They Don't Build Them Like They Used To: The New Construction Shortage

https://www.zillow.com/research/new-construction-shortgage-20991/

by jseliger • 8 years ago

73 80 8 years ago

acconrad• 8 years ago

Inventory is up as well in many locations: https://www.calculatedriskblog.com/2018/08/lawler-few-hot-ma...

Signs are pointing toward a correction in the home price insanity, hopefully this will make things more affordable for everyone.

germinalphrase• 8 years ago

I admit that I don’t have a deep understanding of the real estate market; however, from what I’ve heard the (temporary) reduction of prices in 2008 was largely a unique situation. The reinflation of prices since then would suggest that gov’t doesn’t want to see prices go down significantly (for a variety of reasons) and so it is more likely that prices will simply plateau (and be made more affordable long term by inflating away home values without impact dollar amount to purchase). Thoughts?

burlesona2• 8 years ago

I could buy that devaluation via inflation is coming, and maybe even that the government prefer it, but I’m skeptical that they have the ability to actually do that. Rather it’s more like the fed pushes its buttons and prays.

davemp• 8 years ago

Looks like a steady increase from the '08 crash. I don't really see the issue.

schaefer• 8 years ago

I would like the author to show me on a map where they plan to fit an additional 173,000 single family homes in Washington D.C...

mikeash• 8 years ago

They’re referring to the entire metro area there.

pastor_elm• 8 years ago

national arboretum is around 400 acres. Rock Creek Park almost 2000 acres.

navane• 8 years ago

Why would he not show the trend up untill 2008 on the graph "Permits per 1,000 new residents in previous 12 months"? That seems shady graphing.

cascom• 8 years ago

It seems like these charts are for single family homes only? So a new apartment building wouldn’t be included? If so, that would seem to tell part of the story?

burlesona2• 8 years ago

People can also shift from single-family to multi-family residences. However the share of households in single-unit structures is 61.5 percent — virtually unchanged from 60.3 percent in 2000, which indicates that no such shift has occurred.

Nasrudith2• 8 years ago

That graph is pretty useless by only focusing on single family homes in metropolitan areas. Single family homes may hold nationwide as a housing growth indicator but one would expect mature and rising cities to have more multifamily residences even if they had a space boon from obsolete industrial jobs move elsewhere due to urban areas providing less of an advantage due to high numbers of workers being less needed with increased automation. Similarly sixteen high rise permits would do more for housing than one hundred sixty single family homes despite there technically being fewer new construction permits - evem though they would rightfully be more involved in making sure it wouldn't cause disaster. While I do not doubt that many urban areas have a housing shortage that isn't very good evidence given the caveats.

rootusrootus2• 8 years ago

Condominiums each get their own set of permits. Most importantly, just like a single family house, they each have to be issued a Certificate of Occupancy.

quantgenius• 8 years ago

This depends on the market. This is definitely not the case in NYC

mdorazio2• 8 years ago

I'm not following what your point is. If I'm reading the first table in [1] correctly, 20+ unit condo (and maybe apartment?) complex new construction starts have been declining annually while single-family home construction has been increasing. This seems to support the parent comment's argument that growth indicators are out of alignment with what markets actually need.

[1] https://www.census.gov/construction/nrc/pdf/quarterly_starts...

ryandrake2• 8 years ago

Even in places that are appropriate for single family homes, like suburban areas far from the housing crises in San Francisco and San Jose, it is getting harder and harder to find new-ish single family homes. And there is zero new construction of such homes. If you prefer that kind of lifestyle (1X00 sq.ft. with a lawn), you’re stuck with housing stock built in the 1980s and earlier.

Everywhere I see new construction, even out in the exurbs, it’s 3-story apartments and ugly row homes squished together on postage stamp-sized lots.

mikestew2• 8 years ago

If you prefer that kind of lifestyle (1X00 sq.ft. with a lawn), you’re stuck with housing stock built in the 1980s and earlier.

The problem around the Redmond, WA area is that if you want the lifestyle you describe, despite lots of new houses going up you will still have to have something built in the 80s. Because everything being built is 3200 sq. ft. or more. Now, I understand why, because you get more money from a $1.3MM house than you do a $800K one. But if you don't want some monstrosity with a postage stamp lot (because the house took it all), good luck finding one in Redmond. They're building houses, but nothing I'd personally want to buy.

Spooky233• 8 years ago

That graph doesn't tell the story, it's just picked because single family is the simplest indicator and has well defined economic benefit. The figures always incorporate new housing units -- a 20 story high-rise does not look like a single family home in the stats.

You can look at the raw data and see single/multi/large residential starts: https://www.census.gov/construction/nrc/pdf/bpsa.pdf

Single family construction is the canary in the coal mine because the costs are escalating to the point where more and more people are priced out. New construction is $150-275/sqft (10% more if no garage is present). When I started working in 2000, it was about half that. Per-unit costs drop with multi-family, but it's still creeping up there. The minimum price for finished new construction condos in my area (which is usually a 50th percentile market in the US) is about $350k.

magduf2• 8 years ago

People don't need single-family homes. People in other countries do just fine with multi-family dwellings: high-rise condos, apartments, etc. In cities which are steadily increasing in density, single-family homes are utterly wasteful, and completely unnecessary. You can only fit so many of them in a given area, whereas with a high-rise, you can fit hundreds of people into the area used by a small handful of single-family homes.

tunap• 8 years ago

Heh, 20 years ago $145/sqft got you a custom home w/ vaulted ceilings, imported granite from the Pyrenees Mountains, mud-set features and million dollar views. Todey it doesn't even get you a renovated shack in one of the "gentrifying" 'hoods. Don't know who to thank, the investment banksters or the 'sharing' economy. Perhaps, when the scalea tip past a certain point Glass-Steagal protections will be reimplemented. Preferably, before outright revolt.The Great Recovery is neither for most people in the US(& the world).

dv_dt2• 8 years ago

In coverage I've followed, what houses that are being constructed are largely being targeted to the luxury market with the entry market being under or unserved. That sort of fits with higher square footage costs.

Bluecobra• 8 years ago

I agree, I think you would see a lot more renovations vs. new homes. Where I live in Chicago (not the trendiest part of town), the cheapest single family fixer-uppers are $350-450K. Not many people queuing up to drop at least $1 million on new homes here.

siruncledrew• 8 years ago

Where are they going to find the space to build single-family homes?

Realistically, there's no way the rate of construction of single family homes in a finite amount of area is going to stay fixed or keep increasing over time.

The alternative is create an overload of urban sprawl, which expands the "metro area", and also increases commute times.

deedubaya• 8 years ago

I'm in an isolated market, but I recently priced out a new build of a single family home. Bids between contractors fluctuated by over $200,000 for the same sets of plans on the same lot. Their excuse was high demand for sub-contractors that would work on the project that was paying the highest.

- done well

- done on time

- done within budget

Pick two.

AstralStorm2• 8 years ago

For the customer, number 2 would be the best to skip, but it is the worst for the developer as they cannot really sell an unbuilt house easily, while they get to pay the debt or such leverage plus construction company.

They also cannot do 3 as the budgets are super tight already.

adventured• 8 years ago

It's interesting to see the pre-built / manufactured home business is only finally starting to pick up sales again after imploding post year 2000.

We used to see 350k manufactured home units sold per year in the US throughout the 1990s. That fell to ~50,000 for '09-'12. Now back up to 100k units again.

There used to be a stigma about these types of homes in regards to quality. I was surprised at how relatively nice they are now, looking at the Clayton Homes site (a subsidiary of Berkshire Hathaway). I would think these types of inexpensive housing units are a critical element to relieving the US housing shortage again.

https://www.bloombergquint.com/business/2018/08/16/cheap-and...

briffle2• 8 years ago

There is a middle ground too, prefab homes, where the walls, floors, etc, are all built off-site in a factory, and then shipped to your location in sections. It allows for faster building (can go from foundation to roof on and siding up in 2 days) and in theory, much cheaper costs.. Currently, most roof trusses are already built this way, but all walls, flooring, etc, electrical, plumbing, etc, are all custom done on site, meaning much higher costs. However, the hi-end companies I was looking at when I last looked were much more focused on the speed, then the cost efficiencies.

TheTaytay• 8 years ago

This was my experience as well when I thought, "Gosh, $200/sq ft seems too high for a home. I bet someone could do well building them off-site, shipping them to me, and bolting them together on-site." As it turns out, $200/sq ft appears to be the _minimum_ of prefabs these days. Cost savings is not the benefit from what I could tell. Reduced waste, sure, but not reduced cost.

mywittyname6• 8 years ago

I think a lot of areas still have regulations in place that prevent manufactured homes from being built/installed in a neighborhood.

I grew up in a region where these were incredibly common. Most of my friends grew up on one of these (doublewides, as they were called). They were actually very nice, the build quality was decent, it was incredibly spacious for the price, and they could be installed pretty fast. For about $60-70k in '95 dollars (105-120k today) a family could live in a brand new 2200 sq. ft. house on 2.5 acres of land.

floatingatoll4• 8 years ago

It’s disappointing to see Zillow ignore the wage pressures that are reducing housing demand nationwide. Permits are decreasing per growth capita because that segment can no longer afford houses.

Symmetry4• 8 years ago

If housing demand was going down then housing prices would be going down. That's not what we see except in certain markets such as Detroit.

dragonwriter• 8 years ago

If housing demand was going down then housing prices would be going down.

Assuming supply (in the economic sense) was constant; if supply was dropping, then prices could go up even with demand dropping.

floatingatoll4• 8 years ago

There are a lot of assumptions coded into this, not the least of which being “mortgage lenders only approve applicants with sufficient wages”, which has repeatedly been proven false over the years. Our housing market is not as rational as your statement implies.

Finnucane3• 8 years ago

I find it sort of odd that they feel that keeping an existing house longer is a bad thing. The house I live in now was built in the 1850's, and I lived for a while in a house from the 1780s. The main drawback is you have to get used to there being no level surfaces or right angles.

Symmetry4• 8 years ago

It's great to keep old houses but unless the population stops growing you need to build new ones for people to live in. Well, they can keep living with their parents but most people want to move out.

Finnucane3• 8 years ago

Sure, but what the article is suggesting is that older houses should be torn down and replaced, by another single family home. So it doesn't really add to the housing stock to do that.

WhompingWindows2• 8 years ago

Isn't the main drawback that there is a lot of maintenance needed on old houses? I worked many hours on a fixer upper built around 1900 by an amateur homebuilder. It's incredibly frustrating that every single change you want to make to windows, doors, or anything is complicated by non-right angles. It increased the time required for basic repairs by 2-fold, so much re-doing needed to get even a mediocre fit, never mind a great fit.

munificent• 8 years ago

I've lived in houses built in the 40s and 90s. I would take the former any day of the week. I'm not generally a "they don't build them like they used to kind of person", but my experience with houses is that older homes were built to last while newer ones are just built to sell.

Of course, there's probably some survivorship bias there. All the shitty homes from the 40s are gone now.

Finnucane3• 8 years ago

There's a lot of maintenance needed on _any_ house.

394549• 8 years ago

tl;dr: homebuildling activity is still depressed from its 2008 high.

joshuaheard• 8 years ago

No mention of stricter mortgage requirements resulting from '08 crash? Lower demand = lower supply.

chucksmash2• 8 years ago

This related blog post is an interesting read:

Building Affordable Housing: Where Has the Entry Level House Gone?

http://urbankchoze.blogspot.com/2016/08/building-affordable-...

mywittyname6• 8 years ago

This kind of highlights a huge issue with being poor: lack of mobility.

If people with modest budgets could afford to pack up and move to Columbia, Missouri, then the cost burden of housing could be mitigated somewhat. We'd probably see housing prices stabilize across the country. As it stands, only wealthy people can afford to migrate across the country, usually in pursuit of even more wealth. This just adds to the problem because it results in more dollars chasing a supply of existing houses that isn't expanding rapidly enough.

Probably, the only way to reverse this trend now is to raise property taxes on single family homes in desirable locations such that it becomes uneconomical to maintain them as such. Then these massive tracts of suburbia can be bought up by developers who are incentivized to build high-density housing. Of course, a serious proposal of this sort is likely to get you killed.

chucksmash2• 8 years ago

Heh, not to be the guy posting urbankchoze links all day but the author has thoughts on this as well actually[0].

The whole article is a good read but the thing that feels most pertinent is the idea of dynamic zoning; instead of zoning an area for single family residential you'd essentially zone areas such that new construction rules would be:

- allowed_height = max(2, ceil(avg_area_height * 1.5))

- allowed_occupancy = ceil(avg_area_occupancy * 1.5)

And then without the need for zoning exemptions and political zoning fights, you let neighborhoods up zone themselves organically based on demand. Average building two stories? You can build a three story low rise. Average height three stories? You can build a five story replacement.

I think lowering the barriers to higher density in-fill would effectively accomplish what you're aiming for while side stepping some of the political issues you've foreseen with raising taxes on people until they're forced to leave their homes.

[0] http://urbankchoze.blogspot.com/2014/05/how-to-make-urban-ho...

philwelch3• 8 years ago

If people with modest budgets could afford to pack up and move to Columbia, Missouri, then the cost burden of housing could be mitigated somewhat. We'd probably see housing prices stabilize across the country.

I'm not sure if it's an issue with modest budgets or if it's an issue with job availability. Lots of people can pack up and move to Columbia, Missouri. But the jobs that exist here don't exist there.

If anything, being extremely poor helps with mobility. If you're living off disability, there's a pretty decent payoff to buying a Greyhound ticket to an area with cheaper rent, because you get the same disability check no matter where you live. Homeless people are similarly extremely mobile. It's the whole middle-class, have-to-work-for-a-living-and-my-job-is-right-here lifestyle that inhibits mobility.

Probably, the only way to reverse this trend now is to raise property taxes on single family homes in desirable locations such that it becomes uneconomical to maintain them as such. Then these massive tracts of suburbia can be bought up by developers who are incentivized to build high-density housing. Of course, a serious proposal of this sort is likely to get you killed.

This kind of happens implicitly with a Land Value Tax, except there might be ways of implementing an LVT that wouldn't immediately displace single family homeowners.

Also, you don't need "massive tracts of suburbia" to build high-density housing; the whole point of high-density housing is that it doesn't take as much land. You can just leave most of suburbia alone.

drpentode• 8 years ago

Here's an unexplored possibility: What if the places with room to build single-family homes are too far away from where people work? If the commute is too long, people might prefer to stay where they are.

gwbas1c• 8 years ago

I just built a home. There's a lot of out of control factors that make it harder to build. "Historic districts" are basically ways to add extra red tape for the NIMBYs. HOAs are now more common and also add red tape for NIMBYs. Environmental changes for energy efficiency aren't always funded by banks.

One of the things we need is to abolish things like HOAs and historic districts; and then reform lending so it will fund environmentally-friendly building codes.

scaryspooky• 8 years ago

Building codes themselves are driven by industry and manufacturers. This has been a huge driver for the increase in size of house, compare a 1960s era bathroom against modern code and you will find the increase in minimum sizes dramatic.

They Don't Build Them Like They Used To: The New Construction Shortage

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