If you are starting to feel the effects of old Father Time, you’re not alone. Something else that is starting to become noticeably older is the median age of owner-occupied homes in the United States. In fact, according to the 2016 Census survey, that median age is 37 years. That shows a somewhat dramatic increase from the 2005 median age of 31 years.
What that number means is that 37 years is the midpoint of all the age of all the houses throughout the American housing market. So, half of the houses were built before the year 1980, and half have been built after 1980. The reason why this is something to keep note of, at least for those particularly in tune with the housing market, is that it has shown that even after a decade after the housing market collapse of 2008, housing construction throughout the country is still slowed.
According to a recent report, one of the primary reasons why there is a lack of new houses being built nationwide is because we are running out of land – or more accurately running out of affordable land.
“You have to find the land, you’ve got to be able to buy it and you’ve got to persuade someone to let you develop it. The one you hear the most about is the last one,” Paul Emrath, vice president of survey and housing policy research at NAHB told CNBC.
He added that while the demand for new housing exists, those who are most likely to build in areas that are called Class A lots – that is, the most desirable locations like in our close to city centers – simply cannot afford the land.
“Where we really see the difference in A lots is the price going up,” he said. “Demand is there but at what price?”
John Burns, a Real Estate Consultant added that even if land is built, there isn’t much incentive for developers to build unless they’re building a serious new addition.
“Land is extremely expensive, the developer is selling it for a lot of money and the only way to make money for a builder is to build a big, huge expensive home,” he said.
While there are clear reasons for a slowing down of new construction, it isn’t all bad. Despite the reduced numbers, newer homes are more likely to be owned by younger Americans. In fact, 50% of homes built in or after 2010 are owned by Americans under 44 years of age. Alternatively, 56% of homes built in 1969 or earlier are currently owned by individuals aged 55 and up. That points to the fact that while construction has slowed, there are still new Americans entering the housing market. That seems to point to a strong confidence in the market, despite the crash that occurred ten years ago.
Aging US Housing Stock
Despite that, the fact remains that the approval of new construction permits have slowed substantially. In fact, from the year 1985 to 200, there were 3.9 permits for single-family homes issued per 1,000 residents of the United States. From 2008 to 2018, that number has been cut almost in half to 1.9 permits per 1,000 residents.
As for oldest and youngest housing markets per major metropolitan areas, cities like Pittsburgh and Cleveland have the oldest housing stock with median ages of 65 and 62 years respectively, while cities such as Austin and Las Vegas boast the newest with median ages of 16 and 18 respectively. That should come as no surprise considering the fact that, per Forbes, both Austin and Las Vegas are among the fastest-growing cities in America. As for Cleveland and Pittsburgh, they seemingly have not yet found the answer to the slowing job markets that once gave rise to blue-collar cities along the rust belt.
While the slowing of housing construction could raise concerns for those looking ahead for yet another economic recession, the news isn’t all bad. According to the NAHB, the aging housing stock is a sign that while new homes are not being built at the same prevalence that they used to be, the remodeling market is growing. Part of that is certainly due to the fact that home equity continues to rise. Beyond that, while the annual rate of growth isn’t quite what it was back in 2013-14, it has been steadily growing each year since 2014-15.
So, if you’re considering entering the housing market, what’s this all mean for you? Basically, it means that if you’re dead set on building your very own dream home, you may have to settle for less than ideal housing lots. That certainly does not mean there aren’t great locations available, just that you may have to settle for a longer morning commute to work if your office is in one of America’s many urban centers.
On the other hand, if you are keen on living near the hustle and bustle of your nearest downtown, you could certainly have the option of improving and renovating an already built property to feel like new.
Of course, these trends are always changing and it may become more advantageous to build in the coming years. Still though, it seems housing hasn’t quite recovered to pre-recession numbers. Considering the current economic uncertainties in the global market, it’s possible that housing development could slow even further in the coming years.