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

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.

“The U.S. is now a country where many people live alone in a land of 3-bedroom houses”

Putting together recent data on household type and housing supply in the United States, Emily Badger comes to this conclusion:

As we’ve written before, American households have been getting smaller as our houses, conversely, have actually been getting bigger. But the disconnect between those two trends may be felt the most strongly by people who live alone, whether they’re 22-year-old women who aren’t yet married, or 70-year-old retired widows. As more Americans are opting to live alone than ever before, that now seems like an entirely unremarkable choice. But for years we’ve been building houses for that big nuclear family that’s now less common. And housing data released earlier this summer by the Census Bureau, illustrated at right, suggests that the U.S. is now a country where many people live alone in a land of 3-bedroom houses.

Interesting claim but without knowing exactly if the single-person households are living in the three bedroom homes, it is difficult to support.

A thought: I wonder if household types/family life can change much more quickly than the housing stock. That housing supply data includes a lot of homes built in past decades, both in eras when homes were smaller with larger families (pre-1960s) and when homes have been larger (the last few decades). It will take a long time for the housing market to fully adjust to more people living alone. Micro-apartments may be catching on in a few big cities but smaller housing for solo households is still limited.

But, it would also be interesting to ask single-person households how many bedrooms they would prefer to have if they could. Three bedrooms allows for space for guests as well as other kinds of rooms (used as storage/closets, hobby rooms, etc.). Two bedrooms does the same thing but with less space and four bedrooms probably provides too much space.

Chicago area housing starts up 37%; still one-fifth of “normal”

The good news: Chicago area housing starts are up. The bad news: housing starts had slowed so much in recent years that this is nowhere near “normal.”

Housing starts in the first quarter in the Chicago area rose 37 percent, which puts the local housing market on track to build 4,000 homes this year, the best performance in three years, according to Metrostudy, a housing research and consulting firm.

Still, a normal number for new-home starts in the Chicago area is 18,000 to 20,000. “We’re one-fifth of that. We’re a long way from being normal,” said Chris Huecksteadt, director of Metrostudy’s Midwest markets…

A lack of quality inventory and bidding wars among resale homes have caused some consumers to change their focus and consider buying newly constructed homes. Several local builders report that they’ve started homes as spec or model homes and the properties have gone under contract before the drywall is up…

Because of that kind of demand, as well as a recent spike in lumber prices, some local firms are raising prices by $5,000 to $20,000 per home to help offset the cost of materials and to maintain or improve their profit margins. No one is getting too aggressive with price hikes, though, because it might lead to problems with appraisals and mortgage financing.

This may be the new normal for quite a while. As the end of the article notes, it may be difficult to generate consistent demand until there are more jobs.

When I see figures like this, I always think about the existing housing stock. Does this automatically mean that the available number of houses is really low? Or, is there a growing interest in recent years among buyers to forgo the problems existing houses may have and instead pay a little more to get a spot-free home? If some of the existing housing stock is going unpurchased, what then happens to those homes? Some people may not be able to move while other houses, particularly those in more disrepair and neglect, could become a drag on some neighborhoods.

“The typical American home” is a reminder not all American homes are new

The 2011 American Housing Survey provides a summary of the traits of the typical American house:

This Is What the Typical American Home Looks Like Now

A little bit more on the changes to American houses over time:

Some aspects of the American home have changed dramatically since the first survey was conducted in 1973 (which makes sense because half of the occupied homes today were built in 1974 or later). Central air conditioning was a luxury that only 18% of households enjoyed back then, but the number grew to 43% in 1993, and today 66% of dwellings have central AC.

The number of bathrooms in a typical home has also grown. From 1973 to 1991, one bathroom was the norm, and for the next 20 years, it was one and a half bathrooms. The 2011 survey is the first time that the median residence was found to have 2 or more.

What strikes me most about this summary is that this is a very different picture of housing than we typically see and hear about. A lot of attention is lavished on new housing: people are interested in the size (new homes are on average about 2,500 square feet so way above the full average for US homes), new building trends (McMansions, green homes, homes of the future), new features (less granite countertops and stainless steel appliances?), and new housing starts. There are good reasons for all of this: housing is a big industry with lots of money involved.

At the same time, most houses in the United States are not new houses. They are homes that need maintenance, updating, and aren’t necessarily bringing in similar amounts of money into the economy. They are probably more accessible to average Americans and are probably located in older, more established communities. In other words, we need to also pay attention to the existing housing stock to think how both the existing and new stock can be effectively utilized.