Demand for space is up across the country, but cities like Anaheim, California; Houston, Denver and Phoenix are seeing especially robust activity on large properties
BY VIRGINIA K. SMITH | ORIGINALLY PUBLISHED ON JUNE 25, 2021 | MANSION GLOBAL
It’s no secret that the Covid-19 pandemic abruptly changed patterns of buyer demand across the U.S., halting a years-long trend toward minimalism and small spaces in favor of large, compound-style properties with plenty of private rooms and outdoor space.
“People have spent so much more time in their homes and have been working from home, and a lot of them see the value in having a home office, a big backyard, or just having more space in general,” said Daryl Fairweather, chief economist at Redfin. “I’m not sure if we’re going to see a reversal when things open up and people start going out and spending money on vacations again.”
The effect is especially pronounced in certain cities—often areas with easy proximity to larger, more crowded metro areas, or those that simply offer larger properties for lower prices.
According to data compiled for Mansion Global by Redfin, between April 12 and May 9, the largest year-over-year increases in the median square footage of pending sales were seen in Anaheim, California, with a 5.9% increase; Riverside, California with a 4.1% increase; Houston with a 3.4% increase; Los Angeles with a 3.2% increase; Denver with a 2.6% increase; and Phoenix with a 2.5% increase.
“Thinking through all the clients we’ve helped in the last year since Covid hit, I don’t think a single one downsized,” said Jennifer Wauhob of Better Homes and Gardens Real Estate Gary Greene in Houston. “They’ve all ideally wanted more space, and people are not necessarily having to base where they live on where their office is.”
And while prices have gone up in nearly all categories, the outsized demand for larger properties has in turn had an outsized effect on pricing.
“It really is the largest homes that have gone up the most in value,” Ms. Fairweather said. “That’s why it’s so difficult for buyers to move up. If you’re moving from a three-bedroom to a four-bedroom, you’ll make a lot on the three-bedroom, but the price increase on the four-bedroom is more.”
The flip side of this dynamic is that for sellers considering downsizing, or sitting on large properties that might have had difficulty selling in previous years, the current market dynamics are squarely in their favor.
“If you’re going from a three-bedroom house to a condo, condo prices have been pretty much flat, so you can take all of that profit and get a relatively good two-bedroom at a good mortgage rate,” Ms. Fairweather said.
For sellers contemplating the sale of large properties in these high-demand areas, here’s what to know to take advantage of the current frenzy for square footage.
Wealth From Large Cities Continues to Spread
Even as Covid infection rates drop and pandemic-related restrictions are lifted, wealthy residents of major cities continue to move to more spacious outlying areas, or to farther-flung, lower-cost states in search of larger homes and room to spread out.
“Last summer we started getting calls from buyers in New York and California in particular,” said Jay Monroe of Martha Turner Sotheby’s International Realty in Houston. “They were coming because they could now work from anywhere, and were choosing Houston because we tend to have more space. You can get a 4,000-square-foot house here on a 10,000- or 20,000-square-foot lot for the same price that you’d get an apartment in Manhattan.”
In Orange County, California—home to both Anaheim and Riverside—huge volumes of wealth are coming from Los Angeles County as well as the Bay Area, as luxury buyers, no longer tethered to daily commutes, move outside of some of the state’s most populous cities.
“People are looking for [areas] that are less crowded, have more space, they can work from home and don’t mind driving into Los Angeles once or twice a week as opposed to five days a week,” said Mike Hickman, CEO of Seven Gables/Luxury Portfolio International in Orange County. “And the Bay Area is less than an hour flight from Orange County. It would be like living in Brooklyn and moving to the Hamptons or upstate New York, somewhere you have a lot of space.”
The influx of demand from buyers in more expensive cities is compounded by the desire of existing area residents to upsize as much as possible.
“Even within Houston, I’ve seen so many people moving out of townhomes and apartments,” Mr. Monroe said. “Their first home was a townhome with a patio, but now that seller wants to move to a bigger single-family home on its own lot. And the seller of that lot is moving to a property that’s a full acre. So there’s a domino effect.”
All of which translates into buyers clamoring for larger properties, and paying increasingly higher prices to get them.
“We’re seeing crazy high prices and record-low inventory,” Ms. Wauhob said. “Families are getting so much more house for their money here that they think, ‘Let’s go big.’”
A Swift Change of Fortunes for Owners of Large Properties
While low inventory for these in-demand properties is in no small part driven by owners who have hung onto them for their own use during the pandemic, for those who are willing to consider a sale, this is a particularly opportune moment.
“We went through a phase where I really saw demand for under 7,000 or 6,000 square feet,” said Allan MacDonald, an agent with Sotheby’s International Realty in Scottsdale, Arizona. “There was a period where it was awfully difficult to sell the super large estate homes, and we trended toward smaller properties with one great room.”
Mr. MacDonald added, “If you look at the luxury markets here since Covid, we’ve had so many homes that have sold over 10,000 square feet. A lot of people who probably thought three years ago that they were stuck with a $6 million or $7 million house they couldn’t sell have been able to sell for $8 million or $9 million in this market.”
As a result, with lockdowns largely lifted in most cities, some sellers are now jumping into the market to take advantage while the trend toward “bigger is better” lasts.
“There have been some really savvy sellers who ended up having a significant windfall because of what has happened in the past 10 months,” said Cameron Ansari of Greenwood King Properties/Luxury Portfolio International in Houston. “Frankly, we’ve seen people come into a new market area and overpay, in cash, with no appraisals. This can only go on so long.”
As the year wears on, this dynamic might result in more balanced inventory for large properties, and increased competition for sellers.
“A lot of our downsizers held on [during the pandemic] and are going to downsize this year,” said Amy Cesario, an agent with Compass in Denver. “The ones that were going to list last summer decided to put off their sale and wait until after the pandemic. They’ll start [to list] and change what we’ve seen in the past 12 months.”
And while demand for larger properties in these cities isn’t likely to do a swift about-face any time this year, for owners looking to sell at an optimal moment, this is an unquestionably strategic moment to take the plunge.
“It’s certainly a very financially savvy decision to make at this moment in time,” Ms. Fairweather said. “Because large homes are so in-demand, if you’re downsizing, now is a great time to do it. I don’t think a lot of people are doing that, because everybody seems to want larger homes, but everybody who is is making out really well.”
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