Smart Moves

The pandemic is challenging families financially in every state of the union. Yet there’s one sector of the consumer economy that’s enjoying unprecedented demand: homebuilding.

Take the case of LGI Homes, which builds in 18 states and ranks 10th in size among U.S. homebuilders.

“The demand for affordable entry-level homes has never been stronger. That’s why we’re positive about the long-term outlook for homeownership in all our markets,” says Eric Lipar, the company’s CEO.

What accounts for the surge in demand for new homes? Ivy Zelman, a veteran investment analyst who tracks homebuilder stocks, says the key factor is demographic.

“Many more millennials are now aging into single-family shelters and starting families,” according to Zelman. She also cites low mortgage rates and a severe shortage of available properties as leading reasons for the imbalance between home supply and demand.

“The market is starved for inventory, causing prices to keep rising,“ says Danielle Hale, the chief economist at Realtor.com, the home listing company.

Of course, countless families are struggling to pay their bills and won’t be in a position to buy their first property or a trade-up place anytime soon. But among those who remain fully employed, a number are now actively seeking larger and better outfitted houses, according to research from Zillow, the national real estate company.

Zillow surveys show that numerous home purchasers are eager for more square footage and sizable, enclosed yards.

The desire for many luxury home features is growing out of the experience of families during the pandemic, says Katie Detwiler, the chief experience officer for Berks Homes, a Pennsylvania-based builder.

In 2021, many new home buyers wish to break out of their old cooking habits and start new adventures in the kitchen.

“We’ve seen an increase in requests for gourmet kitchens. This includes bigger cabinets and island additions, so homeowners have the space they need to cook their gourmet meals,” Detwiler says.

Those shopping for new homes also desire smart home technology, including touchless appliances and self-cleaning toilets. In addition, they want dedicated spaces for one or two home offices -- what builders call “Zoom rooms.”

Yet personal finance specialists strongly advise new home buyers to ensure they balance their desires for extra space and fancy features against the need to live in a convenient location.

“OK, so maybe your employer has given its blessing to a full-time work-from-home schedule until the pandemic is over. But after that, the company might insist you go into the office at least a couple of days each week. If that happens, you’ll regret living 200 miles from work,” says Eric Tyson, the co-author of “Homebuying for Dummies.”

Here are a few pointers for new home buyers:

-- Look for a locale where property values will likely rise.

James W. Hughes, an expert on housing demographics, isn’t predicting a drop in real estate values anytime soon. But in the aftermath of such a decline, he says the recovery would come earliest in areas long popular with families who have school-age children, a large segment of the suburban home-buying market.

The first neighborhoods to bounce back from the downturn of 2008 were those that remained popular throughout the recessionary period, says Hughes, a professor at Rutgers University.

-- Choose a community with an excellent elementary school.

“Even more than the middle or high school, an excellent elementary is something families seek out when they’re moving,” he says.

How can you be sure the house you purchase will be served by a high-performing elementary? Real estate agents are reluctant to characterize schools with descriptive adjectives. But they can quickly assemble reams of statistics, such as test scores, that will let you compare one school to another. Or you can find these data yourself by going to the local school system’s website.

-- Make sure the new home you buy is solidly built.

Abraham Tieh, a longtime Texas real estate broker, notes that the homebuilding industry is dominated by many small to mid-sized entrepreneurial companies. And these firms vary widely in the quality of their workmanship.

There’s no reason to accept second-class construction when you choose your new suburban house. But how can you identify subdivisions where the builders take extra care? One way is to closely examine the interior detailing in a house as one indication of its construction quality.

“You can’t see behind the walls of a house that’s already built. However, you can see if the cabinetry and wood trim were well finished. Also, you can judge whether the builder used long-lasting roofing materials or the cheapest available shingles,” says Tieh, a past president of the National Association of Exclusive Buyer Agents (naeba.org).

“People already living in the neighborhood will tell you straight out if there have been lots of problems with the builder or if major construction flaws have surfaced,” Tieh says.

While you’re at it, he says you should survey the neighbors on the energy efficiency of their homes. For instance, ask them how much they typically pay monthly for gas and electric service and whether their homes were outfitted with airtight, energy-efficient windows.

“Utility costs should be of critical concern to anyone moving into a very large home,” Tieh says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

Early this year, an engineer in Minneapolis lost her job at a large tech firm. But at age 67 and ready to retire anyway, she wasn’t crestfallen. An extrovert who relishes sociability, as well as tennis and golf, she soon plotted an active retirement in which she could indulge her favorite pastimes.

But COVID-19 threw a wrench in her plans. As a single woman living alone, she’s spent months in isolation, rarely able to see friends and family. Fed up with the restrictions and anticipating early access to a COVID vaccine, she’s now accelerating her plans for 2021 to make up for lost time.

What does the engineer have in mind for a robust retirement? Though her house is paid off and she never expected to buy more real estate, she’s now pondering the purchase of a second home in a large Florida retirement community. That way she could escape to warmer weather when the Minnesota winters prove too harsh.

“I’m exhausted with the limits I’ve gone through with COVID. It’s time to reinvent my life,” she says.

One reason the engineer can buy a second place is because her lakeside Minneapolis place, located in a popular suburb, has skyrocketed in value. That will allow her to tap a small portion of her equity with a new low-rate mortgage to buy a Florida place.

Obviously, not all Americans have the luxury of buying even a first home due to the economic issues now facing the nation. Many renters are now facing the very real prospect of eviction, and many retirees who own homes but depend on fixed Social Security payments must sell their homes to simply maintain their standard of living.

“The economic rebound has been sharp but is by no means complete. It has created distinct winners and losers among sectors in the economy,” says Danielle Hale, the chief economist for Realtor.com, the national real estate listing company.

Margie Casey, a real estate author and broker, says that in seeking a second home, many retirees want to retain the original place where they raised their family.

“A retiree’s primary place is usually near their base roots -- ideally close to family and longtime friends. The second is often just a small condo or a detached ‘villa’ in a resort setting like the beach or mountains,” Casey says.

Years ago, ownership of two homes was solely for the wealthy. But now more middle-class retirees are able to buy a second residence in a separate state.

“These aren’t rich people. Many were teachers, nurses or government workers. Yet many have traditional pensions that give them enough income to support homes in two parts of the country,” Casey says.

Here are a few pointers for retirees considering a second home purchase:

-- First, seek out advice from a financial planner.

Casey, who reviews retirement communities on her website (realestatescorecard.com), says anyone considering two-home ownership should first discuss the financial implications with a professional adviser.

In theory, it should be no more expensive for retirees to own two homes, as long as their mortgage payments are limited. But in reality, dual homeownership can have hidden costs -- after taking into account homeowners' association fees and travel costs.

Property taxes are also a key element, especially if a local government is running a budgetary shortfall and may have to raise taxes.

“Once you investigate the taxes, you may decide to live one state away from your grandchildren, assuming that lowers your cost of living,” Casey says.

-- Make sure you’d be comfortable with condo living.

Michael Crowley, a real estate broker and past president of the National Association of Exclusive Buyer Agents (naeba.org), says buyers contemplating the purchase of a condo as a second home should exercise caution.

“Compared with living in a standalone house, a condo-apartment is a big change. It’s just personal taste, but some people never adjust well to condo living,” says Crowley, who’s worked with buyers since 1993.

As he notes, there are other options for small-scale living that provide many of the worry-free features of a condo.

For instance, in many “planned unit developments,” you can buy a one-level detached unit that comes with exterior maintenance, including lawn service.

-- Don’t overlook transportation access before buying a second place.

Many a retiree has selected a second home without taking into account airport access, which can be a major error.

Depending on an out-of-the-way airport makes it harder to travel to distant locations for vacation or to see your kids. It can also add to your airline bills.

“Try to live near an airport that’s a hub for one of the major carriers. That can save you a ton on travel costs,” Casey says.

Another transportation factor to consider is proximity to major roadways, including interstates.

“Many retirees hope to live within a two-hour drive from their children,” Casey says.

-- Temper your expectations about visits with your offspring.

“Living near the grandkids is a top consideration for lots of retirees,” Casey says, but she advises realism about how often you’ll see family, no matter how close they live.

“Your kids have busy lives. ... Sure, you hope to see them often. But don’t focus your whole retirement on this factor. What’s equally important is to choose a lifestyle that works for you,” she says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

A couple in their 60s -- a social worker married to a coffee shop owner -- vowed to never let go of the brick ranch house in suburban Maryland that they’d owned for 39 years. Indeed, they joked with friends that the “starter house” they bought soon after their wedding would one day become their “terminal house.”

But that was before the social worker was diagnosed with early stage Alzheimer’s disease. The couple decided she’d be better off if they sold the house and moved near their grown daughter in North Carolina. The medical need wasn’t urgent. Still, they reasoned that from a financial perspective, 2020 was the best year to sell.

As it turned out, the couple’s decision to hasten their property sale proved advantageous. The day their place went on the market in late November, it attracted four offers -- all well above the asking price. The one they chose was all cash with zero contingencies. Their deal closes in mid-December.

Of course, no one knows for sure how the currently robust housing market will play out in the coming year. With the new administration in Washington, D.C., mortgage rates are likely to remain low. Yet economists are fearful an increasing number of would-be buyers are getting priced out of the market.

“The housing market is still hot, but we may be starting to see rising home prices hurting affordability,” says Lawrence Yun, chief economist for the National Association of Realtors (nar.realtor). He notes that pending home sales slid slightly in October, which could be a sign of a cooling real estate market.

Many potential home sellers are now raising questions with their listing agents about timing their sale. Should they rush to list in the immediate future, or perhaps wait until the traditional springtime home-selling season? Opinions vary.

Fred Meyer, an independent real estate broker and appraiser in Massachusetts, acknowledges that current conditions are favorable to sellers. Even so, he advises that sellers with ample time to wait might benefit from delaying their sale until the post-pandemic period.

“My guess is that six months from now, home prices will be a heck of a lot higher -- especially in well-valued suburban communities. Americans will be a lot more cheerful. Many who’ve lost jobs will regain them and qualify to own a property,” Meyer says.

But he expects that in 2021 -- as usual -- there will be wide variations in real estate markets on a neighborhood-by-neighborhood basis.

Here are a few pointers for sellers:

-- Monitor neighborhood inventory levels before targeting a sale date.

In most desirable neighborhoods, a shortage of available homes is a strong signal that many prospective sellers are holding off in hopes of an uptick in property values later on.

“In nearly all cases, you can count on low inventory as a sure sign that the community is coveted and owners can command excellent prices,” says Dorcas Helfant, a past president of the National Association of Realtors.

You may also be observing other indications of pent-up demand for property in a community, such as people driving through trying to spot “For Sale” signs and letters left for residents from wannabe buyers.

If you’re anticipating a springtime surge in nearby listings, don’t wait until the floodgates have opened for sellers.

“Too few sellers consider inventory levels before timing their sale,” Helfant says.

-- Wait until repairs are done to put your place up for sale.

Are painters laboring to finish their work at your home? Are your bathroom renovations still incomplete? Have you yet to finalize the sorting and boxing of books in your huge collection?

If so, make sure all this work is done before giving the listing agent a green light to market your home. Home shoppers often show little interest in a place where renovation work is only half done.

Likewise, a cluttered house can be hard to market to prospects, who often have difficulty picturing the space free of excess furniture and cardboard boxes.

-- Choose a midweek day to launch your listing.

“No one should obsess about the day of the week their home goes on the market. But I favor a Wednesday or a Thursday if possible,” Helfant says.

When a property appears on the Multiple Listing Service by Thursday, agents representing buyers have ample time to schedule a visit to the place during the popular weekend home-shopping hours.

“People who wait until Friday to list typically get little attention until the following Monday. But rest assured that buyers in a popular area with scarce inventory will discover your home no matter when it’s listed,” Helfant says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)