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?

Maybe modernist houses will appeal to millennials – in certain circumstances

Architects and cultural critics often like modernist homes even as Americans largely do not prefer them. But, perhaps millennials will select modernist homes:

“For a while people were just tearing them down, but people are seeking them out now — they’re the anti-McMansion,” says Ellen Hilburg, co-founder of the real estate resource Mid Century Modern Hudson Valley. “For some people, it’s a nostalgia factor. But Millennials are discovering them, too. It’s an aesthetic that appeals to people who are aware and environmentally conscious.”

There are a number of pieces of this story that suggest preferences for modernist homes are tied to particular traits of the homeowner or observer:

1. A higher social class.

2. Higher levels of education.

3. Rejection of consumerism and the implied materialism and conformity that goes with it.

4. An interest in the “cool” factor of a home.

5. Living in a community – such as a wealthy, middle to upper-class suburb – where modernist homes are present and accepted.

Putting these categories together, there may indeed be a slice of Americans who prefer modernist homes. But, this also sounds like a taste connected to cultural capital, to invoke Bourdieu. In other words, expressing a preference for modernist design is connected to social class and education that not all Americans have access to.

17% of millennial homebuyers regret the purchase (but perhaps 83% do not??)

A recent headline: “17% of young homebuyers regret their purchase, Zillow survey shows.” And two opening paragraphs:

Seventeen percent of millennial and Generation Z homebuyers from ages 18-34  regret purchasing a home instead of renting, according to a Zillow survey.

Speculating as to why, Josh Lehr, industry development at Zillow-owned Mortech, said getting the wrong mortgage may have driven that disappointment. For example, the Zillow survey showed 22% of young buyers had regrets about their type of mortgage and 27-30% said their rates and payments are too high.

The rest of the short article then goes on to talk about the difficulties millennials might face in going through the mortgage process. Indeed, it seems consumer generally dislike obtaining a mortgage.

But, the headline is an odd one. Why focus on the 17% that have some regret about their purchase? Is that number high or low compared to regret after other major purchases (such as taking on a car loan)?

If the number is accurate, why not discuss the 83% of millennials who did not regret their purchase? Are there different reasons for choosing which number to highlight (even when both numbers are true)?

And is the number what the headline makes it out to be? The paragraph cited above suggests the question from Zillow might be less about regret in purchasing a home versus regret about owning rather than renting. Then, perhaps this is less about the specific home or mortgage and more about having the flexibility of renting or other amenities renting provides.

In sum, this headline could be better. Interpreting the original Zillow data could be better. Just another reminder that statistics do not interpret themselves…

Slight drop in millennial population in American big cities

The population of big cities may depend on millennials: will they flock to urban locations or leave for the suburbs? New data suggests slightly more of them are headed out of cities:

Cities with more than a half million people collectively lost almost 27,000 residents age 25 to 39 in 2018, according to a Wall Street Journal analysis of the figures. It was the fourth consecutive year that big cities saw this population of young adults shrink. New York, Chicago, Houston, San Francisco, Las Vegas, Washington and Portland, Ore., were among those that lost large numbers of residents in this age group…

The 2018 drop was driven by a fall in the number of urban residents between 35 and 39 years old. While the number of adults younger than that rose in big cities, those gains have tapered off in recent years.

Separate Census figures show the majority of people in these age groups who leave cities move to nearby suburbs or the suburbs of other metro areas.

City officials say that high housing costs and poor schools are main reasons that people are leaving. Although millennials—the cohort born between 1981 and 1996—are marrying and having children at lower rates than previous generations, those who do are following in their footsteps and often settling down in suburbs.

MillennialsCities2019Data

An interesting update: millennials as a whole are leaving cities but younger millennials are still going to cities while the oldest ones are leaving. Does this mean that the argument that young urbanites will still leave for the suburbs when they form families and have kids?

Maybe, maybe not. It would be helpful to know more:

1. How does the older millennial move out of cities compare to previous generations? Are they leaving cities at similar rates or not?

2. Is there significant variation (a) within cities over 500,000 people and (b) within smaller big cities (of which there are many)? The first point could get at some patterns related to housing prices. The second could get at a broader picture of urban patterns by not focusing just on the largest cities.

3. The true numbers to know (which are unknowable right now): what will the numbers be in the future? The chart above suggests some shifts even in the last decade. Which pattern will win out over time (or will the numbers be relatively flat, which they are for a number of the years discussed above)?

Scenarios in which McMansions are passed along to younger adults

Older Americans own plenty of large homes and commentators suggest younger adults have multiple reasons for not going after such homes:

Younger people have loads of reasons not to be charmed by the vaulted ceilings and chef-ready kitchens of homes perched on mountaintops or hugging beaches that promised solitude once but now cry of isolation…

A report from Business Insider highlights numerous reasons that younger people might not want to saddle themselves with such beautiful albatrosses. Down payments, student debt and preferences for rentals in cities coupled with vacation home getaways have all contributed to what the report characterizes as “millennials wiping out starter homes.”…

And that is those among them who can actually manage to save up a down payment. Too many others are so burdened by student debt that buying a house is a foggy image off in the distant future. And lots of young homebuyers underestimate what it will cost them to keep a house, making it less likely they’ll bite off more than they can chew the next time they go home-shopping.

Factoring in their concerns over the environment—the energy footprint of a big house and a long commute—and their disinclination to own cars, as well as the need to hold down multiple jobs or have one or more side hustles—and it looks as if those mega-residences are liable to stay on the market for quite a while longer.

While one angle to this is that Baby Boomers will have a hard time selling their homes, the other side is whether the younger generations want and can get to such homes. I have seen little suggestion that young adults truly desire McMansions.

But, I would not write off this possibility just yet. I could imagine several possible scenarios where McMansions happen to end up in the hands of future generations:

  1. Younger adults do well enough economically – or enough of them do since not all Baby Boomers own big homes either – to keep McMansions going.
  2. Baby Boomers cannot sell their large homes, the prices drop, and the homes are more in the reach of younger adults.
  3. Enough McMansions are converted to other uses – think multi-family housing – to keep the prices up enough to keep everyone happy. (Or, in a more dystopian model, McMansions are simply bulldozed or replaced to limit the supply.

I have a sneaking suspicion McMansions will be passed along in decent numbers to the next generation…despite the wishes of some.

Will millennials kill McMansions?

Millennials get blamed for a lot of things and here is another possible area where their choices may have consequences: the selling and buying of McMansions.

The end of so-called “McMansions” has been predicted several times over the years, but those large, mass-produced houses that the baby boomer generation (born 1946-1964) favored as a status symbol kept coming back. Now, baby boomers are entering their 70s and 80s and many are looking to downsize, but they are finding it hard to offload these large homes, facing a paucity of buyers among the millennial generation (born 1982-2000), who are unable to pay the prices they want.

For anxious sellers, however, respite could be around the corner as mortgage interest rates ease, and the millennial generation becomes qualified for more and bigger loans, experts say…

A big problem for the McMansion market is the mismatch between where millennials prefer to live and where those large houses have been built. The younger generation gravitates to cities – where their jobs are — whereas baby boomers have built their homes in suburban locations…

Keys wondered if the housing preferences of the younger generation have truly changed or if there is only a “delay” in the demand for McMansions. Those homes may not be desirable to people in their late 20s but instead to people in their late 30s or 40s, he noted.

This is not the first time I have seen the suggestion that millennials have less interest in McMansions: Builder had a piece on this a few years back. And the baby boomers may have a problem bigger than just McMansions: who will buy all their homes, McMansions and otherwise? When housing becomes a primary investment for so many Americans, not having enough future buyers can become problematic.

More broadly, this discussion follows a typical pattern for stories and studies about millennials: will they act like previous generations (and have not done so thus far for a variety of reasons including an economic crisis and student loan debt) or do they truly have different tastes and want to lead different lives? In the realm of those who care about cities and suburbs, this is an ongoing discussion spanning years: will millennials be suburbanites or city-dwellers? Will they reject lives built around single-family homes and driving and prefer denser, diverse, culturally-rich communities (or a mix of both in “surban” places)?

If I had to guess, this group will exhibit some change from previous groups but probably not drastic change (based on the idea that social change tends to happen more slowly over time). Reversing suburban culture, ingrained among many American institutions and residents, would like take decades and not just one generation. The McMansions of older residents may not all sell at their preferred prices but barring another housing bubble (which could happen), they will be worth some money.

Census 2020 looking to go online

Reaching younger Americans is part of the reason plans are underway to move parts of the decennial 2020 census online:

Millennials (born from 1981 to 1996) and Generation Z (born after 1996) account for about 35 percent of the approximate 325 million people in the U.S., according to estimates, and census officials say their traditional means of outreach — mail-in questionnaires, landline phone calls and door-to-door surveys — are failing to connect with this significant segment of the population.

The Census Bureau plans to conduct its first-ever online headcount, which it predicts will generate 60 percent of the total responses for 2020…

However, social scientists suggest that millennials and Generation Z could have a hard time appreciating the importance of the census, having grown up amid a distorted media landscape of instant online gratification, “fake news” and a culture of likes on social networks…

Last month, census communications chief Burton Reist was quoted as saying endorsements from celebrities such as LeBron James are being considered. He described a hypothetical situation in which the NBA superstar urges young people during halftime to pull out their cellphones and “answer the census.”

Moving data collection online would seem to offer a lot in terms of lower costs and easier data tabulation. But, as the article suggests, it brings along its own issues such as cutting through the online clutter and working with celebrities to pitch the online data collection.

On one hand, this might lead to the conclusion that it is still difficult to use web surveys to collect information on a broad scale. Unless a research company has a panel of possible participants in a recruited and relatively representative panel, reaching the broader public on a voluntary basis is hard.

On the other hand, perhaps this should be taken as a good sign: the Census Bureau clearly indicates their data collection has to match what people actually use. Going door to door may not be feasible going forward. If people are online or using devices for hours a day, online surveys might be more attractive.

Almost regardless of how this turns out in the 2020 count, it will be an interesting experiment to watch. What will the online response rate be? How will the Census Bureau have to go about advertising online data entry?