Closing in on 2020…

As we close in on the year 2020 it is becoming more and more apparent that the tipping point we began to warn people about back in 2009-2010 has indeed arrived, just as we predicted it would. The tipping point we were referring to back in 2010 is the year 2020, at which time the overwhelming majority of homes in the United States will be at least 20 years of age.

CRC’s principles first started to sound the alarm after we were invited to submit a proposal to be a presenter at the Community Associations Institute (CAI) National Conference. Since we had just spent the last year researching the U.S. housing market in the wake of the collapse of the sub prime mortgage market we thought it would be a perfect opportunity to introduce the world to the phenomenon we had begun referring to as, “The Tipping Point.”

The primary source document for our research was the 2007 American Housing Survey prepared by the U.S. Census Bureau with funding from the U.S. Department of Housing and Urban Development (HUD). This New York City phone book sized document was supplemented with information obtained from the CAI’s Annual Statistical Review published by the Foundation for Community Association Research as well as information obtained from the National Association of Realtors (NAR) and the National Association of Home Builders (NAHB).

To summarize, what the data told us was that by the end of 2008 new housing starts in the U.S. had dropped precipitously from the 2006 recent high-water mark of 1.98M units, which was the peak year for new home starts since 1973 and the third highest in 40 years. Not only had the number of new housing starts dropped from almost 2M units in 2006 to less than 1.2M in 2008, the decline would continue for another 3 years before reaching the bottom in 2011 when new housing starts in the U.S. were only 585K units.

By the end of 2009 new home construction had plummeted to a level that was barely one-third the number of new homes that had been constructed in 2006. This dramatic decrease in new homes starts combined with the fact that by 2010 approximately 65% of the existing homes in the U.S. would be at least 10 years old, meant that within 10 years the percentage of homes in the U.S. that would be at least 20 years old was likely to be in the range of 70%-75%, depending on how quickly and to what degree the rate of new home construction began to increase.

As it turns out, new home construction has never come close to the 2007 level of 1.5M units and in fact through the end of 2018 new housing starts have yet to exceed 1.2M units in any year since 2007. This means that the rate at which new homes are being added to the U.S. housing inventory is only two-thirds the rate of construction that we experienced during the peak production years of 2004-2006.

In the next installment we will examine why it is that 20 years is such an important milestone in the life-cycle of a home and why it is that we continue to argue that The Tipping Point we predicted back in 2010 has in fact arrived…

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