate to describe medium-density urban development, but located in the suburbs.
“The areas that we think have really good opportunities for growth are what we call surban areas, and what it does is that it allows for the best of urban living, with good access to amenities and services like retail, but with a little less true density and a little more security,” explained Perlman. “It tends to be a little more affordable, as well, so I think that’s where we really see opportunity.”
In these environments, multifamily living is balanced with a desire for more privacy provided by connection to outdoor spaces and easy access to retail. And, a push for more space and access to fresh air and light will prompt developers to rethink just how they proceed with planning and building their developments, with overall fewer units packed into a single building.
“Prior to this, we had seen a lot of this push for affordability,” said Perlman. “We saw homes that were higher density so the absolute price point would come down. We are still going to see some density, because people need affordability, but at the same time, I think we are going to see a shift [away] from the very, very, high density apartments.”
Also likely to do well post COVID-19 are master planned communities, states Perlman. Well-designed communities provide more space for growing families, and when laid out effectively, provide safer, controlled environments. Curated parks and open spaces will provide outdoor access but with the ability to continue social distancing if and when needed. Perlman also notes that master planned communities tend to do well in times of uncertainty, holding their value even as the market fluctuates.
“It is really the creation of a lot of instance of a surban development,” said Perlman, who emphasizes that within these communities, it is easy to get access to grocery stores, pharmacies, local schools and services. “There is a variety of residential product that can be appealing to many…The spaces are curated and designed to be flexible.”
Future growth and demand for housing in these sectors will largely be driven by older millennials, who are finally making the decision to pursue homeownership, predicts John Burns Real Estate. These buyers, comprised of mainly couples, families and individuals, are likely those who have been wanting to buy for some time, have job stability and are feeling particularly cooped up by current events.
First time buyers, for example, are typically those living in high-density communities or apartments that lack adequate social distancing opportunities and are comfortable with viewing for-sale homes on-line. John Burns Real Estate also points out that young families might also be motivated to upgrade and move into a new home after living in such tight quarters. The firm predicts that 80 percent of household growth will be captured by suburbs and master-planned communities in the years to come.
Developers who can raise the capital and control properties in the best locations—close to transportation and close to retail and entertainment hubs, for example—will be the first to succeed in the changing residential market. Old retail properties, which are often aptly located and provide the necessary land for redevelopment will likely see accelerated development. How the products themselves continue to evolve, is yet to be seen, noted Perlman.
“That’s the chapter that hasn’t been written yet,” he said. “[These properties] are in good locations. They can check a lot of boxes, and they provide a lot of opportunity for someone who is creative.”