Americans have given up on homeownership. So have builders
U.S. homebuilders are shifting away from single-family properties, opting instead to develop multi-family dwellings that are primarily suited for renters.
According to Reef Insights data, single-family homes now “comprise the lowest share of completed housing units since July 2009.”
“Over the last 30 years, there has been a gradual shift away from single-family home construction, in favor of multi-family builds,” Reef Insights explained before adding that the trend has accelerated over the last two years.
By 2024, just under 63% of housing completions were single-family homes. This is not far off the recession low in 2009.
Single-family developments increased by 8.4% compared to 2023, whereas total completions—which include multi-family units—increased by 30.2%.
Reef blamed affordability challenges for the decline in single-family construction starts. “Multi-decade affordability lows” has more Americans backing out of the housing market entirely in favor of renting.
While rent prices are also pushing Americans over the affordability edge, renting is still a much more affordable option than buying a home.
An analysis by Creditnews Research determined that it’s much cheaper to rent than to buy a home in all of the U.S.’s largest 50 metro regions.
In some regions, such as the West Coast and Northeast, the difference between owning a home and renting is more than $3,000 a month.
“Reimaging prosperity”
With builders constructing fewer single-family homes, the traditional image of the American dream with a brick house and picket fence is being replaced by something completely different.
This is especially true for younger Americans, who face the biggest affordability obstacles of all.
As The New York Times reported, “Young Americans have been forced into a turning point for the American dream, one that might not have a house in it at all.”
The Times cited a recent study by Minnesota University Mankato showing that only about a third of millennials listed homeownership as a staple of the American dream, which is much lower than that of baby boomers.
It’s hard to argue against millennials’ logic. The U.S. housing market increasingly favors the rich, with the share of residential homes worth at least $1 million rising to nearly 10%. By comparison, this figure was around 4% in 2019.
These price points aren’t a problem for cash-flush buyers. According to Redfin, nearly half of high-end homebuyers made all-cash purchases in the first quarter of 2024.
For everyone else, financing is the only way to get into the housing market. These buyers can expect to pay a lot more relative to their income for properties that are getting smaller and smaller each year.
According to Realtor.com, home sizes have shrunk in 132 of the country’s 150 most populous metros since 2019. At the same time, home prices increased by 39% over the same period.
“[B]uilding smaller houses isn’t stopping the growth in price per square foot, leaving buyers with a smaller house and an inflated mortgage,” Realtor.com’s researchers wrote.
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