October 2020 Newsletter

I also hope that you are enjoying the change of seasons, which has come abruptly here in Park City – I woke up to 1 degree F and a negative wind chill this past Monday.  Another season that can come abruptly: BUDGET SEASON.  Many AARC member communities (other than those not on a Jan-Dec fiscal year) are planning for 2021 – and even those who have gotten their dollars approved are coming up on implementation time.  Spring is still when pre-retirees looking to relocate from cold-weather locales will be shopping for their “forever home.”  Regardless of what the election outcome is, and whatever the after-effects of COVID-19, people are looking to escape – and it’s your time to shine!

We are sadly missing the AARC’s annual conference, which was to be held this month in Myrtle Beach, SC.  That meeting has always been a great place to learn – both from the formal presentations on the formal docket and also from the experiences of your fellow AARC members.  Commiserating over situations we all face, and seeing how others have planned and implemented best practices (and maybe borrowing one or two of them) is central to the communal spirit if the American Association of Retirement Communities – and that conference serves as a great springboard to Spring (did I just come up with a tagline?).  Even without the conference, your fellow members are a great resource for your 2021 planning, and I know that your Board Members are always happy to chat.  Looking for a fresh perspective?  Phone a friend!

Bill Houghton
Chair, The AARC

U.S. Case-Shiller Home Price Index Swiftly Accelerated in August

With amplified focus on home space, home prices jumped 5.71%

Selma Hepp, CoreLogic | October 27, 2020

The forgone spring home-buying season appears to have fully shifted into summer months, leading to sales volumes that are picking up speed at a time when they would normally show signs of slowing. Not only was demand in August fueled by buyers planning on purchasing a home in the spring, but also by those motivated by record-low mortgage rates, desire for a larger home or desire for a vacation home as a result of the pandemic.

The national Case-Shiller Index jumped a strong 5.71% in August, reaching a new high and increasing at the fastest rate since July 2018. The index is now 21% above the last peak, reached during pre-Great Recession. Similarly, the month-to-month index also accelerated — increasing 1.06% from July —reaching the fastest growth pace since spring of 2017.

Since demand for homes hit high gear in mid-May, it has since remained at above last year’s levels. If the likely trend continues into the rest of the autumn months, total 2020 home sales may beat 2019 levels, making 2020 the strongest year for home sales since 2006. Demographic trends at the start of 2020, such as the largest cohort of millennials coming of home-buying age, would have ensured strong demand this year. But, additional pandemic-induced demand spurred by a desire for more space and second or vacation homes, further fueled pressures. At the same time, 2020 had already started with for-sale inventories about 15% below last year’s levels. The pandemic further depressed inventories to fall to 25% below 2019 levels, and in some regions of the country, to 50% below 2019 levels.

The 10- and 20-city composite indexes both increased considerably, up 4.66% and 5.18% year over year, respectively, both up over 150 points from June increases. The two indices have surged at the fastest pace in two years. Encouragingly, the 10-city index is marching solidly in line with the 20-city index, suggesting demand in the largest metro areas remains strong despite some being hard-hit but the pandemic and notions of urban outmigration.

Figure 1: Home Price Growth Accelerates During the Pandemic Recession
Source: S&P CoreLogic Case-Shiller Indices,
not seasonally adjusted (October 27, 2020 release)
© 2020 CoreLogic,Inc., All rights reserved.

Of the cities on the 20-city Case-Shiller Index, Phoenix remains the strongest in home price acceleration for the 14 consecutive months, up 9.9% year over year in August. Seattle remained in second place, with an annual increase of 8.5%. San Diego (up 7.6%), Cleveland (up 6.9%) and Los Angeles (up 6.8%) — three cities that were not in the top five in the last few months — followed. Chicago (up 1.2%) and New York (up 2.8%) continue to experience relatively slower price gains, but still logged considerable acceleration in August.

Figure 2: Pandemic Leads to Widening of Differences in Price Growth
Source: S&P CoreLogic Case-Shiller Indices,
not seasonally adjusted (October 27, 2020 release)
© 2020 CoreLogic,Inc., All rights reserved.

Compared to pre-pandemic price growth in April, August price growth jumped in most all cities, excepting Las Vegas, Chicago and Minneapolis, which is a change from July, when eight of the 20 metro areas showed slowing home price growth. Notably, Los Angeles home price growth almost doubled since April as the area’s inventories remained almost 50% below last year and demand for luxury homes surged.

Nationally, home prices in August were 21% higher than the previous peak in the spring of 2006. And while home prices continue to reach new historical peaks, some metro areas have still not recovered to reach their pre-Great Recession peaks. In the 20-city Index, seven metro areas are still lagging, with Las Vegas showing the slowest catch-up to its previous peak.

Figure 3: Most Regions Home Prices Well Above Their Prior Peaks
Source: S&P CoreLogic Case-Shiller Indices,
not seasonally adjusted (October 27, 2020 release)
© 2020 CoreLogic,Inc., All rights reserved.

With millennials driving much of the current demand, homes in the lower one-third of the price distribution continue to experience greatest competition, pushing the average annual growth rate to 7.8% across the 20 cities. Phoenix, Seattle and Tampa, Florida, all experienced a jump of 10% or more in August for lower-tier home prices. The average growth among medium-tier priced homes was 6.6%, and highest-tier prices were up 5.1% on average.

Figure 4: Home Price Growth Strongest in the Lowest Tier
Source: S&P CoreLogic Case-Shiller Indices,
not seasonally adjusted (October 27, 2020 release)
© 2020 CoreLogic,Inc., All rights reserved.

Amplified housing demand brought on by the pandemic shed light on the shortage of homes that has been plaguing the market. As a result, home prices are pushing at the highest pace we could have anticipated during recessionary times. Even with continued uncertainty over economic outcomes, expectations of further accommodative mortgage rates and barring no sudden surge in inventory, home prices are likely to continue marching higher through the autumn. Lastly, 2021 is likely to bring some slowing to home prices as affordability gains, thanks to low mortgage rates, start to dissipate, and more inventory from those who have been waiting out the pandemic come to market.

*Due to the COVID-19 crisis, S&P Dow Jones Indices and CoreLogic are unable to generate a valid June 2020, update of the Detroit S&P CoreLogic Case-Shiller indices for the August release; thus, Detroit was excluded from the analysis.

© 2020 CoreLogic, Inc. All rights reserved.

Builder Confidence Continues Record Climb

Robert Dietz, NAHB | October 19, 2020

In a further show of strength for the housing sector, builder confidence in the market for newly-built single-family homes increased two points to 85 in October, further surpassing the previous all-time high of 83 recorded in September, according to the latest NAHB/Wells Fargo Housing Market Index (HMI). These are the first two months the index has ever been above 80.

The housing market continues to be a bright spot for the economy, supported by increased buyer interest in the suburbs, exurbs and small towns. Moreover, NAHB analysis published last week showed that new single-family home sales are outpacing starts by a historic margin. Bridging this gap will require either a gain in construction volume or reductions in available inventory, which is already at a historic low in terms of months’ supply.

Buyer traffic remains high and record-low interest rates are keeping demand strong as the concept of ‘home’ has taken on renewed importance for work, study and other purposes during and after the virus-induced downturn. However, it is becoming increasingly challenging to build affordable homes as shortages of lots, labor, lumber and other key building materials are lengthening construction times.

Derived from a monthly survey that NAHB has been conducting for 35 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All the HMI indices posted or matched their highest readings ever in October. The HMI index gauging current sales conditions rose two points to 90, the component measuring sales expectations in the next six months increased three points to 88 and the measure charting traffic of prospective buyers held steady at 74.

Looking at the three-month moving averages for regional HMI scores, the Northeast increased six points to 82, the Midwest increased three points to 75, the South rose three points to 82 and the West increased five points to 90.

The HMI tables can be found at nahb.org/hmi.

What Will Homes Look Like in a Post-Pandemic World?

Home buyers’ needs are changing. Find out what features are at the top of their wish lists and how new housing developments are evolving.

Lee Nelson, Realtor Magazine | October 6, 2020

3 Takeaways:

  • Buyers are mainly interested in single-family homes with more square footage.
  • Wellness-centric amenities that combat the spread of the coronavirus and promote healthy living are growing in popularity.
  • More than three-quarters of current homeowners have carried out at least one home improvement project since March.

If the pandemic has taught us anything about the way we live, it’s that our homes are our sanctuaries. Homeowners are increasingly seeing their home as a place where all needs—work, school, play, exercise, and entertainment—must be met.

With people hunkered down in their houses for the past several months, they’ve had time to evaluate what’s missing from where they live and what changes could make their lives easier. Some have decided to purchase a home for the first time, and others have chosen to sell and move to another location that offers more space.

There’s also a healthy contingent of homeowners taking on renovations to make their current abode more comfortable. A recent survey­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­ from Porch.com spotlights exactly what U.S. homeowners have been doing to improve their homes during the pandemic. More than three-quarters have carried out at least one home improvement project since March, and 78% of homeowners plan to undertake at least one project in the next year. A quarter say they’re motivated because they have extra time on their hands, and 21% say they’re interested in adding value to their home. The most popular revamps include improving their high-speed internet connection (33%); adding an outdoor pool (18%); creating a home office (17%); and adding a home gym (16%).

Real estate professionals and developers are now examining how they can best help potential home buyers to fulfill their wants and needs in the near future.

Buyers Have New Wish Lists

Michael Nourmand, president of Nourmand & Associates, REALTORS® in Los Angeles, says he’s seeing buyers mainly interested in single-family homes with more square footage to accommodate areas such as a game room, guest unit, home office, pool, gym, and screening room.

“Before, if a buyer had kids, they would take them to the park to go on the swings. Now, they need a swing set in their backyard,” Nourmand says.

There’s also a preference of having more space between neighbors and a yard they can enjoy year-round.

“While there is still strong demand to live in the city, the world of work-from-home has fueled demand for other places outside of the city,” Nourmand says.

Another growth point is wellness-centric amenities that not only combat the spread of the coronavirus but also promote healthy living, says Allison Greenfield, partner with Miami developers Lionheart Capital. The company’s newly completed Ritz-Carlton Residences in Miami Beach offers many private elevators for social distancing; medical concierge services; and private boat, scooter, and bicycle rentals. The development also takes stress relief into consideration with its water views, large outdoor spaces, private balconies and terraces, and a residential art studio with all the materials needed to create.

“It’s subtle luxury—luxury of a life well lived. The tagline for the project is ‘Designed for life,’ ” Greenfield says. “It’s not about being flashy, but about having privacy, working from home, and having people in your home to entertain.”

To stay ahead of what New Yorkers are looking for in their next homes in a post-COVID-19 world, Eric Benaim, CEO of Modern Spaces, a Queens, N.Y., brokerage, says his company conducted a short survey of a few hundred consumers. He discovered that the most valued aspects of a home were price first, location second, and layout/outdoor space tied for third. Sixty-two percent of survey respondents said they are looking to buy.

What Future Housing Developments Have in Store

Modern Spaces recently opened Townhouse on the Park in Long Island City, N.Y., a new development that could satisfy some buyers’ post-pandemic needs. Each of the 75 townhomes incorporates a fairly large outdoor space; Alexa or Google Home-enabled smart-home devices; keyless entry; flexible office space; and the Mirror, a smart mirror that streams workout classes, in each unit. The Mirror’s popularity has “become a big hit,” Nourmand says.

More developers and investors are incorporating touchless faucets and keyless doors, along with high-quality air filters that can take out 95% of airborne particles. Nourmand predicts fewer vertical condo projects, and the ones that are built will have private elevators and amenities for each wing, he says.

“Los Angeles had been a historically horizontal town but, in recent years, there was talk of more development with higher density,” he says. “The coronavirus has definitely chilled the talk about vertical living for the foreseeable future.”

Consumers are thinking about location more than ever, Greenfield says, and they’re specifically considering future surges in COVID-19 or other events that may force people to stay in their homes. “They need to think about where they want to be stuck,” she says.

She expects new developments to include access to substantial outdoor space, including private gardens or terraces, yards, access to beaches, walking or biking trails, or play spaces for those with children or grandchildren. But when it comes to interiors, Greenfield doesn’t believe the open concept will go away just because people want more privacy for remote work, distance learning, or working out.

“I don’t think smaller rooms is the answer. You need a big common area with smaller private areas,” Greenfield says. “We are at home with more people now. We want to enjoy each other’s company. We are social animals, and we do want be with our families and friends.”

Lee Nelson

Lee Nelson is a freelance journalist from Illinois. She writes for several state REALTOR® association magazines along with LawnStarter.com and Nurse.org. She has written for Yahoo!Homes, MyMortgageInsider.com, and TheMortgageReports. Contact Lee at leenelson77@yahoo.com.