With the continued housing slump (and a story going around that the $8,000 homebuyer credit of recent years only masked the issues of the housing market), a number of commentators have shared their thoughts about the future of housing in America. Witold Rybczynski weighs in with his prediction for the near future in a piece with the headline of “McMansions dead at last?“:
Owning single-family houses represents a long-established tradition that the U.S. shares with many countries (Canada, Australia, the United Kingdom, Ireland, the Netherlands, Norway), but 10 years is long enough for traditions and behavior to change. It is likely that in the future multifamily housing will represent a larger share of the American housing market than the one-in-five new dwellings that has been the historic norm.
What about single-family houses, which will still remain for many people the home of choice? There is some evidence that urban townhomes and infill housing are more popular, as rising gas prices increase the cost of commuting. Higher energy costs also affect heating and air conditioning, which may have the effect of discouraging homebuyers from purchasing large houses with soaring entryways and expansive family rooms. While the evidence is fragmentary—the current reduction in average new house sizes has more to do with the preponderance of first-time buyers than an overall shift in demand—it is clear that the long recessionary cold-shower will dampen the exuberance that characterized the boom years of 2000 to 2005. That will mean smaller houses closer together on smaller lots in inner suburbs, fewer McMansions, and fewer planned communities in the distant hinterland. An alternative scenario is that American optimism will prevail and it will be business as usual, as happened during the boom of the 1950s following the Great Depression, or during the period following the Energy Crisis of 1973, when car buyers, after a brief flirtation with Japanese compact cars, embraced minivans and SUVs. But I wouldn’t count on it.
It sounds like Rybczynski thinks the American housing market will be denser and smaller in the future as a reaction to the last few years. He also makes the point that one big issue plaguing the housing market is more demographic in nature: household formation has slowed down as more people are living with other people rather than starting their own households that require a separate home.
Two other things also seem noteworthy:
1. Rybczynski suggests the reduction in home size is more due to having more first-time buyers than anything else. What about downsizers, particularly Baby Boomers who are retiring or whose children have left the house, that others have talked about?
2. Rybczynski also suggests that we will have fewer planned communities. I assume he is referring to larger planned communities/suburbs that simply may not be possible with low housing demand. But what about a possible uptick in smaller planned developments done by New Urbanists and others who can offer a denser form of suburbia?
Perhaps the fun part about reading pieces like this now is that we likely have years before we can really assess whether something has changed. In the meantime, we can wonder how low home values might go.