How the Pandemic Reinvigorated Homeownership
While 2020 has been a year like no other, it’s also been a year centered around a return to true fundamentals: family, health, home. With home at the center of our lives as never before, the pandemic has helped unleash demand for homeownership and all the financial and emotional benefits it offers. This shift has long been anticipated — with pent-up demographic forces, a housing supply shortage and favorable financial conditions — but COVID-19 has accelerated these existing dynamics. As the CEO of one of the oldest and largest homebuilders, I’ve experienced this shift firsthand and would like to offer a handful of key 2020 takeaways that I believe will continue to drive the homebuying market in 2021 and beyond:
1. The desire for homeownership is alive and well.
The new-home market is stronger than it has been in some time, demonstrating that the desire for homeownership is alive and well. This year has really made clear the critical value of our homes as vital physical and emotional sanctuaries. A home represents security, both financial and personal, a place of refuge and comfort where we can find relief from life’s pressures, whether stemming from the daily stresses of work or the global pandemic. As we move through the important stages of our lives — education, careers, relationships and family — the elemental desire to put down roots in a place that is uniquely our own is a natural part of that arc. This fundamental desire, combined with demographic forces and historically low interest rates, has fueled existing dynamics to create the strongest housing market in many years. In fact, in 2021 the U.S. homeownership rate may hit its highest point since 2005. However, there is a lack of supply for this burgeoning housing demand, as the industry has struggled to catch up since the great recession, with an estimated 6 million fewer homes than is needed, which should continue to drive the new-home market for years to come.
2. First-time buyers are driving the wave.
First-time buyers, particularly millennials, are the primary drivers of today’s homebuying surge. With millennials numbering roughly 80 million, many of them in their prime household formation years, and Generation Z poised to be the next cohort of homebuyers with another 90 million people, we don’t see this trend subsiding any time soon. These generations are getting married, having children and striving toward all the traditional goals that go with those personal milestones, including good schools, security, more space and a sense of home. Many millennial buyers postponed homeownership after the financial crash, either because they saw their parents lose their homes or because their own employment situation wasn’t conducive, but this moment unlike any other has opened the floodgates on that pent-up demand. In addition, members of all demographic groups recognize that homeownership is an investment in their financial futures by building equity instead of paying rent. Helping people onto the path to homeownership is what KB Home has done since our founding in 1957, so it’s not surprising that we’re capturing an increased percentage of this influx of first-time buyers. In Q3 2020, our percentage of first-time buyers increased to 64%, over 10 full percentage points more than the same time the previous year.
3. “WFH” has become Work From Anywhere.
If you’re like me, a year ago you probably didn’t know what “WFH” stood for. Today, work from home has become a way of life for many. It has also created additional options for where to live. Without the need to consider daily commutes, WFH has quickly become “work from anywhere.” Many buyers have reported that they decided to buy a home because the ability to work remotely opened up a world of locations and more affordable homebuying options. Social distancing has also had an impact on location choice, increasing the desire to move away from dense urban areas into communities that offer more space, both inside and out. Millennial and Generation Z buyers also value the traditional conveniences of homeownership as much as previous generations, particularly as they enter peak child-rearing years, so we’re seeing strong interest from younger buyers in owning single-family homes in suburban neighborhoods.
4. Our homes now have to do it all, so flexibility is key.
WFH has also become learn from home and so much more. Our homes are now our offices, schools, gyms, entertainment centers and health and wellness hubs. For some, this has highlighted the shortcomings of their current living situations and accelerated their homebuying plans. For all of us, it has heightened the need for our homes to serve multiple functions. While parents work from home, their children are remote schooling just a few feet away, emphasizing the need for more quiet spaces and intentionally designed “Zoom rooms” to hold video conferences without disruption. At KB Home, we have long offered Flex Spaces that can serve multiple purposes depending on the homebuyer’s needs. More recently, we’ve introduced home office options and smart technology upgrades. Since the pandemic began, we’ve also seen an increase in the percentage of customers choosing personalized, built-to-order homes, particularly younger millennials.
One thing 2020 has proven is that we can’t always predict what’s coming. But what my life in the business of building homes and delivering dreams has taught me is that, while what we look for in a home may change, homeownership never goes out of style. The desire to achieve that milestone is stronger than ever, and I am privileged to continue to be part of offering that achievement to the next generation of homebuyers in 2021 and beyond.