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.

“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.