Tag Archives: single-family homes

Are millennials going to the suburbs like boomers did?

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The American suburbs reach across generations:

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But the reality of many millennials is starting to more closely mirror their parents’. They’re catching up on earnings and wealth, and while they’re still behind on homeownership, they’re not screwed. It may have taken them awhile to settle down, but they’re getting around to it and heading to the suburbs. In short, millennials are looking increasingly boomer-esque, and in some areas, they’re doing better than their parents.

The primary argument here involves wealth and homeownership. Are millennials at similar levels? Can they find the same kind of American Dream consisting of making it to the suburbs and owning their own house?

But it strikes me that there is a larger argument to make: these are longstanding cultural patterns, not just questions about economic resources. A later passage in the article hints at this:

In other words, it may not be that all the millennials headed to the suburbs want to be there, but in some cases, they feel like they have no choice but to exit urban centers and swallow a longer commute in the process.

“The plurality are moving to the suburbs, but that’s where the housing stock is,” Lautz said. Some of it has to do with having school-age kids, for example, but a lot has to do with affordability and availability.

Do economic conditions alone drive these choices – people need housing they can afford – or is it about influential ideologies that provide Americans particular messages about the suburbs? Americans prioritize certain things in suburbia. They like cheap and big houses. They like living near certain neighbors. They like particular amenities in their communities, including those they think help their children succeed.

If millennials do indeed end up in the suburbs at similar rates to previous generations of Americans, they may do so because this is what Americans have been doing for decades. There are economic imperatives for doing this – owning a suburban home is a primary vehicle for acquiring wealth – but also established patterns where they like driving, they are used to the ins-and-outs of sprawl, and they enjoy their private dwellings.

Now we’re reporting on the house next to the Home Alone house?

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The Home Alone house is a popular place. The house next door, briefly featuring in the movie, is also apparently newsworthy:

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In real life, the home of the fictional South Bend Shovel Slayer — aka OId Man Marley — from the 1990 John Hughes-written holiday classic “Home Alone” is located at 681 Lincoln Avenue in north-shore Winnetka…

It’s right next door to the more famous “Home Alone” house at 671 Lincoln Ave. in Winnetka, which was shown extensively in the film as the home of the McAllisters. That home was listed for sale in May at $5.25 million and, according to its Zillow listing, has a sale pending…

As it turns out, Old Man Marley — played by the late character actor Roberts Blossom — is a kindly neighbor who helps Kevin overcome his fears of going into the basement. Kevin, in turn, helps Old Man Marley reconnect with his estranged son…

According to the Zillow listing, the home was built in 1898 and was a creation of Benjamin Marshall, a major influence on the architecture of modern Chicago. The home sits on two-thirds of an acre in Winnetka and features six bedrooms, six full bathrooms, one half-bathroom, a balcony, a library, a putting green, a large in-ground pool, a half basketball court, and plenty more.

Popular movie + expensive suburban house = story people will click on? Americans like single-family homes and may even like looking at interesting single-family homes more than they like their own.

Converting suburban houses into group homes – but they cannot look like group homes

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Multiple suburbs in the Chicago region allow for the conversion of suburban single-family houses into group homes for seniors or adults with disabilities. However, they generally agree that the conversion cannot alter the appearance of the home:

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A 2021 Northwest Municipal Conference survey of its members identified 14 suburbs permitting group homes for particular populations, largely those with disabilities.

However, the conversion of homes into assisted living centers for seniors is becoming increasingly prevalent. Schaumburg has seen two proposals in the past year alone. There are also online seminars offered to entrepreneurs looking to flip homes and turn them into assisted living centers, aimed at the nation’s aging population.

Regulations vary in towns that allow such conversions. Some require approval from a village board or city council, while other towns don’t require such approval because these uses are already allowed in its residential code. But all enforce rules against external changes to the houses that would identify them as group homes…

“You’ll be driving down a neighborhood and never know we’re there apart from a van picking people up or dropping them off,” said Little City Foundation CEO Rich Bobby…

While the intention of the homes is to blend in, a degree of engagement with neighbors is sought in advance to paint an accurate picture of those who are going to live there.

A common suburban story regarding proposed changes to houses might go like this: neighbors get wind of a possible change in a subdivision or residential area. They express concerns about such changes altering the character of the community. Perhaps there might be increased traffic, noise, and lights? They share that they moved into this location because it was a quiet, residential space. Changes to that format threaten their day-to-day experiences and their property values.

But what if the changes to that house or residence were minimal in nature? Or, as the regulations above suggest, the exterior of the home does not look any different and there is not a noticeable change in day-to-day life around the home? Would this allay all the concerns?

From this article, it sounds like concerns have been at a minimum thus far. The number of conversions is small. Perhaps there is a tipping point where multiple proposals in the same neighborhood or on the same straight might draw more attention. But if neighbors do not see significant changes on the outside, they might not have many issues.

Given the needs of the suburban population, I suspect more suburbs will face this particular issue in the coming years. Building large facilities can be difficult and costly. If converting homes to group homes can help serve residents and neighbors are okay with it, perhaps this will happen in a lot of places.

(This reminds of a 2013 book looking at affordable housing built in New Jersey where one of the goals was to design the multi-family housing units in a way that people passing by would not identify them as affordable housing. With some design work, this was largely accomplished and relatively few neighbors opposed the project.)

How young homebuyers say they will come up with a down payment

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Earlier this year, Redfin research looked at how younger adults will find the money to purchase a home:

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More than one-third (36%) of Gen Zers and millennials who plan to buy a home soon expect to receive a cash gift from family to help fund their down payment…

Young homebuyers are also receiving help from family members in other ways. Roughly one in six (16%) Gen Zers and millennials say they’ll use an inheritance to help fund their down payment, and 13% plan to live with their parents or other family members.

Working to earn money is the most common way for young buyers to fund down payments: 60% report they’ll save directly from paychecks, and 39% are likely to work a second job, the most common responses to this question…

Just 18% of millennials used a cash gift from family to help fund their down payment in 2019, according to a Redfin survey from that time, and the share had only increased to 23% by 2023. Note that the 2019 and 2023 survey results noted here are for millennials only, while the 2024 results in this report are for millennials combined with Gen Zers. 

This is one way that wealth is passed from one generation to another. As the parents have resources (including possibly through the increase in value of their own residence), they can pass them along to their children at key moments to improve their prospects. And if parents do not have these resources, it would then take longer to amass a down payment.

One twist here is the suggestion that more parents are providing funds for down payments than in the past. The comparison is between 2019 and 2024. Were the numbers ever higher at some point in the past or perhaps higher among certain segments of the population?

What would it take for third parties to get in on this? Imagine a lending company says we will provide a large percentage of the down payment and you then owe us X amount of dollars when you sell the home at fair market value. I remember receiving some solicitations in the mail with a similar scheme for home equity loans; why not for down payments with bigger returns for the investors down the road?

What builders will do to try to move new houses in a slow housing market

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With homes on their hands, builders have options on how to attract residents:

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A golden run for homebuilders is drawing to a close. When rising mortgage rates trapped many would-be sellers in their homes two years ago, builders turned out to be the big winners — if you wanted to buy a home, your best bet was probably new construction. One economist told me last year that builders were “the only game in town” in some areas. Builders not only offered a welcome alternative to the frozen resale market but could cut deals to make their homes even more appealing to the average buyer: Mortgage-rate buydowns, in which the builder pays the lender up front in exchange for lowering the buyer’s loan rate, can save a new homeowner hundreds of dollars each month.

Now, even with the freebies, builders are selling homes at a slower-than-expected pace as buyers grapple with worsening affordability, sharp swings in mortgage rates, and general uncertainty — people would rather sit on the fence than leap into a market with so many unknowns. With slower sales across the board, the number of homes on the market has climbed. There were 108,000 finished homes for sale at the end of September, some 48% more than at the same point a year ago. There were 258,000 homes under construction but not yet sold, another sizable figure — at the same point in 2019, there were about 194,000. Builders surveyed by John Burns Research and Consulting said they had an average of about 2.5 unsold homes in each of their communities in October, representing a 47% increase from a year ago. In October 2021, they reported only 0.4 unsold homes per community. Some of this increase is by design. Companies are building more homes “on spec,” or before they have a buyer, to shorten timelines and compete directly with the resale market. But there’s no question that builders have hit a snag.

The answer might seem obvious: Cut prices! But builders will “try a lot of other things first,” says Keith Hughes, an executive at the housing research firm Zonda. “And we’re not seeing drastic price drops virtually anywhere.” Buyers may not be flooding the market, but there are fewer homes out there, too. The number of available homes for sale at the end of October, according to Realtor.com, was about 21% lower than in the same month in 2019. Builders looking to move their product lean heavily on incentives — Lennar, one of the largest homebuilders in the country, said that the average sales incentives per home amounted to $48,100 from June through August, compared with $36,400 a year earlier. Builders are also completing smaller floor plans to match the needs of cost-conscious consumers.

Builders have another fallback: the rental market. Over the past decade, homebuilders have forged relationships with companies that purchase thousands of single-family homes and manage them as rentals — if a builder were looking to move a portfolio of homes, they might find a willing buyer in a company like Pretium, which owns nearly 100,000 homes, or Invitation Homes, which manages a portfolio of more than 85,000 homes. Builders have also started developing entire communities of single-family homes to be rented out rather than sold, a strategy known as build-for-rent. The idea is to meet the demand of renters who want their piece of the American dream — a home with a yard in a safe neighborhood with good schools — but either can’t make a purchase or don’t want to. Builders can sell to a guaranteed buyer willing to purchase in bulk or hold on to the homes and enjoy the steady returns of rental income.

How about another option (and this does not change the houses that have already been built): build cheaper units in the first place. With the decline of starter homes, is it time for more builders to construct homes that meet these criteria?

Or how about channeling more effort into multi-family housing? There will continue to be a market for single-family homes in a country that idealizes them but there is also demand for more housing in numerous places and multi-family housing provides more units in the same amounts of space.

I would also be interested to hear how builder revenues and profits are affected by these changes. If builders have found ways to limit the costs by renting, are they losing money or are they making less money than they would like?

Should the American Dream involve a townhouse?

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With Americans idealizing homeownership and a large need for housing, would the townhome provide the answer to the American Dream?

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The new American Dream should be a townhouse — a two- or three-story home that shares walls with a neighbor. Townhouses are the Goldilocks option between single-family homes in the suburbs and high-rise condos in cities…

Instead, developers have found a sweet spot with townhouses. They are cheaper to build. They usually face less “not in my backyard” resistance. And buyers love them. Townhouses have all the trappings of a classic dream home, but they cost less to buy, offer a low-maintenance lifestyle and are more climate-friendly. It’s the American Dream, but with a smaller yard…

Townhouses are becoming more attractive because they almost always cost less than detached single-family homes. In big urban areas, the median sale price for a townhouse is substantially cheaper: $382,000 less in San Francisco, $222,000 less in Los Angeles, $220,000 less in Miami, $190,000 less in Denver, $145,000 less in D.C. and $130,000 less in Phoenix, according to Zillow data from this summer…

Though townhouses have long been perceived as starter homes for young couples who hope to later move to a larger place, developers say that stereotype is changing. Today, townhouses are popular options for many kinds of households — couples with one child, single parents, people who live alone, couples in their 30s and 40s with no kids, and empty nesters in their 50s looking to downsize. People are drawn to the low-maintenance lifestyle and the sense of community. Many people don’t want to isolate themselves in suburban homes where they have minimal contact with neighbors and are fully dependent on a car.

This is an interesting adaptation to fit the priorities of Americans. If a good portion of population want to own a property, apartments and renting are not ideal in the long run. If people want what they perceive to be a good deal, a townhome can be cheaper than a single-family home. If they want a more walkable neighborhood or don’t want to deal with outside work, townhomes can provide options.

At the same time, I wonder how much townhomes have adapted to fit other things Americans want. (This might be in comparison to the rowhouses of past decades mentioned in the article.) How many townhomes have to have garages and/or dedicated parking because American life is still built around driving? How do the interior spaces and the features of townhomes compare to single-family homes (are they built around large kitchens and great rooms, what levels of amenities do they have, etc.)? Where are certain townhomes being constructed – in other words, do the townhomes in wealthier suburban communities look very different than those built elsewhere?

Imagine American suburbs in a few decades that contain a majority of townhomes. Does this fundamentally change suburbia? Does it alter the emphasis on single-family homes? Can townhome neighborhoods be woven together into a broader fabric that reduces reliance on driving? I am curious to see what happens.

When American big cities devote much of their land to single-family homes

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The big city in the United States is dense. It has tall buildings and busy streets. There are plenty of apartments and mixed-use structures. They look and feel different than suburbs, small towns, and rural areas.

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But even American cities have lots of single-family homes. Chicago, for example, has a lot of land devoted to single-family homes:

More than 40% of the city is zoned for single-family housing…

This figure might even be higher in other cities, particularly sprawling ones.

What might this figure mean? Some thoughts:

  1. Denser populations can fit into less space. But the amount of space given to one kind of land use, homes in this case, still matters.
  2. These neighborhoods and residents are going to get at least some attention and representation. Their interests might converge and diverge in important ways from interests of other locations and residents in big cities.
  3. This fits with an American emphasis on single-family homes, even if these homes happen to be in cities.
  4. Suburbs are in between cities and more rural areas. Are city neighborhoods of single-family homes often in between denser populations and suburbs? Do these city places feel more like suburbs or like life in different densities in the big city?

Another way to think about this percentage: even the places that Americans tend not to associate with houses and the lives that go with them have lots. of single-family homes.

Can you have “high-end, custom homes” that are within a few feet of the neighbors?

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A new proposed subdivision in one Chicago suburb will have “custom, high-end homes.” But the image provided suggests these homes will be right next to their neighbors. Do these things go together?

https://www.dailyherald.com/20240903/news/custom-home-developer-asks-lombard-to-annex-site/

A description of “high-end” and “custom” plus looking at the rendering suggests these will be pricey homes. To have this square footage with a garage in a new single-family home build in an older suburb will cost buyers a good amount.

But the homes are so close to each other! Americans like single-family homes in the suburbs but they also like a little space. They like a lawn and an approximation of nature. They like some privacy and an ability to do what they want with their property.

The demand will be there for these homes, yards or not. Housing supply is limited. Some buyers want to pay for less yard space. The new spacious interior with features will outweigh other downsides. If plenty of Americans prefer private interior spaces, these homes will offer that. Like many in the suburbs, people can drive into their garage, close the door, and do their thing inside with little interaction with neighbors or the community.

I also imagine there are a good number of people in the United States who would look at the drawing above and not have any interest due to the lack of space around each house. These are denser suburban homes that do not appeal to everyone.

Searching for the best home for the apocalypse

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How many American homes would survive the end times? You can search for homes now that might have a better chance of surviving a major crisis.

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One critique of mass produced postwar homes is that they would not stand the test of time. They were not built well. They were constructed quickly and lacked quality.

Many of them are still standing. Many of them have been improved over time with renovations, additions, and changes. But how many would survive a global pandemic or major natural disaster or the explosion of a nuclear device in the big city 25 miles away?

Part of the issue would be how close the homes are to the issue at hand. A second is whether the people living there can access resources to keep the home maintained. A third concern is whether people can keep living in the home or if they must flee elsewhere; a home with no one there will suffer over time.

If someone has the money and the fears (or foresight?) to buy a home that prepares them for a period of crisis, now is the time to purchase before the properties get snapped up or they become more expensive. The rest of the residents of the United States will have to wait for the mass produced version…

New American homes down in square footage in 2023

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Census Bureau data for 2023 shows new American homes are a little smaller:

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But as the cost of buying a home has exploded and McMansions have fallen out of favor, homebuilders have reversed course, building smaller homes with an eye to first-time buyers. In 2023, the median single-family home built was 2,233 square feet, down 9% from the 2015 peak, with many formal dining rooms and “bonus” rooms disappearing…

Homebuyers are warming up to the idea of smaller dwellings: According to an April study from the National Association of Homebuilders, the typical buyer wants a home that is 2,067 square feet — still smaller than the typical new home size last year…

There are signs those efforts might be helping buyers get in the door: The median sales price of existing homes jumped to $426,900 in June, according to the National Association of Realtors, while the median price of new homes in June was $417,300, according to the US Census Bureau.

Three thoughts in response:

  1. It will be interesting to watch the long-term trends. The article marks 2015 as a peak. Does this mean homes will continue to get smaller in the coming years?
  2. Connected to #1, how much do Americans want smaller homes or how much do housing prices constrain what Americans expect and want? The first option could be connected to Americans having less stuff. If you buy more consumer goods, you need somewhere put them. But if you stream everything and prioritize experiences, perhaps a house is not needed as much for storage. Or if household sizes are decreasing, smaller homes could be fine. In contrast, if mortgage rates went down or housing prices became more attainable for people, would they once again want bigger houses?
  3. The figures above suggest the new homes are slightly lower in price than existing homes. But the newer smaller homes are still pretty expensive. At what price point and square footage would a bunch of potential homebuyers be able to jump into the market? Where do these lines cross on a graph? A median of 1,800 square feet at $340,000 (very hypothetical)?
  4. From the Census data, it may be worth noting that since 1999 the percent of new homes completed at 3,000 square feet or higher has always been a minority of the market (at 31% in 2015). Now this size is a smaller segment of the market as the mid-size new homes percentages are up (1,400 to 2,399 square feet).