As my daughter has taken up a new career (one which she is thoroughly enjoying, now that she has a successful sale under her belt and another three or four potentially serious and committed buyers on the horizon in the coming new year) I have had, perforce, to take an interest in the market for houses, in this, a moderately prosperous Texas city. Well, moderately prosperous, in spite of all the (explicative deleted) that the current economy and the Biden administration can throw at us. By all evidence that my daughter has noted locally, (mostly in price reductions for a number of listings) the property bubble has well and truly burst, or is now in a mode of slow deflation. Conventional wisdom among realtors who have been in it for years, is that prices for houses are on a seven-year-long boom and bust cycle. We’re about to head into the ‘bust’ downslope. Anyone who does have the wherewithal – the bulging pocketbook to buy outright or a high-enough credit rating qualifying for a loan at favorable rates to buy a house in the next couple of years will have their pick of properties, at least in this part of Texas.
I have noted over more than two decades of living in it, that my own neighborhood is quietly prosperous; a high percentage of homeowners and few rental properties. This is a good thing, most definitely not a class or racial issue. It should be obvious to all now that owners of a house, even if only a small one, will tend to take better care of the roof, walls, windows and HVAC system that they have invested in. I would guess that my neighborhood very closely reflects the national racial makeup; racially mixed in conformance with the overall national stats. (Not culturally mixed, though. Just about all my neighbors are house-proud, responsible and community minded.) My neighborhood is not one of the notoriously wealthiest neighborhoods in San Antonio; the houses are relatively small, in the 1,000-1.500 square foot range on small lots, not more than a 10th of an acre. Some of the larger houses in the older part are on lots a bit larger than that, but all in all, the subdivision is a comfortable fit for people with working-class jobs, convenient to the various military bases, shopping centers, highway access. These small, comfortable houses and manageable gardens are owned by a cross-section of retired military, ordinary retirees, new families, small families, single working women, and small business owners. Working bourgeois; the kind that the New Woke World Order wants to squeeze out of existence for our stubborn insistence on managing our own lives and economics without any interference from the new self-elected and lustful-for-power Ruling Class.
As an aside, I don’t think that will happen – all of us stubborn working bourgeois reduced to rental serfdom, subject to the illogical whims of some ivory-tower and unaccountable bureaucracy. There are, as yet, too many ways for ordinary citizens to slip away from the grasping fingers of control.
An element that my daughter has noticed is that the smaller houses in solid neighborhoods like ours go like hotcakes. The 1,000-1,3000 sf home, two bed, one bath, or bath and a half – such small starter or retirement homes at a reasonable valuation are in great demand, demonstrated by how blazingly-fast they sell, once they are listed. Not all that surprising, actually, as that is the size that I could readily afford, house hunting at the end of my inglorious military career. Also about the size of what my own parents could afford and which we all lived in as a family of six: two or three bedrooms and a single bath for us all. But such smaller homes coming on the market are few and far between. And looking at the new developments spring up around the parts of San Antonio that I frequent, the new builds seem to be at the upper end of that range or larger, even way, way much larger. What about the prospect of smaller homes, homes even under 1,000 square feet, tinier lots?
You might think that the current fashion for “tiny homes” should be appealing to developers, just as a matter of marketing, and the lower costs to build and thereafter maintain … but for some reason, it doesn’t. Builders go on merrily constructing bigger and bigger houses. (Usually on smaller and smaller lots…) I have always wondered why. The usual explanation is that municipalities naturally want to collect the very most in property taxes – the larger and more lavishly-adorned the property the greater the tax assessed, and the existing homeowners in the area being considered invariably hear “Small affordable houses!” and begin screaming to their local political office-holder, “OMG-Poor people! It’s affordable housing for poor people! OMG! Keep away, keep them far, far away!” Still, one would think that smaller, more compact houses would make so much good sense to developers and builders. Maybe it is.
Along the outer ring highway in San Antonio, a large apartment complex has been going in for months – but at the back of the complex, bounded by a small back road which we routinely use as a short-cut, there is a range of smaller units going in. At first, when they began pouring the slabs for them, we wondered if they were to be garages – but no; from the layout, no way to get a vehicle safely in or out, When the walls began going up, we could see that – no, the back half of the complex will be small cottages, and small duplexes. Interesting. Well, not everyone likes to live in a third-floor walkup, hauling groceries up two flights of stairs, with the noise from neighbors through thin walls at all hours … better a small, self-contained little house, with a decent separation from the neighboring unit, or only the other half of the tiny duplex. We wonder if this is a harbinger of things to come; of builders seeing that there may be money to be made in catering to the ‘smaller house’ impulse. Where will the market let us all, in these trying times?
What say you? Discuss as you like.
Don’t ignore the market-distorting effect of government regulations — even in Texas (which happens to be over-endowed with bird-murdering unreliable windmills, for some government regulations reason). Perhaps government regulations forced the builder of the complex to provide some “low income” subsidized housing or handicapped-accessible housing? Oops! I should have said “other-abled housing”.
RE why do developers prefer to pack the biggest house they can onto small lots, it’s simple. Bigger houses have more profit margin. Better economies of scale on the construction-cost end, more revenue on the sale end. Put another way, cost per square foot to construct a place drops at larger sizes faster than market-price per square foot. The modern preference is for more square feet per person in a house, and enough people can afford to indulge that preference to make a substantial market.
It’s sorta like trying to get a modest-size portion in a chain restaurant. The majority of our countrymen would rather have a 12-oz steak for $18 than a 6-oz steak for $12, so we end up paying extra for more meal than we want.
(Instapundit denizen here, always enjoy your stuff when I follow Sarah’s links.)
I hope the home building market goes down. On Christmas Eve, my Cabin was a total loss, in a house fire. I hope my Landlord can rebuild.
I live in a small San Diego community that is big enough to have it’s own schools, grocery stores, churches, restaurants, etc. People move here and raise their kids, put down roots, make friends, and STAY. Now that our kids are grown, many would love to downsize, but we don’t want to leave. If a builder came in and built a neighborhood of smaller homes and duplexes, walkable, with pickle ball, pool, and a central social space – they’d make a killing.
I’m also in SA and in the development industry, albeit at the very front end. Most of the new projects we see starting up now are multi-family or smaller single-family homes rather than neighborhoods of bigger houses. I think developers are bracing for a longer recession, even here.
My sister-in-law lived in a neighborhood a lot like yours on the northeast side near Randolph AFB. If you want good neighbors who take care of their homes, it seems like a good idea to buy in places with lots of retired military.
Good points, all… but I can’t help wondering if sheer demand on the part of potential buyers for smaller homes might actually be making builders reconsider. What profit do they make when a huge house sits empty and unsold for month after month, when the small two-bed/one bath cozy home in a good neighborhood gets snapped up in days?
The ‘small’ house builds are often just to rent, no ownership there. We have lots of them popping up in the Phoenix area, and surrounding cities. Pressure from regulators and Agenda 21/WEF types—you will own nothing… Both ‘diversifying’ single family neighborhoods and taking their nice safe suburbs down a peg by injecting blobs of ‘low income housing’ right into the middle of them. What incentive is there for folks to work their way up from a studio apartment to a starter house when you can just rent next to the McMansions’ gated community and enjoy all of the amenities?
I’m just finishing up a 200 lot development in a ‘no growth’ county in SE Florida. The perimeter landscaping budget, as required by the county, is over $2.0 million. That’s $10,000 per house. Add in high efficiency HVAC, impact resistant windows, smoke & CO2 detectors, GFI outlets, etc., and the next thing you know, it tends to get pricey. Not saying any of these items shouldn’t be included, but the all add cost, and your grandparents survived just fine in a home that had none of them. It’s easy to blame the RE developer, but I’d suggest you dig a little deeper. If you can find a municipality that will approve a development that has one street tree and some foundation plantings on each house, along with a sack of grass seed and a rake for the owner to plant their own lawn, I’m ready to make it happen. Fat chance. And these items are ‘required’ equally in a big house or a small one. So the cost difference in size is essentially for additional ‘air’. Same number of kitchens, furnaces, A/C units, electrical panels, water & sewer lines, etc. Again, I’m not saying right or wrong, but it is a bit more complicated than big house vs small house.
Here in the Northeast (in particular Massachusetts , north shore so up toward Ipswich and Gloucester) there issue is that lot cost is ludicrous. Most lots here have to be 1+ acre arable land to fill MA Title V (septic/sewerage requirements imposed late ’80s) because this area has almost no sewerage except for more citified portions. That size lot runs $350- 500K. If you put $100K of house (with maybe 10% profit on only the house part) best case you made 10K on 440K investment. It took you at least 3 months to get through all the rigamarole and the actual construction. At this point developments are getting rare (land is already in use) and so to maximize profit you put 4000sq ft hip roof McMansions up. Until lately in a town with good schools they sold out shortly after you stuck the sign in the ground announcing new construction. In closer to Boston its much worse, a dilapidated wreck(condemned by Cambridge) of a house on a 1/4 acre lot in a nice neighboorhood wedge partway between Harvard and MIT just sold for 1.2 million dollars. Essentially they bought the lot, the services (gas electric, sewer deeded parking spot and water, and Cambridge water ain’t nothing to write home to Momma about) and are leveling the 100+ year old wreck recycling anything they can to make a profit. The small house thing kind of exists as you get out into rural Maine, New Hampshire and Vermont (mind you away from Ocean, Lakes or other recreational areas). Lots there can go for $25-30K and it is quite common to see trailers (single or double wide, the original micro home :-) ), manufactured homes and a few micro homes. Big issue there is to get the low prices you are 1-1.5 hours from major civilization, and may even be 30-45 minutes one way to basic amenities like a grocery store that isn’t also a gas station and post office. With mortgages going up I think a lot of construction folks are going to be keeping their F150/250 longer and tightening their belts. Although even the early 90’s building bust (with 11%+ first mortgages) things still moved
As a single example of the insanity of Los Angeles, I bought an 1800 square foot, 3 bedroom, one bath house in South Pasadena in 1969 for $35,000. I was a surgical resident at the time and my father had died and left me a small amount of money. The down payment was $3500. and the seller took back a second for the same amount. In 1972, I moved to Orange County to begin my practice and had trouble selling the house. After a year, I sold it for $42,000. That house is listed on Zillow for $ 1.8 million.
I was also in the RE development industry (but multifamily) in MA. I’m with tregonsee314 in attributing the stratospheric housing prices here primarily to zoning restrictions. Many municipalities require 40,000 sf of buildable area, and that means no “wetlands” and sometimes, in some communities, it excludes land area above a certain percentage grade (i.e., slope. And BTW, in MA, “wetlands” isn’t hydrological, they’re determined by what plants grow on the property.) Some towns want 120,000 sf (around 3 acres.)
It is not feasible to build a smaller home in these towns because of these zoning requirements which make the lots very expensive.
Make it hard to add to the housing stock, and prices will go up.
Ah … so in attempts to make communities better, and houses safer and more environmentally-appropriate, local governments have actually succeeded in making the housing situation more difficult and expensive.
It figures.
I bought a small house in the middle of the Hive of MN back in ’92. Two bedrooms, one bath and a one-car garage with one slot of off-street parking. In Murderapolis in the winter being able to park your vehicle so it isn’t towed is a nice thing. That house had 1,100 square feet, was built in 1901 as a farmhouse, and had 9 foot ceiling in the first floor making it seem bigger than it was. We planned to stay there for 5 years and then move up to a bigger house.
We were there for 27 years (so much for the “plan”) and upgraded everything in/on that house from sewer line to roof and everything in between.
When I retired and we moved to our small town in NW Wyoming we found a house that had a 1,500 sq. ft. main floor with a semi-finished (no bathroom) basement that almost doubled that amount of space. Most people downsize when they retire; we almost tripled our living space, and for the first time in our lives finally had enough room for all of the books I’ve accumulated over the years…a basement library/entertainment center makes all the difference in the world.
I’d hate to have to go back to a smaller house.
I cringe when I see the growth in San Antonio. Where will the water come from, where will the wastewater go. My husband graduated from Alamo Heights High School in 1952. His family was in a 2 bedroom, one bath small home there.
As an aside, where the little town of Live Oak was started was his grandfather’s farm. When we last looked the the farmhouse was still there, that was about 15 years ago. It was surrounded by development, I doubt it is still there, as it took up quite a lot of building space.
And for his German heritage the Jung Road is the other grandparent side, and the house his grandmother was born in was still there last time we looked. I think it is gone now, too.
I remember when I first visited his family how taken I was with the city square which still had the real Mexican culture of the evening strolls of the young people. Very friendly town back in the 1950’s.
“RE why do developers prefer to pack the biggest house they can onto small lots, it’s simple. Bigger houses have more profit margin. Better economies of scale on the construction-cost end, more revenue on the sale end.”
I live in a small village near where the “green space” begins, outside of Washington, DC. In the 25+ years I’ve been here I’ve seen developers buy up farmland on several occasions and build what amount to new cities on them. Often the houses are gigantic, built on postage stamp size lots. The windows on the sides facing neighboring houses serve no useful purpose as far as I can see, other than allowing you to reach out and shave your neighbors face in the morning.
“I have noted over more than two decades of living in it, that my own neighborhood is quietly prosperous; a high percentage of homeowners and few rental properties. This is a good thing, most definitely not a class or racial issue.”
You might say we are the cork in the bottle. Our neighborhood is about 25 miles from the White House as the crow flies but is zoned for 2 acre lots and surrounded by agricultural preserves, some of them created by developers themselves who happen to live here (set a thief to catch a thief). We have blacks, Hispanics, and Asians living within 3 houses of us, but all about as identical as peas in a pod when it comes to attractiveness as neighbors. It’s not cheap to live here, and all are proud, hard-working homeowners. Top, a black trucker who lives next door, is the best neighbor I’ve ever had. He’s up there in years and has had some health issues. I grieve at the thought of losing him, because it’s unlikely whoever moves in when he’s gone will be nearly as good. As Sgt. Mom says, when it comes to good neighbors, it’s not a racial issue. It boils down to the quality of individuals, and there are all kinds in every race.
The house we raised our kids in, is now owned by our son. He is selling it soon, and I’ve advised him to refer to the excess space (4 bedrooms + converted attic + full basement) as “work from home/small business” space. Or, mention its ability to be used for home schooling.
We moved from a 2 bedroom + office space in SC to a 2 BR + office space in OH. We’re in a small urban area (we are aging, and want to be able to manage living here should we not be able to drive and need to depend on Uber/public transportation). Also, close to good medical/hospital facilities.
Most of the homes surrounding us are turn of the 19th-20th century era buildings. Yet, they continue to be seldom on the market. I attribute that to the lower cost of housing in this market. Those homes that are newer and higher priced, with sweeping lawns and lakefront vistas are a glut on the market. They are higher priced than will be easy to sell in an inflationary market.
A friend sold a house early this year at what was probably the very top of the market to someone that probably has an interest rate lower than anyone will see for a long time. Timing, as they say, is everything. This after a stint of finding out that renting an older house from 1500 miles away brought joys indescribable without bringing tears to her eyes and pain to her checkbook. Ironically, her problems were exacerbated by being fairly handy and responsible which left her without a list of reliable local tradesmen when confronted with a plugged toilet at 3:00AM on a Sunday morning.
We’re coming to the end of 20+ years of essentially free money with the short shock of 2008 that taught us nothing. Why endure the indignity and calumny of Formica instead or granite, why settle for common granite when Carrera marble is just a few thousand more. We’re fast approaching the time where a $150,000 house will come with payments that would have bought a $300,000 house last year, the people that would have been happy with the $150,000 house won’t have the money and the people that “deserve” the $300,000 hose won’t be happy either. As valuations inevitably decline, don’t expect our civic authorities to take it sitting down, rising property taxes are just around the corner.
Yet to come is the guy with a $300,000 house that he needs to sell for some reason. Well, we’ve already established the precedent that there are no consequences to walking away from an underwater mortgage except to the taxpayers, so it’s all good..
“Often the houses are gigantic, built on postage stamp size lots.”
This is the part the baffles me. Perhaps some of the developers here can explain it to me.
I live in the suburb of a big city in the Midwest. Cities here are surrounded by thousands of square miles of flat farmland, so there are no natural impediments to either development or lot size. Municipalities here are very much in favor of continued development, so there are no regulatory or zoning barriers either — not like you’d see in other, more Democratic, areas of the country. It is not unusual to see a village grow from a population of 500 to 50,000 in the space of twenty years, and then development moves on to the next village farther out.
Yet the last ten years, all new construction has been in the form of huge houses on tiny lots, often 8-10 per acre. The houses are all the same: two-story rectangular houses the shape and proportion of Monopoly hotels, all with identical elevations and vinyl siding. (All the same color too. It’s hard to tell the houses apart from the outside.) The front yards are maybe 100 square feet, and the back yards are about the same size as the patio.
The small lots and the size, shape, and conformity of the houses make the subdivisions look almost surreal. Yet the houses in them sell for 2-4 times what the median price is in this area for an existing home on a 1/4-acre lot.
I don’t get it. What’s going on here?
Small lots require less maintenance. Some buyers might want the biggest house that fits the lot, with small margins on the sides, perhaps a rock garden in the front, and a minimal lawn or rock garden in the back. I know someone who built a house along these lines. He deliberately sited it with the back of the house along public land with a grassy drainage area and a small stream — IOW the local authorities mow his back yard.
All the things like street, curb, sidewalks, (assuming you don’t live in Texas) sewers and other utilities scale by linear foot. Houses closer together means fewer linear feet. Other things like mandated green spaces and storm water control scale with area, again, more houses, less cost per house. All of these represent up front costs of development. No return until the houses adjoining are sold and they increase the cost of the house with little increase in the developer’s margin. And finally, smaller lawns mean lower cost for landscaping and easier upkeep. Too intimate acquaintance with you neighbors is just a byproduct.
The windows opening directly on windows in adjacent property is because the building code mandates a certain ratio of window to floor space and fire codes require minimum size windows of occupied rooms like bedrooms for egress.