Space-Starved Buyers Flock To Master-Planned Communities
In only a few months, the coronavirus pandemic, along with a side of unexpected social unrest in some places, has made people rethink urban living. That new fear of density has been boosting master-planned communities.
Just during the first half of this year, which has been marked by the roller coaster of state and local economies closing and reopening and sometimes reclosing, sales at master-planned communities have spiked, according to a new report by RCLCO Real Estate Advisors, which tracks the top 50 selling master-planned communities.
Compared with sales during the first half of 2019, sales during the first half of 2020 were up in 39 out of the 50 master-planned communities RCLCO tracked. In a few cases, the increase was more than 100% compared with a year ago, but more typically the increases were double-digit. Out of the 39 communities that saw growth, 26 of them experienced growth of more than 10% in sales year-over-year.
"After four months, people want more space," Howard Hughes Corp. CEO Paul Layne said. "They're feeling confined, and they also know that interest rates are low and it's a good time to buy."
Howard Hughes Corp. has overseen some of the largest master-planned communities in the country, including Summerlin in Las Vegas and Bridgeland in The Woodlands in metro Houston. In May, according to Layne, Bridgeland set a monthly residential sales record, up 73% compared with a year ago, posting 111 new home sales.
"This is the kind of thing we're seeing," Layne said. "A couple from a northeastern city Googled master-planned communities and one of the results was Bridgeland. Sight unseen, they leased an apartment here, and are now planning to buy a house. They thought now was the time for that kind of change."
The interest in master-planned communities in states like Nevada and Texas is more than just a reflection of the pandemic, Summerlin President Kevin Orrock said. "People are still looking to get away from high-tax, high cost-of-living places," he said. ""That isn't going to change."
"Even after we recover, the fact will remain that master-planned communities can offer a lifestyle that's hard to replicate in a lot of places, for a lower cost of living," Orrock said.
The uptick in interest in master-planned communities is also possibly part of a larger V-shaped recovery for all U.S. residential sales, at least so far. Pending home sales were up 6.3% in June, compared with a year ago, according to the National Association of Realtors. Existing home sales dropped 11.3% year-over-year in June, but were up 20.7% compared with May.
Master-planned communities have long been successful, especially in warmer states with a lot of open land. Typically they appeal to buyers with enough means to afford an upper-end primary residence or second home and who want a ready-made and usually walkable community, a blending of suburban and urban features.
With the surge in interest among buyers, developers are increasing their activity in the master-planned space.
For example, national homebuilders D.R. Horton, Meritage Homes, KB Home and Richmond American Homes recently kicked off development of the first phase of Stanford Crossing, a community in Lathrop, California, that will include 418 residences on 88 acres.
In July, Edward Homes began work on the Brownstones at Providence, a 30-townhome neighborhood in the Providence Master Planned Community in Las Vegas, which will be the final development there. In metro Houston, Bold Fox Development is kicking off development of Venetian Pines in Conroe, which will include 200 home sites on 45 acres.
"People are leaving congested areas and looking for places in more rural and suburban areas that have natural features,” Bold Fox Managing Shareholder Alex Kamkar said in a statement. “That’s been a priority for us from the very start.”
Commercial developers are also eager to be part of master-planned communities, according to Phoenix West Commercial principal Bobbie Mastracci. She has brokered commercial properties at master-planned communities, including most recently DMB Associates' Verrado, about 25 miles west of Phoenix, which will include about 14,000 residential units at full build-out.
"Verrado began with some retail and office development along with its homes," Mastracci said. "Most recently, investors have acquired sites for other uses, including one for a 10K SF medical office building. There is a lot of interest in Verrado, including by people who are relocating from more expensive states, bringing their businesses with them."
While larger master-planned communities that attract permanent relocations report they are attracting more buyers, so are smaller developments whose focus is second-home buyers in resort areas. Part of the reason is that for now at least, the pandemic has changed the way people think about recreational travel.
"People want to drive instead of fly, and spend more time with their families," said Sea Oats Group owner Jeff Lamkin, developer of the master-planned Cinnamon Shore in Port Aransas, Texas, on the Gulf of Mexico. "Anything within driving distance is going to sell."
Lamkin said that his development, which currently has 300 homes, had planned to sell 80 more over the next three years, beginning in 2020.
"I was wrong. We're going to sell all 80 of them this year," he said. "That's across all the price ranges, with about 90% of them as second homes. About half of those owners will ultimately rent those houses."
Along with a surge in buyer interest has been a surge in people looking to rent on the Texas coast, Lamkin said. "We closed down the rentals during the early days of the pandemic, but they're open again, and any place for rent is booked for months."
Sunflower Beach General Manager Shawn Shepherd said that at her master-planned community, which is also in Port Aransas, she has been selling to Texas residents who have never been to the Texas coast. The property is a townhouse and single-family development by Schnell Urban Design and Legacy DCS.
"Now they need a driveable vacation house," Shepherd said. "They won't fly, they'll just get in the car and drive. Also, some companies [are] going full-time Zoom, so their workers think, why should I sit in my house in Austin when I can be on the coast?"
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