Questions a sociologist asks when seeing changes in the housing stock in their community

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:

  1. What existed here before this current residence?
  2. What motivated the property owners to tear down the existing home and build these homes (and in these particular styles)?
  3. How do existing and new homes interact with their surroundings?
  4. 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.
  5. What happened at the community level (decisions, regulations, proposals, discussions, etc.) for these homes to exist in this form?
  6. In the long run, will these changes be viewed positively in the community or negatively?
  7. 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.

Flipping houses stats – up then Great Recession then up then down again – and questions

How many houses have been flipped in the United States in the last fifteen years? Here are some of the stats:

person holding pencil

Photo by Skitterphoto on Pexels.com

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?

Competing claims: America has a shortage of housing versus it has plenty of housing (albeit overpriced or inaccessible)

Does the United States have lots of housing units or a shortage? The two sides of the argument:

  1. 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.
  2. A recent opinion piece states the other side of the argument:

“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:

  1. How many older housing units can be renovated to today’s codes and standards? And who should pay for this?
  2. Should anyone be put in charge of or help set housing prices so that more housing units are within economic reach of more residents?
  3. 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)?
  4. 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?

Is my 45 year old suburban home worth preserving?

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.

Patterns across the ten metro areas with the most big homes

While the article I discussed yesterday did not provide a helpful definition of a McMansion, it did provide five trends regarding which metropolitan areas had the largest homes:

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:

  1. They have a growing population and thus a growing stock of larger, new homes, particularly in suburbs.
  2. 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.)
  3. 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.

Comparing the costs of tearing down versus renovating a home

Could it cost less money to buy and teardown a home than to renovate it? Here is one data point from a 2015 story about teardowns in the Chicago area:

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:

  1. 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.
  2. Some will want to keep renovating them. (Clearly, however, others will not – hence, we have teardowns.)
  3. 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.)
  4. 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.

Teardowns increase

Demonstrating again that people with means are doing fine in the housing market, the number of teardowns is on the rise:

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.

I like the picture they chose to accompany this story as it highlights why many communities have fierce debates over large teardowns:

Northern Virginia’s Pimmit Hills

That is quite a difference in size and shape.

Remodeling dated and garish McMansions

Some buyers of McMansions do quite a bit to update the 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.

Ironic but enjoyable living in cheaper inner-ring suburbs?

James Lileks contrasts the criticism of 1950s suburbia and the current cool cheapness of such communities:

So it’s great when suburbs die! Except they’re not dying. A recent story in my local paper noted how the first-ring suburbs are great bargains for young people, which makes them cool again. So: Twenty-somethings in 1962 with two kids and a house full of Danish Modern furniture with push-button appliances and a Siamese ceramic cat on the mantle: the oppressive falsehood of the postwar American dream. Twenty-somethings with the same house in 2014, the same decor (they’re into mid-century design), and two pugs: the salvation of urban America, because the style section can do a piece that includes the phrases “lovingly restored” and “Josh works as a web designer for a nonprofit.”

Josh may go to the mall, but rest assured he’ll have the proper attitude: Here I am, ironically inhabiting the lifestyle of suburbanites, when I’m really the sort of guy who’s planning a Kickstarter campaign for my artisanal-shaving-cream company. We’re going to use fair-trade sustainable eucalyptus.

But he’ll go to the mall when the pugs are replaced by kids and they need something to do on a dreary February Tuesday, and everyone needs diversion. He’ll find himself in the food court, the tots fighting over a pretzel, the anodyne music leaking from speakers overhead, an Apple Store bag at his feet. Then one of the kids spies the ride that takes a quarter and lets you pretend you’re driving a car.

I have become my father, he thinks, and realizes that’s actually a good thing.

This hints at the gentrification possibilities of inner-ring suburbs: the homes are relatively cheap and the communities were once thriving suburbs, places that have good if not aging housing stocks. Plus, a number of them have more diverse populations as the cheaper housing allows for more lower-class residents as well as more immigrants and minorities. Their proximity to the big city can mean short commutes downtown even as one lives in a suburb.

At the same time, Lileks may just be downplaying the issues facing these inner-ring suburbs. They may have some potential for gentrification but unlike gentrifying urban neighborhoods, they don’t have the broader financial backing of a big city. In other words, their tax bases may not be very strong which limits what kind of local services and programs are possible. Additionally, there may not be the same cool factor in being in a suburb compared to a hip urban neighborhood. The suburb may be more dependent on cars, upping the cost of living there. The community may not have the quality of life amenities – good schools, safer streets – that wealthier suburbs are known for and that might attract wealthier residents.

h/t Instapundit

Is the US housing stock too old?

A recent article discusses an aging American housing stock:

According to a recent survey from research firm RealtyTrac, 71 percent of U.S. single-family homes were built before 1990. In some states, particularly in the Northeast, pre-1990 houses make up 80 percent of recent sales.

Experts say the new-home drought is mainly due to a hangover from the real estate bust. Homebuilding, which practically came to a halt five years ago, has been slow to restart as big developers have remained skittish. New-home construction this year is still 40 percent below normal long-term levels, says Jed Kolko, chief economist at real estate website Trulia.com.

Furthermore, builders have focused on multifamily homes, and individual buyers have not had access to all the new single-family houses coming to market.

“Wall Street-backed money has scooped up newer homes to use as rental properties,” said Daren Blomquist, vice president of RealtyTrac. “That’s pushed the already-low new-home inventory down to record levels.”

The article seems to suggest the housing stock is too old but then doesn’t provide much evidence that this is the case. Based on the figures presented here, it sounds like 29% of American homes have been built since 1990. Is this too high or too low? Here are a few ways we could approach this argument:

1. There is a certain percentage of the housing stock that should be from the last two decades in a healthy economy or housing market and the US has not met this.

2. Perhaps demand for newer homes has increased. It could be that more homebuyers want homes that require little work or homes with certain features. Thus, this is less about having a set amount of newer homes and rather about responding to what customers want. Theoretically, if more people wanted older homes, then fewer new homes would need to be built.

3. Citing these figures is more of an introduction for then talking about how homebuyers should approach purchasing an older home (As the rest of the article does).

4. The percent of new housing stock will differ quite a bit by metropolitan area and region. While the Sunbelt has been growing faster, Midwestern and Northeastern regions have been growing more slowly.

All together, the quick claim here that the American housing stock is too old needs some more explaining.