"Don’t Bet Against The (Single-Family) House"

From NewGeography:

Nothing more characterizes the current conventional wisdom than the demise of the single-family house. From pundits like Richard Florida to Wall Street investors, the thinking is that the future of America will be characterized increasingly by renters huddling together in small apartments, living the lifestyle of the hip and cool — just like they do in New York, San Francisco and other enlightened places.

Many advising the housing industry now envisage a “radically different and high-rise” future, even though the volume of new multi-unit construction permits remains less than half the level of 2006. Yet with new permits at historically low levels as well for single-family houses, real estate investors, like the lemmings they so often resemble, are traipsing into the multi-family market with sometimes reckless abandon.

Today the argument about the future of housing reminds me of the immortal line from Groucho Marx:Who are you going to believe, me or your lyin’ eyes? Start with the strong preference of the vast majority of Americans to live in detached houses rather than crowd into apartments. “Many things — government policies, tax structures, financing methods, home-ownership patterns, and availability of land — account for how people choose to live, but the most important factor is culture,” notes urban historian Witold Rybczynski.

Homeownership and the single-family house, Rybczynski notes, rests on many fairly mundane things — desire for privacy, need to accommodate children and increasingly the needs of aging parents and underemployed adult children. Such considerations rarely enter the consciousness of urban planning professors, “smart growth” advocates and architectural aesthetes swooning over a high-density rental future.
Just look at the numbers. Over the last decade— even as urban density has been embraced breathlessly by a largely uncritical media — close to 80% of all new households, according to the American Community Survey, chose to settle in single-family houses.

Now, of course, we are told, it’s different. Yet over the past decade, vacancy rates rose the most in multi-unit housing, with an increase of 61%, rising from 10.7% in 2000 to 17.1% in 2010. The vacancy rate in detached housing also rose but at a slower rate, from 7.3% in 2000 to 10.7% in 2010, an increase of 48%. Attached housing  – such as townhouses –  posted the slightest increase in vacancies, from 8.4% in 2000 to 11.0% in 2010, an increase of 32%.

The attractiveness of rental apartments may soon be peaking just in time for late investors to take a nice haircut. Rising rents, a byproduct of speculative buying of apartments, already are making mortgage payments a more affordable option in such key markets as Atlanta, Chicago, Miami, Phoenix and Las Vegas.

Urbanist pundits often insist the rush to rental apartments will be sustained by demographic trends. One tired cliché suggest that empty nesters are chafing to leave their suburban homes to move into urban apartments. Yet, notes longtime senior housing consultant Joe Verdoon, both market analysis and the Census tells us the opposite: most older folks are either staying put, or, if they relocate, are moving further out from the urban core.

The two other major drivers of demographic change — the millennial generation and immigrants — also seem to prefer suburban, single-family houses. Immigrants have been heading to the suburbs for a generation, so much so that the most diverse neighborhoods in the country now tend to be not in the urban core but the periphery. This is particularly true in Sunbelt cities, where immigrant enclaves tend to be in suburban areas away from the core....MORE