As we move on from the second decade of the 21st century (yes, time does fly, even when you’re not having fun), a quick look back at the housing industry during the past 10 years reveals a period of time marked by much hard work and a tenacious determination to keep moving forward. The previous decade, the aughts, offered some highs of euphoria before socking the nation with the depths of depression, and feels now as if it were over in a flash. The ’10s are a different story; a longer one of starting over, reinventing, and rebuilding.
The Great Recession—the most severe economic event in the U.S. since the Great Depression in the 1930s—began in December 2007 and officially ended in June 2009. But it didn’t end there for the housing industry: Banks foreclosed on 1.05 million homes in 2010 and home prices dropped precipitously, with homes in some areas losing 50% of their value.
Half of all U.S. home builders closed their doors between 2007 and 2012, and many of their employees left the industry for good. Job losses across all industries escalated. Workers’ earnings declined and fewer than half of the unemployed found work in 2010. Those who did earned considerably less than their former salaries.
Recovery from the recession began in earnest in 2013 and has continued rebounding. But the downturn and its effects set the stage for fundamental changes in home building, homebuying, and consumer behavior in the remaining years of the ’10s. Here are just a few:
The Shift to Renting: Out of necessity, many households began renting rather than buying, and apartment construction increased from 9% of the total number of units built before the recession to more than 25% of the current total. There are now nearly 110 million renters in the U.S., more than a third of the population. And renting is not just for young adults anymore. The biggest demographic growth in renters has been among those 60 and above; the number of renter households in this age group increased 32% in the past 10 years.
How Homes Are Sold: For those who are looking to buy, however, the days of engaging a real estate agent and having them conduct the search for a house are long gone. Zillow, Redfin, and Realtor.com have pried the information free for home shoppers, who now search available listings by neighborhood and price unfettered by intermediaries. And when they do find the home of their dreams, they can sell their current house to iBuyers—companies that purchase the home as-is and on the seller’s timeline—for just a bit more than the usual broker’s fee.
What Buyers Want: Following home design trends has become a hobby for many Americans, borne out by the continued expansion of the remodeling industry, which has grown more than 50% since the end of the recession. The proliferation of new trends has made it harder for production home builders to stay ahead of the next new thing, but new homes can offer important and desirable features most older homes cannot: energy efficiency, accessibility, lower maintenance, and a healthier environment.
The new decade probably won’t roar like the ’20s of the last century. Its first few years are likely to be a continuation of the last few; beyond that is anyone’s guess. The short-term forecast is for a relatively slow market, slow but steady. The quest for affordability will require that square footage, for both lots and homes, continue its downward trend. The shortage of new homes will persist, and home prices will continue to rise, but at a slower rate. In answer, builders need to keep training their sights on their strengths and on what they can do in the here and now. In other words, keep on keeping on.
Access a PDF of this article in Pro Builder's January 2020 digital edition