Stories like this make Chicago the perfect place to understand how condos usually meet their end—not in a pile of rubble, but in a buyout that leaves some owners feeling lucky and others feeling betrayed. Lauren Kerchill, the owner of a Gold Coast unit overlooking Lake Michigan, was a holdout when investors came to buy out her building. After fighting to toss her condo board, she told Crain’s Chicago Business she was called “petty,” “greedy,” and “uneducated.” She just didn’t think she could find another home like hers nearby. In the end, she didn’t have a choice. Her neighbors voted to sell her building, at 1400 Lake Shore Drive, for $107 million in 2019—another record, this time the most expensive deconversion in the country…
But there’s another side to the story, in which deconversion is the only way out for condo owners stuck in deteriorating properties. In June, the collapse of Champlain Towers South in Surfside, Florida, drew attention to the challenges that confront condo boards as they assess structural damage and raise money for repairs. Maintenance bills for the Great American Condo Boom of the ’70s and ’80s are starting to come due in areas like South Florida…
While states like Florida, California, and Hawaii saw tons of new condo construction in the decades after the concept was established in the 1960s, Chicago saw a different kind of boom: older buildings becoming condos. Fearing rent control, facing declining profits, or saddled with obsolete prewar commercial space, landlords in Chicago raced to sell off their units in the 1970s. Yuppies and middle-class workers gobbled up these starter apartments, which provided an easy and cheap entry point to homeownership.
Fifty years later, those buildings are among the oldest condominiums in the country. Owners who have not kept on top of maintenance, and even some who have, sometimes find themselves facing massive repair bills.
It would be interesting to read more about the specific aspects of Chicago’s history, real estate market, and local regulations that play into the the number of condo deconversions in Chicago.
More broadly, this gets at two larger housing issues:
How do deconversions fit with a larger American promotion of homeownership? Condos offer opportunities to offer homeownership opportunities in settings where the single-family home is less possible. But, given market conditions right now, is there now increased interest in having more rental units?
While aging and the associated expenses is an issue for condo buildings, it is also an issue for many more housing units in the United States. What happens to older homes and residences when there is limited interest in repairing them or redeveloping the property? In wealthier communities and desirable locations, there are often developers and individuals interested in rehabbing or rebuilding structures. Hence, teardowns or new residences in suburban downtowns. Elsewhere, replacing or changing housing is a more arduous task.
What will happen to American homes in the coming homes, particularly all the suburban tract homes and McMansions? One path forward is to provide resources to fix up and improve existing homes. According to plans from the White House:
Build, preserve, and retrofit more than two million homes and commercial buildings, modernize our nation’s schools and child care facilities, and upgrade veterans’ hospitals and federal buildings. President Biden’s plan will create good jobs building, rehabilitating, and retrofitting affordable, accessible, energy efficient, and resilient housing, commercial buildings, schools, and child care facilities all over the country, while also vastly improving our nation’s federal facilities, especially those that serve veterans.
As housing ages, issues pop up. They need maintenance. Standards change regarding efficiency, local codes, and what residents desire. The community around houses and housing can change in terms of demographics and development, affecting the reputation of the neighborhood.
This plan emphasizes retrofitting homes, among other options. Energy efficiency is one reason as features like new windows, better furnaces and air conditioners, insulation, and more can cut down on energy use and utility bills. Retrofitting can also help maintain the appeal of homes; instead of falling into disrepair or failing to keep up with the times, retrofitting can spruce up houses that have been around for a while.
Some of this has been available through various means for a while. The concept does stand in contrast to another approach Americans have taken: just build new homes in sprawling suburbs or as teardowns and leave the older homes and their issues to others. Retrofitting single-family homes could be quite a project in the long-term with the emphasis on the United States on single-family homes in the suburbs. Does every suburban home require or deserve retrofitting at some point?
I try to pay attention to housing changes in the suburban community in which I live. Here are some questions I ask as I observe both existing and new homes:
What existed here before this current residence?
What motivated the property owners to tear down the existing home and build these homes (and in these particular styles)?
How do existing and new homes interact with their surroundings?
What does the inside of the home look and feel like? The outside provides some clues but interiors can be quite different from house to house.
What happened at the community level (decisions, regulations, proposals, discussions, etc.) for these homes to exist in this form?
In the long run, will these changes be viewed positively in the community or negatively?
Who are the people who live in these homes (who is this housing for)? Are they the same or different kinds of people who are in the community?
We can measure features of old and new homes and look at the aggregate data. For example, we could try to look at the “average” home largely based on standardized traits. These figures are helpful but they also leave out other important traits of homes: what is their character? How are they experienced by the owners and the neighborhood and how do they shape social actors? How do they contribute to community life? What do they say about the priorities of the occupants and the community?
In sum, homes are not just part of the housing stock. Each house has the potential to shape and be shaped by people who interact with its material and symbolic presence. And when the housing changes, it can alter existing understandings.
In the first three months of 2020, 7.5% of homes sold in the United States were flipped, according to a June report from real estate research firm ATTOM Data Solutions. That’s the highest rate since 2006 and a jump from 6.3% at the end of 2019.
Home flipping rates had dropped drastically in 2007 and began to gradually recover in 2010. The number of flipped homes sold in a quarter peaked around 100,000 in 2005, and while it was on the rise in recent years, a decline began in the second quarter of 2019. In the first quarter of 2020, 53,705 single-family homes and condos were flipped, according to the report.
Profit margins have also dropped since 2019, hitting the lowest return-on-investment since 2011. After plummeting with the national economy between 2006 and 2008, profit margins on flipped homes grew at a steady rate until 2017. But since then, return-on-investment has been on a decline.
Still, it’s too soon to fully grasp how the coronavirus pandemic will impact the house flipping market through 2020 and beyond, ATTOM chief product officer Todd Teta said in a statement.
Flipping homes is by now a well-known process due to TV shows and personalities plus its spread throughout the United States. Yet, alongside other phenomena featured on HGTV and among certain groups (such as tiny houses), it can be hard to know how widespread a phenomena is.
Not surprisingly, these stats suggest flipping homes is connected to broader economic conditions: flipping increases when property values are high and repairs to a home can pay off in a sale. When times are tough and property values stagnate or even drop, there is less money to be made in flipping homes.
In the data above, it would be helpful to see how the national trends compare to patterns in particular places. Does flipping work in the hottest markets where prices are already high (limiting who can flip)? What about Rust Belt communities in good and bad times? Suburbs? Urban neighborhoods? I would guess there is a lot of variation across communities.
It is also worth considering what happens to the housing stock in places where flipping does or does not take place. If flipping happens, older housing stock gains new life. If it does not, do these homes simply keep sliding into disrepair?
Finally, this article starts with an example of a family involved in a flipping business but says very little about the role of small flipping businesses or more corporate operations. Even if flipping activity declines during tougher economic times, does it present opportunities for some to buy up properties to flip later? How do the profit margins differ across different kinds of flippers? Are smaller firms or family-owned flippers viewed more favorably by communities than corporate entities?
Does the United States have lots of housing units or a shortage? The two sides of the argument:
A few years ago, I had a conversation with a sociologist who studies housing. When I brought up the issue of not enough housing units in connection with a need for more affordable housing, they said the problem was not a lack of units. Rather, more of those units needed to be made available to the people who for a variety of reasons could not easily access them now.
“Stephen, you’ve been proven right on housing, and I think you’re about to be proven even more right. The most important driver of home prices is supply and demand. And right now, there is a chronic undersupply of homes in America.“
As I said, the 2008 bust turned a lot of folks off from investing in housing. It shattered the confidence of homebuilders, too. Census Bureau data shows an average of 1.5 million homes were built each year since 1959. Yet since 2009, just 900,000 homes have been built per year. In fact, fewer homes were built in the past decade than in any decade since the ‘50s!
We have a serious housing shortage in America today. It would take less than six months to sell every existing home on the market, as you can see here…
…In the past year or two, the first wave of young homebuyers came into the market. But every year for the next decade, tens of millions of Millennials will hit home-buying age.”
I could see a possibility where both prognosticators could be true: there are many dilapidated or older units that need to be updated and priced in ways that more people can access them and there is a relatively shortage of new homes that meet the demands and tastes of younger buyers.
But, this gets at some bigger questions about housing in the United States:
How many older housing units can be renovated to today’s codes and standards? And who should pay for this?
Should anyone be put in charge of or help set housing prices so that more housing units are within economic reach of more residents?
Should developers and builders primarily focus on profit or do they also have a responsibility to communities (beyond paying a fee for affordable housing or sprinkling in a few cheaper units)?
Can housing be revitalized in areas without significantly changing the population composition or housing values or other ways that might significantly disrupt what current residents like about the location?
I realized recently that my suburban home of nearly two years is 45 years old. While there are no major problems with the home, it made me think: how long could the house last? And, how much effort and money should be expended to keep it going?
The home has some nice features but I don’t think there is much that distinguishes it from millions of other suburban homes. Its architecture is bland if not McMansion like and the lot has a good location.
As the postwar housing stock ages, many homes like ours may face more issues and newer housing units in a variety of places provide new competition. Complicating matters is that many of these older suburban homes command a decent price. When located in more desirable communities, these dwellings will likely prove attractive for some time.
But, when will the tide turn? When will the repair costs become extensive? Are older suburban neighborhoods destined for teardowns or complete redevelopment, not just in the wealthiest areas? Will populations shift away from postwar suburban neighborhoods?
I have little idea of how many years I should predict my suburban home will stand. Twenty-five more years? Seventy-five? One hundred? The builders and developers of postwar suburbs probably spent little time considering what their neighborhoods of tract homes would look like in a century but we are not too far from that. Future generations will decide whether homes like mine are worth investing in or no longer the trouble.
Supersize trend No. 1: Outdoorsy types need plenty of space
Supersize trend No. 2: Seeking space in the suburbs
Supersize trend No. 3: Southern cities are churning out jobs and big homes
Supersize trend No. 4: Big homes are all that’s left in tight Midwestern markets
Supersize trend No. 5: Tech hubs + deep pocked buyers = more McMansions available
And, like the McMansion definition, another important caveat:
And if it wasn’t for the fact that we limited our ranking to one housing market per state, Colorado and Utah would’ve had all five top metros.
And a third caveat: this is based on only homes that are on the market.
Even with these significant limitations, I wonder if an analysis could reveal some underlying patterns behind these noteworthy metropolitan areas:
They have a growing population and thus a growing stock of larger, new homes, particularly in suburbs.
They have relatively low housing prices paired with enough higher income jobs. (Seattle and Portland are the ones that stick out here but perhaps this is relative: those same buyers could find higher prices in the Bay Area, LA, Vancouver, etc.)
These places have looser zoning restrictions on the whole that allows for more and/or quick construction. (I imagine there is some variation in these top 10 places. Portland and Bridgeport, for example, likely have some tight restrictions compared to an Indianopolis or Provo.)
This could be worth pursuing though the data needs to provide a more complete picture of the housing stock.
The teardown candidates aren’t just tiny bungalows this time. Developers are targeting larger houses as well, particularly if they sit on coveted property. Antiquated plumbing, the absence of upscale amenities such as media rooms, and the high cost of gut rehabbing (roughly $300 a square foot, versus $200 for new construction) are pushing homes on North Shore lots near the lake into early retirement. Two properties that sold for around $4 million each in 2014—one in Wilmette and one in Winnetka—are on their way to the scrap yard, says Berkshire Hathaway HomeServices KoenigRubloff agent Joseph Nash. Both were on three-quarter-acre lots with private beaches, and the Winnetka house had seven bedrooms—big and nice, but apparently not nice enough.
At various points, I’ve thought about what might happen to much of the aging suburban housing stock in the United States. Many of those homes, small or large, will be slowly renovated over time. Depending on the neighborhood as well as the desirability of the individual homes, renovation could take place at faster or slower rates. Yet, will there be a point when many of the older suburban homes will be demolished? How long can they be maintained or renovated? If they need to be demolished, who has the money to replace them and if they are replaced, will the residents be able to stay?
From an economic perspective, presumably the money spent renovating the older homes will at some point surpass the cost of building new ones (that may also be of better quality and more up to code) and living in those. Yet, this ignores a lot of features of homes and their construction:
They are part of neighborhoods and communities. People often enjoy having a certain character when they purchase in a particular place. This character is often related to the homes present as well as to a unified character on streets.
Some will want to keep renovating them. (Clearly, however, others will not – hence, we have teardowns.)
They may be able to last a lot longer than critics gave them credit for. (One of the common complaints about mass produced suburban homes is that they are of poor quality. While this may be true, it does not necessarily mean that they are uninhabitable or cannot be improved over the decades.)
Replacing large swaths of suburban housing requires both foresight and funds. Who is willing to look that far into the future? Who has the resources to undertake large projects in this domain rather than working with the occasional house here and there?
For now, most of the news we hear about replacing suburban homes tends to be in wealthier communities where teardowns are desirable. This may change in the near future.
Home teardowns are becoming common in U.S. suburbs such as Pimmit Hills, a 65-year-old neighborhood just beyond the borders of the growing Tysons Corner area near Washington. Builders, lured to locations where land is more valuable than the aging housing stock, are transforming communities outside of major employment hubs to take advantage of demand for real estate where schools are decent and commutes are short.
Knockdowns across the country are increasing, said Robert Dietz, an economist with the National Association of Home Builders. The trade group estimates that builders tore down and reconstructed about 32,000 homes last year, representing 5 percent of all single-family housing starts. Beyond the nation’s capital, the trend can be found in suburbs of cities from Boston to Minneapolis and Los Angeles.
“It’s all about traffic jams — people can have nice houses far out in outer suburbs but the commute time is impossible,” Lawrence Yun, chief economist of the National Association of Realtors, said in a telephone interview. “This is an ongoing process because older-built homes happen to be closer to job centers and may not meet the needs of modern homebuyers.”…
More builders are ripping down existing homes because well-located vacant lots are becoming difficult to find and structures in communities close to urban areas are among the oldest. In 2013, about 47 percent of owner-occupied homes in the U.S. were at least 40 years old, up from 27 percent in 1991, according to an analysis of Census Bureau data by the homebuilder group.
If you have the resources, you can get the bigger home with the shorter commute in a desirable suburb. The figure cited above about a dated housing stock is intriguing; many people today seem to want new and turnkey construction but many older suburbs – even ones founded right after World War II – could have primarily older homes.
The towering (and disintegrating) stucco walls, pretentious interior columns, two-story great room, and four vinyl garage doors that greeted visitors didn’t do much to distinguish it from its neighbors.
“We knew it was, inherently, a version of a McMansion. So one of our challenges was: How do we bring a new identity to it?” said Seip, vice president of Chase Building Group, based in Doylestown.
As the region’s stock of oversize – but often under-designed – suburban tract houses ages into its teens and 20s, some homeowners are looking to reverse the gravest missteps and most ludicrous larks of prerecession developers. They’re ripping out never-used master-bath Jacuzzis, lowering space-wasting cathedral ceilings and replacing builder-grade finishes with more personalized selections…
“If you have a house that was cheaply built with bad materials, with a short-term development mentality . . . it will always plague whatever you do,” he said. “We can solve for a badly planned house. But we can’t change a badly made house into a well-made house.”
This is one answer to the question of what will happen to McMansions several decades later: some of them will be remodeled to fit new trends. New owners often want the latest features and want to avoid the appearance of dated finishes.
There are several possible responses to this:
1. Not all McMansions are likely to be significantly remodeled. What happens to them and how many will there be?
2. The last quote in the passage above is interesting: the changes can only go so far to fix earlier features of the house.
3. Critics of McMansions might suggest no one should buy these homes in the first place but it is interesting to note that there are homebuyers who think McMansions can be “fixed” or changed to better meet their needs. Even if significant remodeling is desired, is square footage still a key drawing point of these homes?
4. The stucco McMansion finishes in Pennsylvania seem to draw quite a bit of attention. Are there no stucco McMansions further in the Northeast? Perhaps builders got a little carried away with this exterior finish in an area that has more roots in northern European architecture.