Although it seems like just yesterday for some, the Eighties were more than 40 years ago. And while mullet hairstyles are making a comeback, many of the home design trends that were popular then are now considered wildly outdated (looking at you, fluorescent light fixtures).
Given that more than half of all owner-occupied homes in the US were built before 1980, this has resulted in a renovation boom. But modernizing an ’80s split-level does nothing to solve the real issue facing the country’s real estate market — the shortage of 3.8 million homes needed to meet demand from Millennial buyers, the largest generation in US history.
A recent post on the National Association of Homebuilders’ Eye On Housing blog illustrates just how dated the nation’s housing stock has become as a result of constrained construction. As of 2019, the median age of an owner-occupied home was 39 years, up from 31 years in 2005. The median age has steadily increased since the Great Recession as the share of new construction homes built within the last nine years fell from 15 percent in 2006 to 7 percent in 2019.
Even homes from the early aughts, built between 2000 and 2009, make up just 15 percent of the owner-occupied housing stock. Meantime, the share of homes that are over 50 years old (constructed before 1969) jumped from 30 percent in 2009 to 37 percent in 2019. This is all happening as Millennials enter their prime household formation years, an event that was entirely predictable.
A survey conducted by Homes.com found that the cities with the most older homes for sale tended to be clustered on the coasts. The list was topped by Washington, DC (69.1 percent), Providence, RI (68 percent), New York, NY (65.3 percent), Cincinnati, OH (61.6 percent), and Baltimore, MD (60.9 percent).
Sunbelt cities had the most modern homes for sale, led by New Orleans (21.6 percent), Nashville, TN (21.2 percent), Richmond, VA (20.7 percent), Boston, MA (18.4 percent and a notable northern exception), and Raleigh, NC (15.3 percent).
Supply issues in the real estate market are likely to persist for years to come unless residential construction ramps up considerably. Starter homes, in particular, are desperately needed to get Millennials on the property ladder. Fannie Mae notes that entry-level housing supply in 2020 was less than one-fifth of what it was in the late 1970s and early 1980s.
Conditions in the new construction market have been gradually improving, however. According to the latest data from the US Census Bureau, the pace of single-family home construction rose 22 percent above 2019 averages in April. Although surging lumber prices are causing some homebuilders to delay construction temporarily, the hope is that supply will continue to increase throughout the decade to prevent a full-blown housing crisis from unfolding.