One thing remained constant throughout 2020 – change. The pandemic shifted front runners and opportunity zones. Home buyers are valuing privacy, safety, space, less regulation, and access to the outdoors while their employers, favorite retailers, and restaurants are doing the same.
General interest in real estate accelerated, with Nest Seekers Consumer Sentiment data indicating unique visitor traffic on Nest Seekers’ website up 55% in 2020 over the prior year, and page views up 77%. The Hamptons saw an incredible 794% increase in traffic, driven by both the shift in national preference and premier of Million Dollar Beach House on Netflix.
Similarly, Zillow’s mobile apps and websites reached a record 236 million average monthly unique users in the third quarter, an increase of 21% year over year, driving 2.8 billion visits, an increase of 32% year over year. We have only seen the beginning of the most significant residential value shift in our lifetime, what we at Nest Seekers are calling ‘The Great Reshuffle.’ Although some of this demand is tied to the coronavirus pandemic, it is also attributed to longer term, structural changes as families express preference for strong public schools, backyard beaches, and shelter from income tax after a year fraught with political and civil unrest. The Great Reshuffle is a flight to safety whereby our homes become anchors for our existence and an opportunity for tangible alternative investment.
Florida continues to receive attention as the preferred relocation hub of 2020. Palm Beach has been described as the ‘hottest market in the world,’ with average home prices soaring above $7 million. Palm Beach market reports indicate that single-family home sales in the area were up 33% in 2020 and 36% for townhouses/condos, despite scarce inventory, as many chose to leave urban density, high taxes and colder weather in trade for the Sunshine State. In Miami, single-family luxury home sales increased 120% in Q4 2020 and 88% for luxury condo sales, according to Business Journals’data.
The migration south has also hit Wall Street, with Goldman Sachs contemplating a move to Palm Beach while Citadel and Elliott Management have already set up shop in Florida. Similarly, Tesla and Oracle are forging ahead with plans to relocate to Texas to create better economics for investors and employees. Overall, we see businesses seeking alternatives to more expensive coastal markets and taking advantage of pro-growth, low-tax, politically stable mid-sized cities with an educated work force, like Austin, Salt Lake City, Raleigh, Charlotte, Nashville, and San Jose. Home buyers still want to be within commuting distance of large employment centers, but with the prevalence of remote work, they are willing to extend the distance from urban downtowns.
We have continued optimism for the long term of New York City and are putting the finishing touches on our new Nest Seekers International Billionaire’s Row flagship store, thus laying the foundation to capitalize on the city’s bounce back. First time home buyers who have been sitting on the sidelines waiting to get into the Manhattan and Brooklyn markets have the opportunity to do so at a 3-20% savings over nine months ago, according to Bloomberg. In the third quarter, 52% of the market was driven by sales <$1 million and 25% by sales from $1 million to $2 million, according to Curbed.
Many city-dwellers have chosen to shift their primary residences to the Hamptons, and thus, total Hamptons sales were up 80% in 2020. According to the Hamptons Market Data report, there were 70 sales in the $10 million+ market, up 126% from the year prior and 130 sales in the $5-$9.999 million market, up 106%. This boom is driven by the same lifestyle preference for more space, safety, and a slower pace that we have been seeing in the Florida market.
We have seen a similar shift into New Jersey, the Long Island Gold Coast, and Greenwich markets. The Wall Street Journal reported that within North Jersey, Hoboken recorded the most deals in the third quarter, with 214, totaling $180.4 million and Downtown Jersey City followed with 151 deals, collectively valued at $131.6 million, inclusive of a 20% price increase. Inventory continues to encourage bidding above ask on the North Shore of Long Island as young families flock to the area so children can attend in-person schools and parents can build out home offices and gravitate to healthy outdoor lifestyles. Similarly, Yahoo! Finance reported that deal-flow in Greenwich was up over 100% in November compared to last year.
The Beverly Hills and Malibu markets, which had been running tight on inventory until September, also show new opportunity for buyers. The California Association of Realtors reported that buyers saved an average of 3% under list price in closed transactions during the third quarter with a 21.6 % increase in inventory year-over-year, creating continued buyer strength.
London’s market rebounded quickly in early Fall after the easing of lockdown, buoyed by pent-up demand, with price momentum up 6.6% over 2019 despite a fall of 0.6% in December, according to Rightmove data. The average time to secure a buyer in London decreased to 54 days in November 2020, from a peak of 88 days in May 2020. Rightmove also reported that the number of sales agreed in London in October 2020 was 57% up from October 2019.
Throughout the US and London, the ultra-high-end $10mm+ market has showed continued strength. The super-wealthy are able to secure expedited low-interest loans in the 2% range via private banks, making it an opportune time to purchase a trophy home. Alternative tangible investment in art, yachts, gold, planes, and precious jewelry has also trended heavily with the same individuals.
The Year Ahead
Overall U.S. 2020 sales grew about 6% ove2019, despite obvious pandemic headwinds, and Nest Seekers’ expectations for 2021 are even stronger. Zillow is predicting 21.9% annual growth for 2021, totaling almost 6.9 million homes sold – which would be the highest annual sales growth since 1983. Interest rates are expected to stay historically low for the foreseeable future, encouraging the country’s economic recovery and contributing to the bullish forecast. Purchase mortgage applications have risen consistently year-over-year since May, averaging 22% annual growth over that period. And an index of pending home sales from the National Association of Realtors also indicates double-digit annual growth since June, and was almost 20% year-over-year in October. INSERT CHARTS BELOW
All indicators point to the suburban markets remaining strong, with new construction and move-in-ready opportunities selling at a 10-20% premium. Buyers will continue to capitalize on urban living opportunities at a discount, thus rebalancing in the long run. The influx of millennial and Gen Z buyers into the market, many of whom had de-prioritized home ownership until now, will also keep demand steady. Home price appreciation will reach its fastest pace since the Great Recession, as the inventory crunch continues to pit buyers against each other, competing for a scarce number of homes for sale.
Wall Street is also predicting a strong 2021, with the coronavirus vaccine rollout lifting the economy into the second quarter and home goods retailers like Home Depot, Restoration Hardware, and TJ Maxx will continuing to outperform the overall market as we upgrade our home’s livability and workability function. What we have termed as the ‘new normal’ as now just ‘normal’ – our county has accelerated its evolution and has become comfortable with the long-term lifestyle prospectus.
Nest Seekers Chief Economist, LEED AP, Real Estate Advisor FL & NY