Affordable Housing Institute : US

Does an active home market imply a healthy one?

 

 

When you’re this adorable, who needs to think?

 

This question is fun because one can readily marshal common-sense arguments pointing both ways:

 

 

Both make sense, don’t they?

 

·         Yes, active is healthy.  Lots of sales mean people are buying and moving in, so the neighborhood must be desirable.

·         No, stable is better.  Communities are stronger when families put down roots, and for every buyer there is a seller, so a lower turnover rate is the better indicator of health.

 

When speculation becomes fruitless, perhaps one should turn to data?

 

 

No matter how shocking the conclusions

 

As supplied by the good people of MassInc, who publish the useful quarterly CommonWealth, comes this little article (free registration required):

 

Cape Cod apparently saw a lot of moving vans last year, but the South Coast was unusually quiet in home-buying activity.

 

Certainly there’s no trend to be discerned from that.

 

The larger map below shows the number of single-family homes and condos (both new and pre-owned) sold for every 10,000 current residents in each town.

 

 

Residences (single-family and condo) sold per 10,000 population, by city or town

Source: The Warren Group (www.thewarrengroup.com).

Only single-family homes and condos are included in sales data.

 

What, if anything, does this map tell us?

 

 

Figures don’t lie, do they?

 

First of all, roughly 1 home sells annually for every 600 people (160 divided by 10,000).  From that we can wring out another interesting stat:

 

Assume an average household of 2.50 people (national average is 2.60; Massachusetts is 2.55).

Assume 70% of all households are home owners (national average is 69%).

 

Then the average household owns its home 17.5 years.

 

(Calculated as: 10,000 people / 2.50 = 4,000 households x 70% = 2,800 owned households / 160 sales per year = 17.5 years between sales.)

 

Isn’t arithmetic remarkable? J

 

 

 

If we further project that the average adult is a homeowner for fifty years (age 25 to 75), then we can project the average American will own three homes in his or her lifetime. 

 

Yet one more inference, something to bear in mind with all the talk of home-price bubbles and landings soft or hard.  If the average household owns its home 17.5 years, then less than 6% of all the home inventory trades in any one year, which further means that 94% of the homes don’t trade. 

 

Almost no other financial asset has such low turnover, meaning there is a vast, vast asset base that can be financed or refinanced without sales.

 

Meanwhile, there are clear regional variations:

 

Provincetown (population: 3,400), was the clear leader in the infusion of new property owners, with 216 condos and 29 homes sold.

 

That has to be an anomaly, since the Provincetown market is likely to be heavily influenced by the emerging phenomenon of multi-housing families, people who aren’t planning to live there year-round. 

 

That’s more than 10 times the number of sales in Sunderland, which has a slightly larger current population. Outside of western Massachusetts, which is presumably too far to attract many commuters to Boston, the Fall River and New Bedford areas stand out a lack of activity in the residential market.

 

Evidently home sales activity (or lack thereof) may be driven by demography and economics, as people are buying farther out for the pleasure of commuting to Boston.

 

“Ownership” means either the free-standing homestead …

 

 

Cows optional

 

… or the multi-family condo:

 

 

A slice of air space can be yours

 

Increasingly, urbanization brings people into higher-density living, closer proximity to one another, and as a result, condominiums and occupant ownership as a rising share of all tenures:

 

 

 

 

 

 

Condo sales as a percentage of all residential

 

With the mild exception of the New York and New Hampshire border towns (where employment and taxation edge behaviors come into play), the map shows a clear and overwhelming correlation with urbanization.  Where are the condos?  Why, in cities, of course, where the jobs are.

 

Boston itself was not too far behind the state average, with 148 sales for every 10,000 residents. But sales of condos greatly outpaced single-family homes (6,766 to 1,511), and in two neighborhoods (East Boston and South Boston), the average condo was just about as expensive as the average house.

 

That apparent equivalence masks a vast difference in location, configuration, and quality.

 

 

Some markets good, others not so good

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