Top Ten Fastest-Selling Master Planned Communities: Value Stability Presents Itself as the Top Reason Consumers Are Buying
The Urban Land Institute recently reported a listing of the current fastest-selling master-planned communities, and as encouraging as any news of successful sales is in the world of real estate is, the article also pointed out that sales volumes are still hovering at one-third of their pre-recession absorption levels. Through interviews with communities, one common question emerged: what did it take to obtain success in today’s market, in light of the greatest downturn in real estate in decades? Each community offers something elusive and intangible that clearly represents value stability within their respective market, but can that essence be distilled into something tangible? Can it be replicated and used by others to create profit, and if so, what is it? The answer to that is value stability.
Every inventor, designer, seller and manufacturer dreams of finding the secret to how things hold their value; how to create products that will be enduring classics, as opposed to flash-in-the-pan pop culture waves; how to build homes whose perceived values stay constant (or grow larger) throughout time. This perception of value, and the ability something has to holds its value, is the concept behind value stability. So if value stability is the common current with the master planned housing communities topping this list, how can we clone their success?
For starters, these communities’ response time and adaptation to changes in market conditions seem to be what has largely contributed to the value stability represented in most of these communities. No data at this point clearly demonstrates whether this value is real or perceived, however, given the circumstances and other options available to them, consumers believe master planned communities are the best place to park their cash if they are going to purchase a new home today. Consider the list prior to looking into some of the details.
#1 The Villages by The Villages, Orlando (2107 units)
#2 Villages of Irvine by The Irvine Co., Orange County (965 units)
#3 Cinco Ranch by Newland, Houston (816 units)
#4 The Woodlands by Woodland Dev. Co., Houston (786 units)
#5 Mountain’s Edge by Focus, Las Vegas (644 units)
#6 Telfair by Newland, Houston (406 units)
#7 Providence by Focus, Las Vegas (378 units)
#8 Brambleton by Soave, DC (352 units)
#9 Sienna Plantation by Johnson Dev. Corp., Houston (288 units)
#10 Stapleton by Forest City, Denver (271 units)
Source: ULI and Robert Charles Lesser and Company http://urbanland.uli.org/Articles/2011/May/SpivakTop10MasterPlan
Obviously, certain strategies and components of all of the communities on the list positioned them within their markets to lead in sales volume and crush the competition, but in general, master planned communities provide customers with a vision of their future, along with a long-term plan, diverse products, and regulations and restrictions which protect values across the community. At a time where foreclosures are wide-spread, unemployment is still high and general economic recovery remains slow, these communities outshine the rest, because they were all quickest to adapt to the change in market conditions, and in many cases, they also had components built into their communities which positioned them as the logical place to invest in residential real estate, even where regional conditions were weak.
Case in point: Las Vegas is still considered the foreclosure capital the Country, right? If so, then why did it make two of the places on the list? Who’s still buying there, since the Las Vegas real estate market has been pummeled by a wave of foreclosures still far from being absorbed? The amount of decent properties available, many of which are vacant, is deteriorating rapidly; the foreclosed-on homes are abandoned by their previous owners and often stripped of appliances, flooring, cabinets, wiring and fixtures, vandalized and in many cases, left in great states of disrepair. Adding to the physical destruction of these properties are also the issues experienced by many customers when dealing with the banks that own the foreclosures. These homes are not being offered at prices comparable to new homes in the market, especially when adjusted for aggravation involved, repairs required and lack of stability within their host communities.
Prior to 2007, buyers wanted homes which were 2000-2500 square feet and cost between $250,000 and $350,000. Today, reality has set in and consumer preferences have changed dramatically in Las Vegas. The new product has adapted downward to meet the new expectation and demand. This new crop of homes is smaller and cheaper than before, but these are also new and in turn-key condition; they are being offered with numerous builder incentives to entice buyers, at prices far below previous levels. The target house is now an 1800-2200 square foot home with three bedrooms, two baths and a two car garage. Sales prices for homes in the top selling communities are now $150,000-$200,000.
When faced with this alternative – homes which are newer, smaller, ready immediately, in neighborhoods which are not filled with loads of unsightly foreclosures – most consumers would ask themselves why they should buy distressed properties, given the alternative option of buying within a stable master-planned community. This reason, this sense of value and stability, is largely why the communities listed above are seeing success, even in a real estate market so devastated. They adapted quickly to the market and offered consumers a variety of products addressing the concerns presented by much of the competition, whose communities are now riddled with high numbers of vacant and foreclosed homes. The larger, slower to recover communities may not stabilize for years (if ever), while the stronger communities represented on this list do not need to recover because they are strong today and present an immediate advantage in terms of value to their buyers.
On the other side of the coin, regional conditions in Houston and Washington DC have remained strong throughout the recession (does Houston even know we had a recession?), which begs the question: do master planned communities fair as well in areas which have not been so greatly impacted, as they do in areas which have been hit hardest? In these two parts of the country, consumers still seek products which are provided at prices which are similar to those which are comparable to pre-recession rate, if not greater than before.
In DC, the Federal Government is the largest economic driver, while in Houston, it’s health-care and oil and gas. As long as we have a government, get sick and need to drive a car, the economies in DC and Houston will continue marching on. While products offered in the Houston communities are similar to those offered before the real estate downturn, the demand starts at the $140,000 price point with the average still around $300,000. Homes are still large, at more than 3,000 square feet, but today many buyers are seeking this larger home because of the increase in multi-generational buyers. Houston’s economy is robust; on this list, it represents four of the top ten communities and captured 33% of the total units on the list.
Looking over at another part of the country, Denver’s community of Stapleton has one of the most diverse product offerings, in terms of residential, commercial, civic, education facilities, amenities, open-space, recreation and sustainability beyond ‘green building.’ Sustainability was woven into the Stapleton plan from its original conception by the City of Denver and its residents. Stapleton is a model for long-term sustainability on many levels and is uniquely positioned to be a community of choice for years to come – a model which will likely adapt best to our evolving demographics. Because this mix was built into the original master plan, little adjustment has been required to sustain the absorption seen at Stapleton. While a bit slowed, this community still represents an absorption greater than the remainder of metropolitan Denver.
Sustainability was not a driver at any other community on the list, making Stapleton stand out from the rest, and although energy conservation was important to a few others, Stapleton had the greatest demand. People generally still do not want to pay for sustainability, but when it is integrated into the fabric of the plan, rather than simply being used as a green building add-on, sustainable development contributes to success on multiple levels. Quality of life is a number one driver at Stapleton, and this is a direct result of both the master plan that was created and the holistic approach which was utilized in incorporating sustainability as a central component.
In Florida, the top selling community embodies most of the components of the lower nine and many additional, but is also unique in that it is an age restricted retirement community. The Villages is a massive resort style retirement destination, covering more than forty square miles, and is estimated to have a population in excess of 84,000 people. The Villages is considered a census-designated place (CDP), a census statistical counterpart of incorporated places such as cities, towns and villages. CDPs are populated areas that lack separate municipal government, but which otherwise physically resemble incorporated places. While its absorption numbers are impressive, this must be taken into consideration relative to the scale of this community. This community represents 30% of all units on the top ten list. Similar to Stapleton, the variety of housing types and prices points, blended with wide variety of social, civic and recreational amenities, has required little adaptation from the original plan. Its successes are attributable to a variety of factors that also translate into value stability: affordable prices points that range from $140,000 to more than $400,000, and two vibrant mixed-use town centers with shopping, dining, theaters, live entertainment, special events, houses of worship and health and wellness facilities.
For those who are deciding to buy homes today, even if they don’t have a name for the concept in their minds, value stability is the most critical factor in decision making and is the number one reason people are buying within these communities. This will likely continue to be a leading factor of where to buy, but for those who aren’t motivated to buy today, will these communities meet the demand of those who will buy homes in the years to come? With so much pent-up household formation, how may the future need for homes manifest itself in terms of demand as the market continues to rebound? Some have suggested that multifamily homes – as an integrated and central component – could take the place of entry-level, single-family homes in many communities and markets. As households continue to form, population expands and boomers continue to age, we will see product mix and demand adjust to meet this demand. The communities which respond at that point may not be the ones which top the list today, because while some offer a variety of product in terms of size, few offer a true diversity of product. In the end, it’s still quality over quantity.