The state of the U.S. housing market
The thing about being based in DC and writing a variety of pieces, based on what's happening in this area, is that our real estate market is much different from most of the rest of the country. Because of the federal government along with trends favoring urban living, the transit system, and a fair amount of high quality historic building stock, the market in DC proper isn't that bad.
It's not perfect, many neighborhoods lack a diversity of housing types--meaning a mix of single family houses, smaller and larger apartment and condominium buildings, accessory dwelling units-alley housing, etc.--so the market is unbalanced. But because of the nature of the market, the neighborhoods will remain relatively resilient, with the negative consequence of a continued reduction in the availability of affordable housing.
Even though a lot of people oppose the addition of larger multiunit housing buildings in their communities as a harbinger of change and "gentrification," the reality is that this type of housing extends a community's ability to remain relevant in changing markets, and healthy neighborhoods need a variety of housing types in order to better meet the demands of a variety of types of households.
Nielsen, in their analyses of the consumer market, identify 9 different types of households:
- startup families (with children under 6 years of age)
- small-scale families (children older than 6)
- younger bustling families (larger households, head of household under 40)
- older bustling families (larger households, head of household over 40)
- young transitionals (no children, under 35)
- independent singles (no children 35-64)
- senior singles (65+)
- established couples (no children, 35-64)
- empty nest couples (55-64)
- senior couples (65+)
and that is an interesting way to think about the housing market, and whether or not areas provide housing that satisfies the varying requirements of different types of households and income levels.
New Urban News has a two part series on the state of the housing market nationally, "The coming housing calamity: The great senior sell-off, rising household sizes, dropping homeownership, tighter lending standards, and other reasons why the next decade will be a disaster for homebuilders" and "Housing: An irresistible force meets an immovable object: Rental and transit-oriented development will dominate market demand for the next decade, but will public officials provide the right framework?"
It's very ugly.
From the second article:
... rising household sizes, declining homeownership, tighter lending standards, and a sell-off of single-family houses by the nation’s fastest growing demographic — senior citizens — will keep the for-sale building industry depressed for the next 10 years. Yet demographers expect the US to add 33 million residents by 2020 — so where will these people live and what part of the housing industry will be strong? The answer, in a word, is rental. ...
Three reputable studies — by NAR, the Robert Charles Lesser & Co. (RCLCo), and Nelson — all found a nearly identical, massive imbalance in US housing supply and demand. The 2010 American Housing Survey found that 28 percent of houses are attached, 29 percent are detached on small lots, and 43 percent are detached on large lots. The three studies found that only 24 to 25 percent of Americans would prefer to live in large-lot single-family houses (see graph "Housing preference versus supply"). Consequently, there’s an oversupply of approximately 28 million units in the drivable suburbs.
Attached housing and small-lot housing, on the other hand, are undersupplied — by about 12 million and 13.5 million units, respectively.
What I think is relevant for DC in particular, and of course all the other markets, is the ability to add rental housing, especially in association with transit. This is what has been driving revitalization in neighborhoods such as Columbia Heights and Petworth, although those neighborhoods are at different stages of growth.
Interestingly, those neighborhoods are more successful with new housing driving broader improvements than is new housing at Fort Totten Metro, which doesn't have the same kind of street grid and block pattern, although that area will be undergoing significant change as a more traditional block pattern is created and retail is brought into the mix.
Interestingly, plans for increasing density at Metro Stations in DC is fought in some neighborhoods, like Brookland and Takoma, which have traditionally been bastions of single family homes.
But the issue of staying relevant and successful as neighborhoods needs to be on the minds of residents more typically focused on the here and now.
From the article:
A flood of new rental units could come in many forms — new apartment buildings; condo buildings converted to rental; accessory units attached to single-family houses; and existing owner-occupied houses that are flipped to rental — but the most popular locations will be mixed-use, transit-friendly neighborhoods.
“Forty-seven percent of households want urbane living; that’s a big change from 10 or 20 years ago,” says Nelson, referring to a recent National Association of Realtors (NAR) finding on that percentage of households that prefer to live downtown or in mixed-use city or suburban neighborhoods. “Back in ‘70s or ‘80s, people wanted drivable suburbs. Now 70 percent want to walk to discernable destinations, from transit to grocery stores. This wasn’t the case until recently.”
The New York Times had an an article, "Builders of New Homes Seeing No Sign of Recovery," about the increased demand for townhomes, what we call rowhouses in the city, in the Chicago suburbs.
But townhomes aren't new in suburban markets (like the DC region) where demand and the cost of land is high.
To stoke demand, one builder of traditional single family homes, KLM Homes, is giving a free car to every purchaser. I guess we still have a long way to go before the idea of compact development and walkability, and transit adjacency, catches on. The subdivision is in Richmond, Illinois, 50 miles from Chicago.
Given how long it has taken to see transit oriented development come about in DC, depending on the station and the market and other conditions peculiar to the city, it has taken 10 to 35 years, the period of time it takes for these changes to become evident will be considerable.