Little (empty) boxes on a hillside
February 18, 2009 6:07 AM   Subscribe

Why are we so focused on the construction of new homes?

Report on NPR this morning about the low rate of new home construction. But why are we still so focused on building new single family homes? Aren't there huge numbers of empty, (unsold or foreclosed) houses already kicking around? Don't people need apartment houses? Rentals? Construction jobs aside, what am I missing here?
posted by nax to Society & Culture (14 answers total) 1 user marked this as a favorite
the construction of new homes is a leading economic indicator. They are used to predict the trajectory of the economy and not at all absolutely accurate.
posted by jerseygirl at 6:15 AM on February 18, 2009 [1 favorite]

It's a leading economic indicator; when housing starts go up, it indicates that there is confidence in the economy and developers are investing in real estate. Real estate is what people typically borrow against and is their single most valuable possession. When real estate loses value, people's ability to fund college educations, make home improvements, and start businesses are dramatically curtailed.

We aren't focussed on housing starts for the value of having more housing (although with an expanding population we'll certainly need more eventually), but for their value in predicting how the general real estate market will be performing in the near term.
posted by jenkinsEar at 6:16 AM on February 18, 2009 [1 favorite]

I think it's a bit absurd too, but I think at least one part of it has to do with the types of houses that are available. In addition to the McMansion craze, baby boomers (like my parents) are finding that much of the existing housing doesn't meet their needs as they age. My parents live in the rural south, and looked for two years to find a single story house around 1500 sq ft that they could retire in. Everything had stairs (houses built after 1960, or was under 1000 sqft (houses built earlier than the 60's). There were very few options, and ultimately they ended building. Now there are a few neighborhoods of single story, zero lot houses going in.
posted by kimdog at 6:17 AM on February 18, 2009

Yes, there are empty homes. Two of the problems are:

1. There tend to be more empty homes in places where people don't want to live (e.g. places with a lot of crime or other social problems).

2. The construction industry has more to gain from building new homes than from renovation work, and they have lobbyists.
posted by le morte de bea arthur at 6:17 AM on February 18, 2009

The current "retail" thesis (I say retail referring to retail based investors) is that stabilization of housing prices will stabilize the economy. There is a lot of coverage of housing indicators with the hope of divining the bottom of the housing bubble.
posted by teabag at 6:30 AM on February 18, 2009

Houses take time to build. You start construction on a housing estate and it's maybe 6 or 9 months until you can sell those houses.

So if I expect the housing market to really take off in 6 to 9 months, I need to start constructing houses now to take advantage of that. And if I expect the housing market to crash in 6 to 9 months, I need to stop constructing houses now so I don't put a bunch of money into making houses I can't sell.

So fluctuations in the construction market today represent our best predictions* for fluctuations in the housing market in 6 to 9 months.

*In the sense that if you had a better prediction than the overall market, you would make investments now in order to become rich when the anticipated events occur, and your investments would reshape the market to include your predictions. And if you aren't confident enough to make such an investment your prediction can't be worth much...
posted by Mike1024 at 6:58 AM on February 18, 2009

But why are we still so focused on building new single family homes? Aren't there huge numbers of empty, (unsold or foreclosed) houses already kicking around? Don't people need apartment houses? Rentals? Construction jobs aside, what am I missing here?

Money. Greed. Convincing people that they will perish if they don't own at least 2000 sq feet, which ensures a continuing demand for new homes and depresses the resale value of older homes. Construction jobs are nice, but the real money is for the real estate developers.
posted by desuetude at 7:13 AM on February 18, 2009

Seconding house building as an indicator. We focus on the housing details because they might indicate market directions.

Foreclosures, on the other hand, paint a picture of financial stability. If people can't afford to live somewhere, there are more issues at hand. Maybe they'll try to find cheaper housing in the same area, or maybe they'll move to areas with cheaper housing. Maybe they'll move back with family.

It's all business. Business means keeping people employed, paid, fed. In the abstract: yes, foreclosures could be seen as some sort of clensing, or coming to terms with the differences between needs and wants. But in reality, it means people have to make drastic changes to their lives, and often without much of a safety net.
posted by filthy light thief at 7:31 AM on February 18, 2009

Seconding everyone regarding leading economic indicators.
posted by mikewas at 8:41 AM on February 18, 2009

[few comments removed - could you stick to fact-type things please? thanks! ]
posted by jessamyn (staff) at 8:54 AM on February 18, 2009

Not just construction jobs, but jobs in industries that provide the inputs for the construction industry. Transportation, heavy equipment manufacturing, extraction industries, steel industry, etc.

There´s not really an aspect of increased housing starts being good because of a need for housing so much as that it´s a vote of confidence that the economy will be in reasonable shape to sell the things after they are finished. It´s a bet that there will be buyers, and seeing lots of homes being built means that there is a lot of betting in that direction. A show of confidence in the economy on the part of the builders.
posted by yohko at 11:14 AM on February 18, 2009

The housing start numbers the US census bureau collects track both single family and multifamily units.

PDF with the Feb 2009 report here

So it´s not just single family homes they are concerned with.

Oh, and some new single family homes do become rentals.
posted by yohko at 11:26 AM on February 18, 2009

Oh, and this page has a quick summary of housing starts as an indicator.
posted by yohko at 11:30 AM on February 18, 2009

Well, that makes sense then, thanks everyone. Thanks esp yohko for the links (didn't want to "best" it because so many good succinct answers.)
posted by nax at 5:20 PM on February 18, 2009

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