Why Are Single Family Housing Starts so Sluggish?

[Teacher Terry]

They are expecting 50k people to move here in the next 5 years. We have a big housing shortage and because of that a one bedroom apartment is between 1100-1500. Our homeless population is increasing because they tore down much of the weekly motels downtown where seniors and the working poor lived.

 

[Helena]

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Here in the Dallas area, new single family homes are too big, too expensive and too far out.

While there are less expensive smaller 50s/60s/70s/80s single family homes closer the city center... new houses of that size/cost [which would be ideal for first buyers and retirees] are not being built today and there is more competition for these existing homes.

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[Helena]

They are expecting 50k people to move here in the next 5 years. We have a big housing shortage and because of that a one bedroom apartment is between 1100-1500. Our homeless population is increasing because they tore down much of the weekly motels downtown where seniors and the working poor lived.

Similar situation here in North Texas. Many people of all stripes moving here. Many from the West coast who can well afford homes here. But also many working class Americans from other areas of the country along with newly arrived immigrants who move here to work. Fortunately, there are still plenty of jobs here. Although new apartments are being built, the price of an apartment keeps increasing with the increasing demand.

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[Midpack]

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Here in the Dallas area, new single family homes are too big, too expensive and too far out.

While there are less expensive smaller 50s/60s/70s/80s single family homes closer the city center... new houses of that size/cost [which would be ideal for first buyers and retirees] are not being built today and there is more competition for these existing homes.

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We very recently considered Dallas but found exactly as you describe. We lived in north Dallas in the late 70’s when Plano and Richardson were considered way out there. Now they seem to be building quite a bit further out, so we crossed Dallas off our list even though we really enjoyed the area back when we lived there.

 

[sengsational]

Beyond making home sales slow, seems like the rate increase has banks clamoring for our cash too.

Not sure if this is an "indicator" or not, but I'm still getting just as many "I'll buy your house for cash" junk mail items as usual, maybe even more (Charlotte).

 

[ShokWaveRider]

Interest rates have been going up in Canada too, and for the most part housing is robust. The UK and Australia are the same.

I think Americans are bred to spend too much on frivolous items, and things they do not really need, (Consume and Keep up with the Jones') and then end up not being able to afford a home, or not wanting to. Homes are for the most part a bargain in the US (Except Hawaii, NYC, Coastal CA.) compared to some other countries, and often twice the size for the most part.

 

[REWahoo]

I think Americans are bred to spend too much on frivolous items and things they do not really need, (Keeping up with the Jones') and then end up not being able to afford a home, or not wanting to.

Not bred, brainwashed.

 

[imoldernu]

Compare population growth... https://www.google.com/search?q=population+changes+in+the+us&oq=population+changes+in+the+us&aqs=chrome..69i57j0l5.10103j0j4&sourceid=chrome&ie=UTF-8

What seems minor, indicates direction. Down 30% in ten years.

 

[ExFlyBoy5]

In addition to the variables already listed, this time of year is traditionally slower...so it just adds to the angst. My DW is in the RE business (leasing of SFHs in GA, NC, SC, PA and IL) and the rental market has slowed in many of those markets too. They have a large portfolio of investment homes (institutionally owned) in the Raleigh area that they are having a very hard time renting...so it's not just the sales.

We really lucked out when we sold our house in Georgia. We got it under contract in a couple of days and sold for more than asking in a neighborhood that was in great demand for several years. Now, houses there are languishing. What is surprising about that is they are houses that sell for 300-350K which is (or was) the best pricing you could get for the some of the best schools in the metro ATL area. All the new builds were going for 700K+, so our older neighborhood sold like hotcakes.

Likewise, the house we have purchased in our new town I think we got a fair deal on it. We have no plans on leaving anytime soon, so if prices go down over the next couple of years, that's OK. The seller's agent knew that things looked to be going south, so there was little negotiating when we came in with a pretty low offer.

Edit: DW just pulled up our old hood on MLS and there have been 4 houses listed for sale since we went under contract. 2 are still active (with price reductions) and the other two were withdrawn.

 

[JoeWras]

I wonder also if some speculation was going on in Triangle NC due to Amazon HQ. Also, Apple 2 talk has cooled down.

 

[steelyman]

I wonder also if some speculation was going on in Triangle NC due to Amazon HQ. Also, Apple 2 talk has cooled down.

I’m curious about that too, but I think it’s more general growth in the area. Damn Yankees like me. I’ve seen pieces about “dodging a bullet”, although I wonder how much of that is spilt milk, wash-that-man-right-out-of-my-hair.

 

[jazz4cash]

I wonder also if some speculation was going on in Triangle NC due to Amazon HQ. Also, Apple 2 talk has cooled down.

Why would it affect Triangle region and not the several other proposed locations? We had three in the DC area and there was no speculation until the day after the announcement that it was going to Arlington, VA.

 

[JoeWras]

Why would it affect Triangle region and not the several other proposed locations? We had three in the DC area and there was no speculation until the day after the announcement that it was going to Arlington, VA.

How do you know there was no speculation?

 

[FIREd]

In my current suburban neighborhood, single level homes in good condition sell quickly (mostly to retirees). Everything else lingers on the market for months or even years. The neighborhood is definitely getting older (only a handful of kids left on my street). All the young pups with means rent "luxury apartments" downtown. Many apartment complexes catering to this younger demographic have been built in the area over the past 5 years. I tried to rent one such apartment in the summer and I would have had to wait at least 6 months for the next availability (a 2-bedroom apartment). They told me that the wait time was even longer for their popular 1-bedroom units. So even for youngsters with the means to buy, renting retains its appeal apparently.

 

[haha]

In my current suburban neighborhood, single level homes in good condition sell quickly (mostly to retirees). Everything else lingers on the market for months or even years. The neighborhood is definitely getting older (only a handful of kids left on my street). All the young pups with means rent "luxury apartments" downtown. Many apartment complexes catering to this younger demographic have been built in the area over the past 5 years. I tried to rent one such apartment in the summer and I would have had to wait at least 6 months for the next availability (a 2-bedroom apartment). They told me that the wait time was even longer for their popular 1-bedroom units. So even for youngsters with the means to buy, renting retains its appeal apparently.

For a single man, renting has a large appeal. I would be renting for sure were it not that I could see that the neighborhood where I was renting and enjoying living was transforming and I feared that I might get priced out. This was in autumn 2011. I have zero interest in redecorating or playing with my rooms in any way, but I know that should I want to sell I would be facing that. Granite anything is fine, but IMO not worth thinking about, let alone paying for.

Ha

 

[jazz4cash]

How do you know there was no speculation?

I track the local market pretty closely. There was plenty of dialogue wrt the specific properties that were being proposed by local government but hardly anything about impact on housing until after the announcement. You seem to be deflecting my question.

 

[JoeWras]

I track the local market pretty closely. There was plenty of dialogue wrt the specific properties that were being proposed by local government but hardly anything about impact on housing until after the announcement. You seem to be deflecting my question.

Thanks for the answer. I'm no RE guy so I don't have such inside info. Sorry if you thought I was "deflecting."

As to your question... Triangle also has very specific rumors about Apple HQ 2 with one news outlet saying it was a done deal, just needed a few details ironed out. Surveyors and land companies were even working the rumored site. I lumped in Amazon along with it.

The Apple 2 thing has cooled off a lot just about when the market turned.

 

[FIREd]

For a single man, renting has a large appeal. I would be renting for sure were it not that I could see that the neighborhood where I was renting and enjoying living was transforming and I feared that I might get priced out. This was in autumn 2011. I have zero interest in redecorating or playing with my rooms in any way, but I know that should I want to sell I would be facing that. Granite anything is fine, but IMO not worth thinking about, let alone paying for.

Ha

Renting must have a large appeal because those luxury apartments downtown rent for $1000 to $1,600 a month. In our area, one could easily afford a 3,000-5,000 sqft house with an equivalent monthly mortgage payment! The dream of owning a house which projects one's financial success seems to be withering.

As a single guy, I understand the appeal of renting. But I will be purchasing my next home because rents have a history of going up faster than inflation in my target neighborhood. But I won't be buying a SFH requiring all kinds of maintenance and improvements. I will be looking for a low maintenance condo just large enough to meet my needs.

 

[Bir48die]

Yes we've seen an uptick in mortgage rates which certainly has an effect on overall housing sales and in particular housing starts. It's my impression that two things have happened:

1) The hierarchy of the movement of housing generally is the purchase of a new house, the growth of the family resulting in the desire for a larger house and ultimately the sale of your old home. Then there's a new cycle for that family.

2) I live in a very popular NW city. As all of us cackle about how our homes have increased in value, we've also seen two things: the upper middle tier is now pushing $1.0 million. We're now seeing a glut of those homes on the market and that particular segment is stagnant. So, those who would be trading up normally are either remodeling or staying put due to the huge nut they have to pay.

3) With the uptick in pricing our "starter" homes are pushing $350k at a minimum. In addition we have a strict urban growth boundary that limits sprawl and pushes pricing along with focusing on either condos or attached housing.

4) In the last several decades with the increase in home prices we have converted from a possibility of one person staying at home with the kids to dual income as a necessity. Now the prices are ruling out those with dual incomes because day care is such a huge nut to pay.

So, you stir all of this up and I just think how is there not a day of reckoning in all of this. It is just unsustainable especially with many families struggling just to pay rent. Curious on how this is all going to work out. Our economy is so heavily based on housing starts and services that once this slows down there will be a domino effect.

 

[karen1972]

Thanks for the answer. I'm no RE guy so I don't have such inside info. Sorry if you thought I was "deflecting."

As to your question... Triangle also has very specific rumors about Apple HQ 2 with one news outlet saying it was a done deal, just needed a few details ironed out. Surveyors and land companies were even working the rumored site. I lumped in Amazon along with it.
The Apple 2 thing has cooled off a lot just about when the market turned.

Yeh the Apple line was used on me to try to get me to buy into a few of the newer master planned communities, especially Cary/Apex area... the real estate agents had no issues dangling that out there and how "hot" it was going to make the market. I of course ignored them, the houses I was looking at in June lowered their prices and some are sold, some not, but I doubt they are using that as a selling point any longer.

I personally felt some of the developers were banking on it to justify the "master" part of their plan, ie the homes are needed, but all that additional retail and such they had suggested "could" be there I didn't really buy into as the demand would have to be really hot to justify it that far out. And thats the risk of these types of communities, the plans look awesome but barely any of it is locked in, so you buy a house thinking you will have a grocery store and dining within walking distance and it never appears so now you have to drive 5 miles to get gas, no thanks.

 

[FUEGO]

In the Triangle area, real estate has clearly changed overnight. Red Badger, you might check the latest. Up until mid summer, everything was hot. It changed really fast. We see it in our neighborhood. Houses were selling before list ("coming soon!"). Not anymore. They are now languishing and suffering list price drops. The speed at which this happened was pretty amazing.

Midpack's reference to the Tate video is good. What he says is what we see in our neighborhood.

I've noticed the same thing here in my $200-250k neighborhood. Used to be 1-2 homes for sale out of the 1000+ house neighborhood at any given time, and most sold within a day or two, usually above list price.

Since summer it's been kinda slow. There are currently 4 houses listed. All on the market since October or earlier, though one shows as contingent. Another neighbor had to lower prices several times but their house was a bit of a fixer upper being sold as is (and they were motivated sellers).

I wouldn't say things are slow yet. But the bidding wars seemed to have stopped. Higher rates? Nervous buyers? Who knows.

 

[Seagirt]

I think the original question was about housing starts. It seems evident to me that, if new homes aren't being built, the demand on existing homes increases and drives up prices.

I would guess the underlying issue is high land prices (because it's a limited commodity in growing cities) and high building costs.

I remember talking to someone who was involved in a big non-profit building project in the 70's, and it was cheap, cheap, cheap compared to today (correcting for inflation). People in construction trades used to be poor, materials were cheap, there were fewer building regulations, etc. etc.

So, it's just not economical to build low cost housing, unless you can go to an area where land is cheap. Or you build condos.

So the trends are: persuade people to buy more expensive homes, increase urban density, or try to attract people to move to new communities with lower land prices.

 

[ExFlyBoy5]

I think the original question was about housing starts. It seems evident to me that, if new homes aren't being built, the demand on existing homes increases and drives up prices.

I would guess the underlying issue is high land prices (because it's a limited commodity in growing cities) and high building costs.

I remember talking to someone who was involved in a big non-profit building project in the 70's, and it was cheap, cheap, cheap compared to today (correcting for inflation). People in construction trades used to be poor, materials were cheap, there were fewer building regulations, etc. etc.

So, it's just not economical to build low cost housing, unless you can go to an area where land is cheap. Or you build condos.

So the trends are: persuade people to buy more expensive homes, increase urban density, or try to attract people to move to new communities with lower land prices.

I also think the tariff "scare" is having an effect too. We recently moved and were initially going to build. The first builder told us that they hadn't had any issues with rising material costs, but the second builder said that they had seen increases in lumbar. Carrier (HVAC people) have had 3 price increases this year alone due to the costs of materials, so this all rolls down hill.

The second builder also told us that it's been tough to find good trades. Once he finds them, he had to keep them busy or they would leave and go to a competing builder...which also affects costs.

Ultimately, we decided not to build since we 1) found an almost perfect existing house that 2) could be purchased for less than our build budget (less 20% contingency). The second builder still has two houses (custom builds) that have been listed for over 3 months and a couple of lots he can't move, either.

 

[ShokWaveRider]

I would have thought the folks seeing the interest rate trend would be jumping on rates as they are still manageable. Thus increasing the movement in home purchases, not necessarily in new homes as they seem way more expensive than existing ones, even those just built as recently as a couple of years ago.

 

[foxfirev5]

I believe that all real estate is local. However the anecdotal evidence I'm seeing is that we're nearing the end of another cycle nationwide. Unless you're in some hotspot the market is cooling. After 40 years of playing the construction/real estate game I'm pretty much out of the picture. No need to play right now. However if the market goes down the tubes I probably won't be able to resist a little bottomfeeding.