By one important measure, American housing’s “lost decade” has ended. Meanwhile, in housing’s decade ahead, density looks to be a primary weapon in the battle to make homes more attainable to would-be homeowners.
Statistically, national house prices have retraced the entire distance they fell from August 2006, and then some.
CoreLogic analyst Molly Boesel offers highlights of the latest CoreLogic Home Price Index here. The top-line take-aways are these:
The lowest price tier increased 9.4%, year over year. Home prices forecast to rise 4.7% over the next year. Utah and Washington continued to post double-digit year-over-year gains. National home prices increased 6.9%, year over year in August 2017, and the index level reached the peak level last seen in April 2006.
Some may take this for granted. As a matter of fact, most of our youngest team members started working with us for the first time after The Great Recession. They’ve never yet experienced despairing times like those days.
For those who can still almost feel the effects of housing’s dark days a decade ago but can’t cite the statistics, Boesel reminds us:
The overall HPI (all price tiers combined) has increased on a year-over-year basis every month since February 2012, and as of August 2017 prices are back to the peak set in April 2006. After hitting that 2006 peak, home prices fell 33.3%, before bottoming out in March 2011. Since then home prices have risen 49.9%.
Thing is, because who-said-life-is-fair?–the come-back trail is not equal for all markets, and submarkets. Not by a long shot. The narrative around why that’s the case, and why that matters is a focal point of political polarity, economic challenge, and societal risk.
Importantly, and a material contributor to the economic mobility and affordable, attainable housing challenge right now, prices at CoreLogic’s “lowest price tier” rose the fastest in the past year. Demand for that crop of available for-sale homes eclipses supply, so prices soar.
Home builders fret that labor capacity constraint and price inflation on materials will mess with their modeled monthly sales and delivery pace in each selling community, and they have and will. However, a lot of the root of that anxiety lies at the doorstep of overpaying for lots due to the tight competitive concentration of operators all seeking the same quarry, build-able home sites.
The job for smart developer, designer, engineering, and construction talent now is to get out of the corner of paying too much per lot by optimizing land parcels, and, often enough, by shrinking lot sizes and selling more of them within the same tract. That densification trend is well under way.
This analysis by National Association of Home Builders research analyst Natalia Siniavskaya of the Census Bureau’s Survey of Construction (SOC) tracks a new low-point in average lot square footage. She writes:
The median lot size of a new single-family detached home sold in 2016 stands at 8,562 square feet, or just under one-fifth of an acre. This is a new record low and a small decline since 2015, when the median lot size fell under 8,600 square feet for the first time since Census Bureau’s Survey of Construction (SOC) started tracking the series for single-family detached homes.
Regionally, increased density varies. The NAHB looks geographically at how it’s playing out:
“It is not surprising that more than half of single-family spec homes started in New England are built on some of the largest lots in the nation, with more than half of the lots exceeding a third of an acre (0.37 acres).
The East South Central Division is second on the list with the median lot occupying just slightly less than a third of an acre (0.3 acres). The Pacific division where densities are high and developed land is scarce has the smallest lots, with half of the lots being under 0.15 acres. The neighboring Mountain and West South Central Divisions also report typical lots smaller than a national median, 0.17 and 0.16 acres, respectively.
Ironically, greater density may be housing’s remaining most effective lever to open up the housing box, so that more median-level households can attain median-priced rentals and ownership in so many markets that have priced them out.
