Feb 06, 2020

Housing Trends

Common Characteristics of Best-Selling Communities

There are no absolute truths as to why one community sells over another, but there are starting points. What are some commonalities between the best-selling communities in the country?

blogpost-common-characteristics-best-selling-communities

Homes sell for a collection of reasons, many of which can be intangible. For example, home shoppers will consider how they ‘feel’ about a home or a community as much as the floorplan, amenities, schools, or even the crime rate. Even still, using Zonda‘s data of roughly 18,000 actively selling communities across the country, we can pinpoint common characteristics of top communities across the country.
 
Here are the top traits of the best-selling communities over the last three months*: 
  1. A large share of detached. The dominance of the detached market is partly demand-driven and partly supply. Consumers overwhelmingly say they want a detached home over one that is attached and of the actively selling communities nationwide, 80% fall in that category. 
  2. 1,500 square foot homes are embraced. Both the average and the median of the top best-selling communities’ minimum unit size for homes fell right at 1,500. As expected, the outliers were either smaller homes in expensive coastal areas or larger ones in Texas and the Midwest. 
  3. Many communities are 20 miles from the central business district (CBD). The best-selling communities are between 4 and 40 miles from the CBD, but more than 50% are at the 15 to 30-mile range.
  4. The FHA loan limit is a good guide. On average, the best-selling communities offer a floorplan about 30% below the local FHA loan limit. Only 10% of the best-selling communities are priced above the FHA loan limit. 75% of the markets with the biggest gap between the FHA loan limit and the minimum price were in Texas. 

The table below shows the averages by type.

The difference between the best-selling communities for public and private builders closely follows their respective business realities. For example, the best-selling communities highlighted above for public builders offer 4% larger homes with a 9% lower price per square foot and are part of 40% bigger communities compared to private builders. The difference is, in part, due to less expensive capital, economies of scale, and the need to sustain a healthy backlog.

 

Homes Are Larger And Further Out In Dallas

In Dallas-Fort Worth (DFW), the top market for new home production in the country, many of the same stats hold true with some exceptions: The average size of the best-selling homes in DFW are 7% above the national average at 1,700 square feet, the top communities are 30 miles from the CBD versus 20, on average, nationally, and detached product is still king, representing all of the top communities for both public and private builders.

Our Senior Vice President of Advisory and Texas expert, Bryan Glasshagel, believes there’s strong demand for attached product in DFW but the market share is more limited than in some other top metros across the country.

Bryan attributes the divergences from the national trends on three main things: 

  1. Land has yet to reset in many locations. Land prices are still high in DFW, which gives builders two main options when trying to hit attainable prices: look to more attainably priced locations or shift to smaller lots. Bryan notes that the core of the market in DFW is 50’ wide lots with pricing ideally under $350,000.  
  2. Strong growth and affordability drive development outward. DFW is a market known for urban sprawl and many established suburbs are 25 to 30 miles from the CBD. Bryan indicated the availability of land and the ability to deliver affordable homes causes builders/developers to consider further out locations.
  3. Municipalities and residents push back on density. As mentioned, 50’ wide lots are the core of the market, but demand exists from a pricing perspective to go smaller. NIMBYism, both from residents and many of the Metroplex’s 212 municipalities, make it difficult to get the market from where it is today to a point where more affordable homes can be delivered in closer-in locations. 

"It has been somewhat of an uphill battle. Builders and developers know where the market needs to be in terms of pricing and they want to get there, but perceptions around density and affordability need to evolve."

Bryan Glasshagel, Senior Vice President, Advisory

The stats on both the national and local level are meant to act as a starting point to determine the best positioning for your next community. Our Advisory team, led by our Senior Managing Principal, Tim Sullivan, analyzes the demand, supply, and competitive landscape by market to help our clients make the best decisions possible. 

*To come up with the characteristics, we: 
  1. Excluded LGI Homes And D.R. Horton’s Express Homes because of their unique selling propositions
  2. Adjusted for regional affordability by looking at the difference between local home prices and the respective FHA loan limit 
  3. Broke out the data by public versus private builder to account for operational differences 

Ali Wolf

Chief Economist

Ali Wolf

Chief Economist

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