The spring real-estate season is upon us, and prices are blooming – er, booming.
The Georgia Association of Realtors reported the state’s median home selling price in March was $260,000, almost 12% higher than a year earlier. For single-family homes, the figures were slightly higher. Within metro Atlanta, the real-estate firm Re/Max reported March figures of just over $309,000 for the median home selling price, up a whopping one-sixth from a year ago.
The explanation across the board is fairly simple: too little supply.
Listings of existing homes are too few to keep up with demand. Also important is an alarming dearth of new construction.
Nationally, the mortgage-finance company Freddie Mac says the housing market is short of meeting demand for single-family homes by 3.8 million units. This problem is accelerating: The company said the shortage has increased by 52% since 2018, or by about 1.3 million homes. This, even though new housing starts last year were at their highest level since 2007. In Georgia, the shortage is in the hundreds of thousands.
Communities across Georgia that want to deal with their shortage of affordably priced housing will need to grapple with this problem.
There are many culprits for the building shortfall: lumber prices, land prices, labor prices. But there’s also an important tension here between what cities and their planners have been telling us Americans, particularly millennials, want – and what those consumers’ recent behavior tells us.
For more than a decade, we’ve heard all about the desirability of walkable communities and “live-work-play” developments. Certainly, a great deal of investment by private builders has gone into that idea, as evidenced by the explosion of these types of developments not only in Atlanta proper but numerous suburbs and other cities around the state.
But there’s a natural limit to how many single-family homes can be built that are walkable from entertainment districts, whether new or old. The prices for, say, townhomes near the Avalon development in Alpharetta, can run more than double the area’s median price. And we aren’t even talking about fully detached single-family homes.
The gap between demand for such areas, and the demand at those kinds of prices in such areas, has largely been filled by apartments. But it’s unclear that those are fulfilling what younger adults want as they get older. They aren’t necessarily more affordable anyway, with rents often outstripping the mortgage payment for an average-priced house.
I had a long-running debate with a former editor about this topic. He said millennials, with their preferences for denser communities centered on transit hubs, would change development patterns in cities forever. I countered that they’d change their preferences once more of them started families – and valued things such as having a yard for the kids to play in, or good schools for them to attend.
That generation’s choices probably have changed compared to their parents, at the margin. But by and large, it’s increasingly evident that more traditional housing choices have made a comeback.
I suspect this trend will only harden after the pandemic. Density won’t go away, but having some space and distance will be more desirable. The home office will be more prevalent, as more companies allow more employees to work from home more often. More Americans are moving to medium-size cities or farther-flung suburbs that weren’t as appealing before, as numerous reports illustrate.
Trends change, of course. But this one seems likely to persist for a while.
So, back to those communities across Georgia dealing with these disconnections. What policies can they change to reflect these new trends? Are their incentives too heavily skewed toward developments that don’t address the demand for single-family housing? Can they strike a happy medium by removing restrictions on, say, lot sizes that would allow more single-family homes to be built in different patterns than we’ve seen over the past half-century?
The communities that figure out the answers to these questions should be very well positioned for growth and prosperity in the post-Covid era.
