By Dennis Walsh
After years of record-low housing production, builders across the nation are gearing up and bringing homebuilding back to life. Building on an inventory of lots purchased during the recession, new-home construction is helping to offset low housing inventory, increasing buyer interest in many markets.
As a result, more than one million residential housing permits were issued during the last 12 months alone. And, as developers come back into the game and builders expand their production capacity, experts expect pent-up demand for homeownership, as well as household formation, job growth and a better overall economy to stimulate increased construction and development for many years to come. Here, I share some of the current trends and opportunities for real estate professionals in the new, new-homes market:
Majority of Homebuyers Desire a Brand New Home
Several national surveys have substantiated that a majority of active home shoppers across the nation either want only a brand-new home, or want to shop for new homes along with existing homes throughout their search. In other words, exploring the option of a new home is an essential component of the home-buying process for the largest segment of homebuyers today. In the minds of homebuyers, it’s part and parcel to making their best decision in the purchase of their next home.
Yet only an extremely small percentage of sales associates have the training, market knowledge, systems and builder relationships to support the new-home search professionally. How can anyone honestly position themselves as a true residential real estate professional while ignoring such an important need for the majority of today’s buyers?
What’s exciting is that for those who do undertake the training, develop the market knowledge and market this professionalism effectively, this new-home sales expertise becomes a powerful differentiator, providing a significant winning edge. Of course, many of the industry’s highest producers have known this “secret” all along.
The Growth of Big Builders
Builder magazine reports that the nation’s 200 largest homebuilders accounted for 53.1 percent of all homes built throughout the U.S. in 2013. This is a dramatic change from decades past when small volume builders delivered more than 70 percent of our nation’s homes. This same group of big builders enjoyed a huge, 24 percent increase in sales over 2012. As the availability of developed lots grows and financial resources become available to smaller builders, we’ll see an even stronger increase in the construction of new-home inventory to meet the needs of today’s buyers.
The great news is more of these builders today are courting broker participation, allowing real estate professionals to bring buyers and earn excellent commissions. More real estate professionals are enjoying increased success marketing their expertise in New-Home Buyer Representation, earning great co-broke commissions on these new homes, along with the listings of these buyers’ contingent homes.
Infill Development and Construction
While larger builders are dominating the major development and subdivision activity, plenty of opportunities are available right now for smaller builders who focus on infill construction. What we’re talking about here are situations where we’re tearing down older buildings on properties in an established neighborhood—older homes, apartments, hotels, commercial buildings, etc.—and rebuilding something new. Today, this can mean larger, more luxurious single-family homes, new rental units or condos. On larger parcels, we find opportunities to create mixed-use developments, combining residential options with retail or light commercial buildings.
For brokers and agents with the training, relationships and market knowledge, infill development offers fantastic business-building opportunities today and for many years to come. Infill also offers excellent opportunities to partner with smaller investors, builders and developers to bring to market new inventory through projects too small to interest the larger players.
Senior Housing – Through the benefits of modern medicine and increased life expectancy, the demographic segment of seniors and active adults 55 and over has grown to the largest number in history. At the same time, the majority of this group is not living in homes ideal for their needs at this stage of life. As a result, the opportunities for the development of senior housing have never been greater, and are projected to continue as one of the fastest-growing sectors of the housing industry.
Finding the land and bringing together the players to deliver quality senior housing of various types allows savvy brokers and agents to create new market-specific inventory that meets a huge pent-up demand in markets large and small from coast to coast.
These and other trends are not only driving greater buyer desire for new homes, but opportunities for real estate professionals to enjoy tremendous long-term success by adding new-home sales expertise to their arsenal. For those who move quickly, now is the time to prepare to step ahead of the competition by working effectively with builders and developers to truly meet the needs of today’s homebuyers.
Dennis Walsh is co-founder and CEO of Dennis Walsh & Associates, Inc., based in Newport Beach, Calif.
For more information, visit www.sellnewhomes.com or call 800.428.1122.
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