In a survey conducted by NAHB online in recent days, 81 percent of respondents said the coronavirus has had an adverse effect on traffic of prospective buyers.  The survey, which was publicized in various internal NAHB communications and social media, collected 308 responses between March 18 and March 23.  The largest share of responses (51 percent) came from single-family home builders.  Two-thirds of the respondents were the owner, president or CEO of their companies.

The survey listed seven possible impacts of the coronavirus and asked if each has so far had a major, minor, or no adverse effect on respondents’ businesses.  The most widespread problem the virus has been causing in the industry, by a substantial margin, is reducing traffic of prospective buyers.  A total of 46 percent reported virus-induced traffic reduction to a major extent, and another 35 percent to a minor extent.  Five of the items were clustered in a group having adverse effect (either to a major or minor extent) on 50 to 57 percent of respondents’ businesses: the supply of N95 respirator face masks, how long it takes to obtain a plan review for a typical single-family home, supply of building products & materials, amount buyers are willing to pay for a new home, and how long it takes to obtain an inspection from the local building department.  Willingness of workers to report to construction sites was the least common problem on the list so far, although even that one has had at least a minor negative impact on 42 percent of respondents’ businesses.

One caveat to keep in mind is that the above results are based on an online survey.  So the survey was not sent to a representative sample of NAHB members, and was not subject to other quality control measures NAHB’s Economics and Housing Policy Group typically employs.  Many of the usual procedures were foregone in this case, in the interest of obtaining timely results in what has been (to say the least) a rapidly changing environment.

Home builders make a lot of decisions about how to run their businesses every day.  Among their most critical determinations is what features to include in the homes they build.  Experience, region, trends, target audience, and many other factors play a role in a decision that directly affects their bottom line.  In order to provide our members with actionable research, NAHB conducts a nationwide survey annually to find out the most likely (and unlikely) features builders will include in the typical home they build during the upcoming year.

The graph below shows the features builders are most likely to include in their homes in 2020.  At the very top, with average ratings of 4.8 or 4.9 are a walk-in closet in the master bedroom, low-e windows, and a laundry room (on a scale from 1 to 5, where 1 means not at all likely and 5 means very likely).  Also likely to show up in homes this year are energy-efficient features:  efficient lighting, programmable thermostat, and Energy Star appliances and windows.  Kitchens most likely will have a central island, a walk-in pantry, and granite countertops.

On the other hand, there are features builders are rather unlikely to include with the price of the home.  Heading this list are cork flooring for the living areas of the main floor, geothermal heat pumps, solar systems, and dual toilets in the master bath.  Also unlikely are specialty rooms like a sunroom or a media room as well as two-story family rooms or foyers.

New home sales were solid in February before challenges associated with the coronavirus set in on the economy.

Contracts for new, single-family home sales declined slightly in February by 4% to a 756,000 seasonally adjusted annual rate according to estimates from the joint release of HUD and the Census Bureau. However, this marked a 14% gain over the February 2019 pace. Moreover, the January and February sales figures, helped by warm weather during the winter, were the best recorded seasonally adjusted annualized rates since the Great Recession.

The current months’ supply of new single-family homes stands at a healthy level of 5.0 after peaking at an elevated 7.4 in December 2018. After rising over much of the post-Great Recession cycle, new home inventory measurably declined from January of 2019 until stabilizing in September and rising slightly in recent months. The count of completed, ready-to-occupy new homes is 75,000 homes nationwide.

The pace of new home sales will decline during the second quarter due to the impacts of higher unemployment and shutdown effects of parts of the economy, including elements of the real estate sector in certain markets. However, given the momentum housing construction held at the start of 2020, the housing industry will certainly be a sector leading the economy in the eventual recovery.

After rising for six consecutive years (2010 to 2015), the average home size in the US has fallen steadily for the past four years (2016 to 2019).  In fact, estimates indicate the average home built in 2019 was the smallest since 2011.  This trend is evidence that builders are working to meet the demand for smaller homes; that they are trying to shift their production mix toward more entry-level homes affordable to first-time buyers.

Given this reality, it is important to keep in mind what it is first-time buyers most want to have in a home.  Below are some of the findings recently presented at the 2020 International Builders’ Show (IBS).

What type of home do first-time buyers want?

• 77% prefer a single-family detached home
• 1,977 square feet is the median size home they want
• 59% would prefer to live in the suburbs
• 40% want a 2-car garage, but 12% want no parking facility at all
• 76% want the kitchen and the family room to be completely or partially open
• 57% want the laundry room on the first floor
• 70% want stainless steel kitchen appliances

What specific home features top their wish list?

• Laundry room
• Hardwood flooring for the living areas of the main floor
• Energy Star windows
• Walk-in pantry
• Patio

What do they expressly say they don’t want?

• Elevator
• Charging station for electric car
• Cork flooring
• Wine cellar
• Golf course community

If first-time buyers had to choose (for the same amount of money) between a smaller house with high quality products/amenities and a bigger house with fewer amenities, 62 percent would opt for the former.  Translation:  after about 2,000 square feet of space, most first-time buyers will derive more value from quality amenities than from size.

A complete copy of the IBS presentation is available Here.

Supported by historically low interest rates and rising demand, existing home sales, as reported by the National Association of Realtors (NAR), surged to 13-year high in February after a slight decline in January. Unfortunately, this will mark the high water mark for some time due to virus concerns.

Total existing home sales, including single-family homes, townhomes, condominiums and co-ops, rose 6.5% to a seasonally adjusted annual rate of 5.77 million in February, highest level since February 2007. On a year-over-year basis, sales were 7.2% higher than a year ago.

The first-time buyer share remained at 32% in February from both last month and a year ago. The February inventory level rose to 1.47 million units from 1.40 million units in January but decreased from 1.63 million units a year ago.

At the current sales rate, the February unsold inventory represents a 3.1-month supply, equal to last month but down from a 3.6-month a year ago.

Homes stayed on the market for an average of 36 days in February, down from 43 days last month and 44 days a year ago. In February, 47% of homes sold were on the market for less than a month.

The February all-cash sales shared 20% of transactions, down from 21% last month and 23% a year ago.

The February median sales price of all existing homes was $270,100, up 8.0% from a year ago, representing the 96th consecutive month of year-over-year increases. The median existing condominium/co-op price of $249,900 in February was up 7.0% from a year ago.

Regionally, all regions saw an increase in existing home sales in February except the Northeast, compared to previous month. Sales in the Midwest, South and West grew 0.8%, 7.2% and 18.9%, while sales in the Northeast declined 4.1% from last month. However, on a year-over-year basis, sales rose in all four major regions, ranging from 2.9% in the Northeast to 11.5% in the West.

Although existing home sales remains on an upward trend in February, a recent reduction in buyer traffic indicates that the housing market recovery is likely to be derailed by the coronavirus pandemic. Meanwhile, supported by low mortgage rates and tight inventory, builder confidence remains solid in March, though sales expectations for the next six months dropped four points on economic uncertainty stemming from the coronavirus.