By Deborah Goonan, Independent American Communities
debgoonan@icloud.com
A brief summary of housing consumer preferences, the growth of the rental housing market, and state laws changing the property rights of homeowners and their HOAs.
Where do home buyers prefer to live?
Once again, according to recent National Association of Home Builders (NAHB) surveys, a majority of home buyers in all generations prefer to live in the suburbs.
Here’s how the percentage of home buyers who prefer to make their home in either close-in or outlying suburbs shakes out by generation.
- Millennials – 51%
- GenX – 64%
- Boomers – 67%
- Seniors – 85%
Another interesting statistic: a surprising number of housing consumers are not looking for a brand new home. Between 41-47% of home buyers, across generations, prefer to purchase an existing home.
However, Millennial preferences differ from those of older generations on two key factors.
A growing percentage of Millennials want to live in a city (6% in 2007 vs. 23% as of 2018). Compared to previous generations at the time they were of similar age, millennials are 3 to 4 times as likely to prefer city living.
Millennials show a growing preference for a new house offered by a builder. That preference grew from 28% in 2007 to 41% in 2018. Across all older generations, roughly 30% of homebuyers said they would prefer a tract built home built by a developer. Those preference levels have remained steady since 2007.
What do home buyers want in a new home?
NAHBs 2018 What Home Buyers Want report reveals high demand, across generations, for several specific home features:
- Laundry rooms
- Energy efficient windows and appliances
- Patios
- Exterior lighting
- Garage storage
- Walk-in pantry in the kitchen
By contrast, home buyers show a noticeably low demand for features synonymous with common interest, HOA-governed communities. These are among the Top Ten least wanted features in a new home.
- Golf course community
- High-density development
- Elevators (common in mid-rise and high-rise condominiums)
Sources:
Where Do Generations Want to Live? (NAHB)
Filed in Economics, Housing Trendson August 21, 2019
MILLENNIAL HOME BUYING PREFERENCES
Special Studies August 1, 2019
By Benjamin Coomer
NAHB Economics and Housing Policy Group
Report available to the public as a courtesy of HousingEconomics.com
Top 10 Home Features Baby Boomers Want — and Don’t Want
Filed in 55+ Housing, Housing Trendson April 4, 2019
Housing becoming less affordable, homeownership rate stuck at 64%
According to U.S. Census data, homeownership is a major contributor to household wealth: net worth of homeowners is 80 times that of median net worth of renters.
Unfortunately, with limited housing supply and high prices in relation to household incomes, the homeownership rate in the U.S. has remained stagnant at roughly 64% since 2014.
And in the past decade, median rent payments shot up from around $700 to $1,000 per month.
Meanwhile, data compiled by the U.S. Federal Reserve show that median home sale prices now exceed their 2007 pre-recession peak of $257,000, topping out at $330,000 as of the second quarter of 2019.
More rental properties under construction
As a result of declining affordability, the real estate industry continues to churn out more rental properties to meet housing demands of U.S. residents who are unable or unwilling to purchase a home.
At this time, Census tables still indicate no noticeable increase in the share of multifamily condominium units for sale.
Overall, the stagnant homeownership rate is good news for residential builders of multifamily properties. NAHB surveys indicate increasing builder confidence in production of all three types of multifamily housing: low-rent apartments; market-rate apartments, and condominiums.
At the same time, a growing number of builders and investors are entering the single family home rental market. (See previous IAC post on this topic.)
In fact, NAHB reports new construction of 42,000 single family built for rent (SFBFR) homes in the past year, representing about 5% of single family construction.
In comparison to single family homes built for sale, SFBFR homes are more likely to have the following features:
- smaller size home
- fewer bedrooms
- single-story construction
- townhouse construction
- smaller lot size
- 1-car garage or no garage
- age-restricted housing
In short, the real estate industry is responding to a less affluent housing market by building more rental units, including small single family homes in addition to apartments.
Sources:
Many U.S. Households Do Not Have Biggest Contributors to Wealth: Home Equity and Retirement Accounts (U.S. Census)
JONATHAN EGGLESTON AND DONALD HAYS | AUGUST 27, 2019
NAHB: Multifamily Market Survey (MMS)
Multifamily Production Indices – Q2 2019 (Seasonally Adjusted)
Contrasting Built-for-Rent and For-Sale New Single-Family Homes (NAHB)
Apartment and Condominium Market Bounces Back to Positive Territory in Second Quarter, August 22, 2019 (NAHB)
How to squeeze more housing into single family home neighborhoods
There’s a new political movement simmering in several states and cities across the U.S. – the push for zoning changes to allow owners of single family homes to create new housing units on their property.
The new buzz word in the industry – Accessory Dwelling Unit.
An Accessory Dwelling Unit (ADU) can be a section of a single family home that is set aside as a separate residential space. Think basement or above-the-garage apartments or in-law suites. ADUs also include small guest cottages placed in a homeowner’s back yard.
An ADU can house family members such as adult children or aging grandparents. A duplex apartment can provide an affordable rental unit, as well as an income stream to help the homeowner pay off the mortgage more quickly.
But…many local governments and most HOAs won’t allow a homeowner create an ADU, due to single family use zoning and covenants.
New state laws allow ADUs in HOAs
Several ADU manufacturers have joined affordable housing advocates in lobbying for new state legislation banning exclusive single family zoning by local governments.
Their efforts have been successful in Oregon, which recently passed HB 2001. The new state laws gives any homeowner with property in a city of more than 10,000 residents the right to convert their home into a duplex.
The intent of the legislation is to allow property owners to create additional housing units on their existing property. According to the full text of the enrolled bill, any Covenants and Restrictions enacted or amended after the new law’s 2019 effective date cannot prohibit a homeowner from converting a single family home to a duplex.
And in California, Governor Newsome recently signed CA SB670, which states that Covenants and Restrictions, and HOAs that enforce them, cannot prohibit or unreasonably restrict the right of a homeowner to add an ADU to their property.
Local governments and HOAs will retain their rights to set reasonable restrictions and codes related to duplex conversions, ADUs, or other allowable land uses.
But these new laws are certain to shake up the status quo in HOA-governed communities. ♦
Sources:
Oregon Becomes First State to Ban Single-Family Zoning
Realtor Magazine, August 12, 2019
August 22, 2019
ECHO post on CA AB670 (Educational Community for HOA Homeowners)