Top 50 Master Plans Achieve a Record 37K New Home Sales in 2020

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by Jody Kahn & Devyn Bachman & Nicole Luszczak January 6, 2021 John Burns Real Estate Consulting 

The John Burns Real Estate Consulting team congratulates the management teams behind the top 50 master-planned communities, which sold at least 437 new homes per community during 2020. This threshold is the highest in our 10-year survey history!

Over 37,000 home buyers purchased new homes in these master plans, reflecting a 31% increase from 2019 and a new combined sales record. Six master plans achieved sales of 1,000 new homes or more in 2020, rising from 5 in 2019, including 3 Florida master plans and one each in Las Vegas, California’s Inland Empire, and Salt Lake City.

The COVID-19 Effect: Home Sales Surge Nationally

2020 started off strong following an unexpectedly solid 4Q19. Builders were enjoying the strongest spring selling season in years, until fear of COVID-19 and stay-at-home restrictions hit.

  • The onset of COVID-19 halted new home sales across the country. In late March, we downgraded every market in the country to our Slow or Very Slow ratings based on new home sales and pricing.
  • After a 2-week stall, the new home market began to improve, starting with the entry-level segment.
    • Entry-level demand was the first to show its strength, driven initially by renters wanting to move out of dense urban settings. Today this segment generates the highest average sales rates and strongest YOY price appreciation.
    • Next the move-up market began to soar, led by buyers seeking more space in their homes, yards, and neighborhoods. Many quickly realized their current living situation would not accommodate multiple people needing to work and school from home.
    • Then luxury and 2nd-home sales started to surge as the stock market improved, mortgage rates remained low, and work-from-home permissions were extended indefinitely.
    • Sales to the active adult buyer were the last to recover. The 55+ sector sales are finally matching or slightly exceeding pre-COVID volumes. With COVID cases rising again and vaccinations on the horizon, we believe this group may shift back to the sidelines temporarily.
  • Today new home sales remain robust, both inside and outside of the master plans. Our proprietary builder survey reflected 35% YOY new home sales growth nationally as of November, paired with 8% YOY new home price appreciation.

Amenities Retain Their Appeal

Master-planned communities continue to dominate the new home sales scene across the “smile states” as buyers in every life stage find appeal in the thoughtful community planning and highly desirable lifestyle. Despite amenity closures during the spring pandemic restrictions, buyers are viewing these features with a longer horizon. Many want to ensure access to outdoors areas that are more controlled than public spaces outside of their communities.

Florida and Texas Master Plans Lead Sales Growth

Prior to COVID-19, in-migration from California was augmenting strong local demand in the Southwest and Northwest regions, benefiting numerous master plans ranked in the top 50 this year. The pandemic accelerated several migration trends nationally and generated a burst of luxury home sales.

  • Migration from urban to suburban locations increased within metros or regions. Buyers are seeking less density, larger floor plans, and control over private outdoor spaces. Low mortgage rates, relatively affordable housing options, and the shift to working/schooling from home supported suburban migration.
    • Examples: Bay Area workers flowed into the adjacent Stockton MSA, boosting sales at the River Islands master plan. Similarly, Seattle builders migrated to Tehaleh in the adjacent Tacoma MSA.
  • Migration from gateway cities to secondary markets continues to rise, boosting new home sales and driving robust price appreciation in smaller metros such as Boise, Spokane, Reno, and Charleston.
    • Examples: Residents from the Northeast and mid-Atlantic are heading south, often to locations in the Carolinas, heating up sales at Cane Bay Plantation and Nexton, both master plans located in Charleston.
  • Luxury and 2nd-home sales soared in locations drivable from major coastal metros. Some of these homes have become the primary residence for now, giving buyers time to decide whether to keep or sell their previous homes.
    • Examples: New home sales increased across the price spectrum in Naples, benefiting affordably priced Ave Maria, and at more upscale Lake Nona in Orlando. Sales of move-up and luxury homes popped in 2020 in Salt Lake City and Las Vegas, benefiting Daybreak and Summerlin, respectively.

New home sales at this year’s top 50 masterplans increased in Florida, Texas, Southern California, and the Southeast. In this graph, the Southwest’s decline in sales volume is driven by closeouts of some popular masterplans and broad-based shortages of replacement lots following 2–3 years of robust sales. New home demand remains robust across the Southwest, exceeding supply.

2021 Challenges and Opportunities

As we look ahead to 2021, we expect new home demand to remain strong and home prices to continue rising, but supply challenges to hinder sales growth in the near term.

  • New home sales at the top 50 master plans rose 31% YOY in 2020 to over 37K, the largest YOY growth we have seen in nearly a decade. We expect low mortgage rates and buyers’ sense of urgency to improve living situations (as described above) to support strong demand well into 2021.
  • New home prices rose 8% YOY according to our proprietary builder survey. Robust demand and limited supply are driving prices up, up, up. We do not forecast this trend to change any time soon.
  • However, supply constraints may limit sales growth in 2021.
    • Finished inventory per community remains anemically low, falling -54% YOY to below one completed home per community on average.
    • Builders are restricting sales at 28% of their communities nationally, to align with production capacity and lot supply.
    • Finished lot supply runs low. Builders are scrambling to find new land deals and develop additional lots after selling far ahead of expectations. Some of the new lot supply won’t be ready until the second half of 2021, especially in markets with difficult approval processes.
    • Building product delays and shortages continue to plague the builders, extending build times for homes in their enormous backlogs.
    • Resale home supply remains very low in most metros, encouraging even more consumers to consider new homes.

BRENT LEATHWOOD, MBA

LICENSED REAL ESTATE BROKER | BK 3300751

CROSS BORDER REALTY LLC | CQ1046895
2100 CONSTITUTION BLVD. #207
SARASOTA, FL, 34231
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3 Big Mistakes Buyers make:

  1. 1. NOT KNOWING THE NEIGHBORHOOD...ContinuedReal estate always has been and always will be a local business. Know your neighborhood is a cardinal rule in this business. A real estate professional knows what is going on in their local market area. Hire a knowledge, local professional. When we see folks wandering around with a notebook and a list of questions, we know they are the most likely to make a costly mistake. A PROFESSIONAL Realtor, (please note the word professional), can spend 15 minutes listening to your needs and wants, and probably rule out 90% of the local market options, and focus your attention, on the 3 or 4 or 5 communities that will meet your needs, and make sense from both a financial and lifestyle point of view. I am amazed at how many people from out of State, go it alone, end up buying in the wrong community, and come to regret it. I meet people like this everyday, and everyone single one of them will say to me: “I wish we had met you first.”
  2. 2. GETTING STUCK IN AN HOA NIGHTMARE...ContinuedHome owners association nightmares are the stuff of legend in our State. Do not buy the wrong property in the wrong community. A knowledgeable real estate professional can explain to you upfront, the ins and outs of the HOA regulations of the community you are considering, and help you avoid 99% of these potential pitfalls. This is another very costly mistake.
  3. 3. THINKING YOU DO NOT NEED A REALTOR WHEN BUYING A NEW HOME...ContinuedEverybody knows you need a Realtor to represent you, when buying a resale home. Many do not know, you also need a Realtor to represent you, when buying a new home. The new home sales person in the model home works for the Builder, not the Buyer. They are paid to look out for their employer’s interests, not yours. You will not save $1 by going it alone. You will lose money. A lot of money. One of our largest local builders reported 872 annual sales, of which, 762 were handled by Realtors representing the Buyer. That is 87% of the total. The Builder has already factored paying a finder’s fee into the price. The Builder will not rebate $1 of this money back to you. Builders laugh under their breath, when Buyers try this negotiating tactic, even though they will politely agree with you. Professional representation costs you $0, why would you fend for yourself, in a market you know almost nothing about? Buyers know less than 20% of what they actually need to know, to get a great deal. Having gone through the new home buying process hundreds of times with clients, we know all the pitfalls to avoid, and how to make the process go smoothly. Do not go it alone, get professional representation, it costs you $0. Not doing this is the most costly of the 3 mistakes. But everyone has heard the old saying, you can lead a horse to water. We are in the business of helping our customers solve a problem. Our ability to do that, is the sole reason we have a thriving business. We are here to help you through the entire process, and get a great deal.

4 Big Mistakes Investors make:
  1. INCOME... ContinuedThe rental income does not justify the $/sq. ft. purchase price.
  2. EXPENSES... Continued The monthly expenses are too high, relative to the property type and rental income produced.
  3. CAP RATE... Continued The capitalization rate is too low to justify the investment.
  4. HOA REGS... Continued The home owners association regulations are too restrictive, or do not permit the intended use. Frequently overlooked or glossed over by some sales people, the long run financial consequences are catastrophic if a mismatch occurs.
Avoid Costly $$$ Mistakes: Hire Brent. Costs you $0.