
They Don't Build Them Like They Used To: The New Construction Shortage - jseliger
https://www.zillow.com/research/new-construction-shortgage-20991/
======
Nasrudith
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.

~~~
Spooky23
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](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.

~~~
magduf
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.

~~~
ptero
There are pros and cons to both options. High rises bring exploding
population, lack of green areas and noise, congestion and different set of
limitations and high prices.

But high home prices in a tech center can bring medium to long term system
level benefits, too. They help distribute work options and wealth generation
to other cities. If one builds monster high rises to house 20M people in urban
SF it might still suck in young smart engineers two decades from today. But if
instead you price them out, they might gravitate to other, cheaper cities and
help those thrive. It is painful to be priced out of the city where ones job
is, but with jobs plentiful it is also an opportunity to look elsewhere. One
might end up happier in the end. My 2c.

~~~
AstralStorm
High rises can actually extend green areas, presuming the city planning isn't
completely dumb or bought out.

Unfortunately developers is live to fill every space in with small flats to
sell more of them and with high rises likewise. As long as pricing holds up.

The thing that cannot be provided with single homes is services availability,
since they cannot be built close at all. This necessitates big road
infrastructure and pedestrian hostile design.

~~~
ptero
> High rises can actually extend green areas, presuming the city planning
> isn't completely dumb or bought out. Unfortunately developers is live to
> fill every space in with small flats to sell more of them and with high
> rises likewise.

Agreed on both points. And IMO, the second part quickly negates the
advantages. What I have seen is that once you start on high rises sooner or
later (usually during property price peaks) we have most green areas built
over and what is left is either far far away or feels like an overcrowded zoo
between concrete walls.

On pedestrian hostile design -- the small city I live in has sidewalks
practically everywhere and while I do drive to the store from my condo I can
walk to my work. And if I drive, the short, non-congested, <2 mile trip is
still a pretty efficient commute. And my kids can still play outside with
other kids with no playdates arranged weeks in advance.

Urban life can be pleasant and good for society, too; but small towns and
suburbs are not an evil it is often portrayed to be.

~~~
magduf
Surburbs are what drive the need for everyone to have a car, which has an
enormous impact on the environment and society. As a result, we have global
warming, high pollution, insanely-long commute times, and massive sprawl.

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Finnucane
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.

~~~
WhompingWindows
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
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.

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adventured
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...](https://www.bloombergquint.com/business/2018/08/16/cheap-and-sleek-
manufactured-housing-is-primed-for-a-comeback)

~~~
briffle
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
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.

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deedubaya
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.

~~~
AstralStorm
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.

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

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gwbas1c
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
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.

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cascom
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?

~~~
burlesona
> 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.

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navane
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.

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chucksmash
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-...](http://urbankchoze.blogspot.com/2016/08/building-affordable-
housing-where-has.html?m=1)

~~~
mywittyname
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.

~~~
philwelch
> 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.

~~~
mywittyname
I relocated when I was poor, single, and in college. Literally the only reason
I was able to do so was because I knew a person in the town I was moving to.
Without a social network, it would have been impossible for me to relocate
without also becoming homeless.

People with money can find apartments or stay in hotels. People in my
situation needed money for a place to stay before they could get a job.

------
drpentode
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.

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floatingatoll
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.

~~~
Symmetry
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
> 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.

~~~
WhompingWindows
I don't know if you're expert, but I'm curious: What's the push/pull balance
between destruction/abandonment of old homes vs. construction of new homes vs.
constant habitation of the existing homes? I guess I'm asking is the effective
amount of houses on the market stable, decreasing, or increasing? Also,
relative to number of people looking for homes, what's the situation?

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acconrad
Inventory is up as well in many locations:
[https://www.calculatedriskblog.com/2018/08/lawler-few-hot-
ma...](https://www.calculatedriskblog.com/2018/08/lawler-few-hot-markets-home-
inventories.html)

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

~~~
germinalphrase
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?

~~~
burlesona
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.

~~~
johnvanommen
It's already happening, but the Fed isn't doing it. Here's what's happening:

1) Trump put tariffs on Chinese imports

2) The Chinese retaliated by devaluing their currency, to negate the effect of
the tariffs

3) This had the net effect of strengthening the US dollar

That's why home prices are flat-ish in 2018.

~~~
prewett
How does a strong dollar affect home prices in the US? The exchange rate only
matter when importing something, and you aren't importing anything when you
buy a house in the US denominated in USD.

Besides, the RMB hasn't been devalued (as in the standard definition, which is
creating a new currency and dropping a few zeros). It has risen from 6.29 RMB
to 1 USD in April to 6.86 today, but that is +10% and the tariffs are +25%.
But a year ago the RMB was 6.68, so the year-over-year increase is +2.6%.

Of the four assertions, only #1 is correct.

~~~
mywittyname
Labor prices must be set in USD. So during a strong dollar, the cost of labor
relative becomes the dominant factor in the price of new houses, since
material goods can be imported. This makes it difficult/impossible to reduce
the cost of a new house by just building smaller houses, since the marginal
cost in terms of labor is lower, i.e., installing 30 outlets in a house costs
much less than twice the cost of installing 15; only the material costs are
doubled.

This is ignoring the fact that a strong dollar makes real estate in the US a
much, much more attractive investment. Not only do you get a decent
appreciation in real value if you own in a desirable areas, but you also enjoy
the relative appreciation in value relative to the currency you buy goods in.
Chinese investors holding real estate in the coastal USA have done quite well
in the past decade.

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schaefer
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
They’re referring to the entire metro area there.

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394549
tl;dr: homebuildling activity is still depressed from its 2008 high.

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

