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


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.

Millennials, the generation born between 1983 and 2003, are often described by urban boosters as unwilling to live in their parent’s suburban “McMansions.” Yet according to a survey by Frank Magid and Associates, a large plurality define their “ideal place to live” when they get older to be in the suburbs, even more than their boomer parents.

Ninety-five million millennials will be entering the housing market in the next decade, and they will do much to shape the contours of the future housing market. Right now many millennials lack the wherewithal to either buy a house or pay the rent. But that doesn’t mean they will be anxious to stay tenants in small places as they gain some income, marry, start a family and simply begin to yearn for a somewhat more private, less harried life.

In the meantime, many across the demographic spectrum are moving not away from but back to the house. One driver here is the shifting nature of households, which, for the first time in a century are actually getting larger. This is reflected in part by the growth of multi-generational households.

This is widely believed to be a temporary blip caused by the recession, which clearly is contributing to the trend. But the move toward multigenerational housing has been going on for almost three decades. After having fallen from 24 percent in 1940 to barely 12 percent in 1980, the percentage topped over 16 percent before the 2008 recession took hold. In 2009, according to Pew Research Center, a record 51.4 million Americans live in this kind of household.

Instead of fading into irrelevance, the single-family house seems to be accommodating more people than before. It is becoming, if you will, the modern equivalent of the farm homestead for the extended family, particularly in expensive markets such as California. This may be one of the reasons why suburbs — where more than half of owner-occupied homes are locatedactually increased their share of growth in almost all American metropolitan areas through the last decade.

Some companies, such as Pulte Homes and Lennar, are betting that the multi-generational home — not the rental apartment — may well be the next big thing in housing. These firms report that demand for this kind of product is particularly strong among immigrants and their children.

Lennar  has already developed models — complete with separate entrances and kitchens for kids or grandparents — in Phoenix, Bakersfield, the Inland Empire area east of Los Angeles and San Diego, and is planning to extend the concept to other markets. “This kind of housing solves a lot of problems,” suggests Jeff Roos, Lennar’s regional president for the western U.S. “People are looking at ways to pool their resources, provide independent living for seniors and keeping the family together.”

But much of the growth for multigenerational homes will come from an already aging base of over 130 million existing homes. An increasing number of these appear to being expanded to accommodate additional family members as well as home offices. Home improvement companies like Lowe’s and Home Depot already report a surge of sales servicing this market.

A top Home Depot manager in California traced the rising sales in part to the decision of people to invest their money in an asset that at least they and their family members can live in. “We are having a great year ,” said the executive, who didn’t have permission to speak for attribution. “ I think people have decided that they cannot move so let’s fix up what we have.”

These trends suggest that the widely predicted demise of the American single family home may be widely overstated. Instead, particularly as the economy improves, we may be witnessing its resurgence, albeit in a somewhat different form. Rather than listen to the pundits, perhaps it would be better to follow what’s before your eyes. Don’t give up the house.

This piece originally appeared in

Joel Kotkin is executive editor of and is a distinguished presidential fellow in urban futures at Chapman University, and contributing editor to the City Journal in New York. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

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The future of America will

The future of America will be characterized by rented building; as day by day the cost of living as well as the cost of house rapidly increases. Therefore we can estimate the future of housing in the United States of America seems to be in a deep problem. Every person dream for a big and better house; but due to lack of proper resources they are unable to afford it.

Mortgage plans and programs are available but how long it will helpful for us. Therefore owning a house is quite tough for a person, so it's better to be in a rented home with a small family.

I just built my home and

I just built my home and it's not in the most convenient location. I decided it was an investment and to take the risk of developing a family in a newer area in Phoenix. I had to go through a local mortgage broker phoenix to help me get qualified for my home loan. Having that done sped up the process of getting my new home built. Within 3 months, I had a brand new home in a brand new neighborhood. I've been living there over a year now and I love having my own privacy and not having to deal with the creepy landlord. It's worth investing your money into a home rather than wasting it on rent. As long as you can get approved from the loan, which all mortgage companies will help you with that process, and you can pay the down payment.

The American Dream is Still Alive

Great post and true, regardless of what the true believer urbanists believe. As a blogger on urban issues and most especially housing, I have found that it's a North American desire that is both visceral and heartfelt; we long for a home apart. Americans are a separate breed and have been for two hundred years, our aspirations are, I truly believe, different than those of Europe. Land laws, ownership of land, and a history of top down governmental management is different in Europe and to think we will be better with their system of land use laws and cultural structures is foolish mischief. As a planner of thousands of homes and hundreds of communities I have found this to be true: Americans want the biggest house, on the biggest lot, they can afford! Put that in your market study.

Greg Randall

What kind of house do I live in?

I live in a new [side by side] duplex in Denver.
I would say that I live in a multi-family house.
However, most RealWhores® would list my dwelling unit as a single-family.
So, do I live in a single-family or a multi-family house?
Inquiring minds want to know.

Dave Barnes

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

I completely agree with the author as the future of single family housing is far from dead, even in California with a weighting toward smaller (one and two person) new households.

The American Dream remains home ownership, not renting. We have bred that preference into our children and grandchildren and our immigrant population has eagerly signed on to the dream.

Owning a home is far more than just an economic decision and always will be. Pride of ownership and sense of place and permanence for families are of prime importance. Even economic gain remains a strong motivator as evidenced by recent consumer research that shows that even today nearly 60% of all households consider home ownership to be a good investment.

Daniel R. Levitan
President, Levitan & Associates

Planning Theory vs. Reality


Good article. In real estate investing it is important to distinguish between user demand and investor demand. Right now there is strong investor demand for multi-family residential, not because of the intrinsic merits of multi-family, but because of the demerits of all other investment alternatives (stock market too volatile and propped up by Fed keeping interest rates low, commercial real estate too risky and no lending, and even municipal finance no longer being a safe haven, given city + state budget disasters and unfunded pension liabilities). Multi-family residential is the only real estate asset class for investors that can access the government sponsored credit markets (FHA loans), renter demand is temporarily increasing because the difficulty in buyers obtaining loans for the preferred single family home, and the short term nature of apartment rental agreements (one year leases) provides a legitimate inflation hedge in an era of current and anticipated federal printing of money.

So the point is that the money chasing apartments right now is completely rational given the current investment environment, but it is another bubble in the making, with even new developments in the pipeline given all the investor demand. And, as you indicate, it has nothing to do with any intrinsic cultural preference for apartments over single family homes.

As an aside, and while I will grant you that most of my evidence is personal and anecdotal, most of the planning professionals and multi-family investors and developers that I know live in single family homes by choice.

The aside is telling:

That the planning professionals etc are in the do as I say not as I do mode. I say that before making their pronouncement about how people should live, they need to live that way. It is easy to be a Hypocrite and in this case they are. It would be interesting to do a real survey of these folks. After all even the rich can find expensive apartments. But between the lack of effective firewalls between units (A double stud wall with 2 sheets of drywall between the studs does not count, plus open attics etc)

Disagreeing in the Central Valley

You may not want to give up on the house, but why would you build a single one on spec in today's world?

We are building apartments for the next 5 years, since our Central Valley town has lots and lots of one and two person households. Arthur Nelson looks at the same census data as your guy and comes to _very_ different conclusions in the recent ULI report; The New California Dream.

Page 65; the conclusion identifies that 75% of demand for new housing in California metro areas will be for multifamily rental.

I tried to post a link to the PDF, but your spam filter didn't like the URL.

R. John Anderson