Could Densification Give Builders More Space to Build?
If you’re shopping for a home this year, you may have noticed you’re facing some competition. Real estate professionals are expecting one of the busiest home buying seasons yet, due to low mortgage rates and fewer homes for sale. Zillow researchers analyzed 17 metros across the country to conclude converting just 10% of single-family lots to two-unit homes instead could add 3.3 million additional housing units to existing available homes.
Across the country, many home shoppers are competing over a limited number of homes for sale. Part of that inventory crunch has to do with not enough available lots to build new homes. With homeowners occupying their homes longer, there are fewer existing homes for sale and many markets are depending on new construction. At the current pace of construction, the 17 metros surveyed will build approximately 10 million new homes. Expanding 10% of single-family lots to include two-unit homes would boost that number to 13.3 million homes.
In recent years, home builders have started to build smaller. The buyer demand for larger luxury homes has subsided, and with many prospective first-time home buyers attempting to enter the market, the demand for starter homes has surged. Replacing single-family homes with duplexes or triplexes can help satisfy the demand for smaller homes faster and more efficiently. Denser redevelopment or densification does not just have to be limited to urban areas or coastal markets. Single-family neighborhoods make up the vast majority of residential zones in the United States and converting just some of those single-family lots to house two units or more adds housing more inventory.
Two-unit lots do not always mean two families occupying one lot. In some cases, an added suite can house aging relatives and give them the company and care they need plus the comforts of home. In other cases, a garage apartment can house adult children saving to buy their own homes. As many American families shift toward multigenerational living, diversifying single-family units into multi-family units can more comfortably accommodate this lifestyle. Other savvy home buyers may choose to buy a two-unit property and rent out their additional unit and earn extra income.
Real estate professionals are expecting many markets to be busy in 2020 with today’s historically low mortgage rates. If you have any questions about what to expect from the housing market this year, please let me know.