The building industry is experiencing a period of myriad opportunities and challenges, making it hard to pin down one overwhelming influence affecting their businesses.
“It’s really a confusing time,” Mollie Carmichael, principal at Meyers Research, said on a webinar in late January, hosted by Metrostudy.
[Related: Pressure points—What builders can expect in 2019]
Carmichael outlined the results of a study Meyers Research conducted with Metrostudy.
Existing homes sales fell between 2017 and 2018, she said, “but we also had a tremendous 2017.”
Data from builder marketing firm BDX show that its new construction search site newhomesource.com received about 2 million monthly online visits from home shoppers, Carmichael said, but there was a big decline in December.
The fourth quarter was hit with changes in the stock market, compounded by uncertainty from the 2018 election, trade wars, increasing interest rates, and uncertainty in general, Carmichael said. Low supply is pushing up prices around the country, and consumers who would be interested in buying have fewer choices, she said.
However, there are positive indicators as well. Consumers are confident in their job security. Consequently, consumer spending is strong.
The current recovery is about five months away from being the longest economic recovery ever, she said. “This recovery, how long it can last, we still have some life left,” she said, suggesting “at least another year or two of strength.”
Mortgage applications are up so far in 2019, Carmichael noted. She attributed that to some lower interest rates, as well as a tougher November and December for many builders.
Demographics and regional growth
Most growth is heading west, Carmichael said, but affordability is not following it.
“When we look at the West, that’s where affordability is the most challenged,” she said. Idaho is an exception where affordability and growth intersect.
Meyers Research examined the behavior of over 21,000 new home shoppers around the country to determine who was buying homes.
The study found that around the country, between a quarter and 40% of consumers would consider “microhomes,” those that are between 900 and 1,500 square feet, if there were more affordable. Furthermore, 82% of shoppers said functionality was more important than size when considering a home.
“When you look at the challenges with affordability, we have to get better with space,” Carmichael said. “We have to get to a more deliberate approach with a more functional and, frankly, more exciting space.”
She emphasized that the “opportunity for 2019 and 2020 is figuring out how to get that 1,500 square feet to feel like 2,000 square feet.”
She pointed out that the average home size before 1950 was under 1,000 square feet.
“Many of us have lived in these smaller homes, and they can be great if designed right,” she said.
Who’s buying and why
Young boomers make up the largest buyer group, followed by Gen X and older millennials. Younger millennials and mature boomers are less likely to be shopping for new homes, Carmichael said.
She noted that “tweeners,” the people born on the fluid cusp of the Gen X and millennial generations, are the most mobile buyers.
“Because we have the most shoppers out there for young boomers,” she said, “it does take them two to four times as long to make a decision.”
Correction: The original version of this article cited data that indicated BDX received about 2 million monthly online views. The correct metric is visits, which measures the number of times users visited the website, not the number of pages viewed by users. This article has been updated to show the correct metric and to clarify the source of the data, BDX’s listing site newhomesource.com.