October 1, 2014
By Natalia Siniavskaia
Report available to the public as a courtesy of HousingEconomics.com
NAHB Economics regularly studies characteristics of new single-family homes relying on Census Bureau’s Survey of Construction (SOC). The most recent 2013 annual survey reveals substantial regional differences. Even though new single family homes started in New England are some of the smallest, they are built on the largest and most expensive lots in the nation. They also stand out for being some of the most expensive in terms of sale and contract price per square foot, even after excluding lot values. The most economical new single-family homes are started in the South, where not only lots are least expensive but sale and contract price per square foot are lowest in the nation. These homes rarely have basements and most are served by public water and septic systems.
Among other findings highlighting regional differences are:
- Most homes started in the Northeast and Midwest have basements, unlike new single-family homes in the South that are rarely built with basements.
- While most of new single family homes started in the US have two or more stories, the majority of new homes in the Midwest have only one.
- Less than 9 percent of new homes are built on individual wells but this share is more than 42 percent in New England.
- Nationwide, porches are most popular outdoor feature. Patios, however, dominate new home building in the West South Central division, and are just as common in the West. Decks remain the most popular outdoor feature in New England.
- Vinyl is the most common primary siding material in the Northeast and Midwest. However, while two out of three homes in Midwest mix vinyl with secondary siding, the practice of mixing siding materials is not common in New England.
- Stucco is the most popular primary siding material in the West. Brick is used more widely in the South. The popularity of fiber cement has been rising. It is now the second most popular primary siding material in the Pacific, Mountain and West South Central divisions.
- While most new single-family homes are purchased with conventional loans nationwide, cash purchases are more common in New England, FHA-insured loans play a bigger role in the U.S. West and South, the reliance on VA- guaranteed loans is stronger in the South Atlantic and Mountain divisions compared to other regions.
The Survey of Construction which is conducted by the US Census Bureau and partially funded by the Department of Housing and Urban Development (HUD) collects detailed information on physical and financial characteristics of newly-built single-family homes. The information comes from interviews of builders or owners of the selected new houses. About 1 in 50 new single-family homes are selected for interviews based on a sample of building permits and a canvassing of areas not requiring permits. This sample is large enough to provide estimates for nine Census divisions.
Traditionally, the Census Bureau provides detailed annual estimates for new homes completed and sold. NAHB Economics often prefers to analyze data for new homes started since starts occur before completions and therefore can detect changing trends a bit earlier. Starts is also the statistic most often cited in the media. This article looks at characteristics of new single family homes started in 2013 and analyzes their regional differences.
Homes Started by Sale Type and Community Associations
The SOC differentiates between houses built for sale, houses built by contractors, owners and for rent. Built for sale are houses built on builder’s land with the intention of selling the house and land in one transaction. These are often called “speculatively-built” houses. Contractor-built or owner-built houses are built for owner occupancy on owner’s land with either the owner or a builder acting as the general contractor. During the recent housing contraction the share of speculative starts declined from 79 percent in 2005 to less than 65 percent in 2010, most likely as a result of the severe lack of Acquisition, Development, and Construction (AD&C) credit. The trend finally reversed itself in 2011 and the share of for sale starts reached 74 percent in 2013.
Even though most homes started in 2013 are built for sale, the share varies widely across the United States. The Western divisions - Mountain and Pacific - register two of the highest shares - close to 83 and 80 percent, respectively. In the Northeast (New England and Middle Atlantic) and East North Central divisions, less than 60 percent of all single-family starts are homes built for sale. Rather, these divisions register the highest shares of starts supervised by contractors or owners – close to 39 percent in the East North Central division, 37 percent in New England and 36 percent in Middle Atlantic, see chart 1. The East South Central division stands out for having the highest share of homes started for rent, close to 10 percent, more than double the national average of 4 percent.
The SOC also keeps track whether new homes are started in community or homeowner’s associations, formal legal entities created to maintain common areas and to enforce private deed restrictions. These organizations are usually created when the development is built, and membership is mandatory. Nationally, 59 percent of single-family homes started in 2013 are built in community associations. Most of these homes, close to 90 percent, are homes built for sale, so it is not surprising that shares of speculatively-built homes and homes built in community associations are highly correlated across the United States. The two divisions that report the highest shares of for sale starts – the Mountain and South Atlantic divisions – also report the highest shares of starts in community associations – 78 and 73 percent respectively. And the two Northeast divisions - New England and Middle Atlantic – simultaneously report some of the lowest shares of speculative starts and the lowest shares of new starts in community associations, 23 and 32 percent, respectively.
Sale and Contract Prices
Of the homes built for sale, the most expensive homes are in New England, where the median sales price of new single-family homes started in 2013 reached $400,000. Homes in the Pacific division are second most expensive with the median sale price reaching $355. The least expensive homes started in 2013 are in the East South Central and West South Central divisions with median sale prices reaching $221,000 and $223,000, respectively.
Contract prices of new contractor-built homes do not include value of improved lot and, typically, are lower than sale prices. The national median contract price for homes started in 2013 is $240,000 compared to the national median sales price of $272,000. The exception is the West South Central Division where contract and sale prices are roughly the same and the Mountain division where contractor-built homes are delivered at higher prices even though they do not include the cost of lot development.
Regional differences in home size do not help explain regional differences in home prices. Nation’s most expensive new single-family homes that are started in New England are, at the same time, some of the smallest with the median home size of 2,240 square feet. The biggest homes are started in the South Atlantic division with the median size of 2,596 square feet. The national median is 2,469 square feet.
The maps below display median contract and sale price per square foot and highlight the regional price differences even after controlling for home size. To make comparison more meaningful the cost of lot development is excluded from sale prices. The most expensive homes are contractor-built homes in the Pacific and New England divisions with median contract price of $145 and $143 per square foot, respectively. The Middle Atlantic division is the only division where homes built for sale cost more per square foot than contractor-built homes, $131 versus $103. This makes the Middle Atlantic division home to the most expensive (in terms of price per square foot) new single-family houses built for sale.
Median Contract Price per Square Foot of New Contractor-Built Single-Family Houses Started in 2013
(Contract price excludes value of improved lot.)
The most economical homes are started in the South region, where median sale prices per square foot (excluding lot value) range from $73 in the West South Central division to $84 in the South Atlantic division, consistently below the national median sale price of $86 per square foot. Looking at the contractor-built starts in the South, prices per square foot are slightly higher ranging from $84 in the East South Central division to $88 in the South Atlantic division but still well below the national median contract price of $93 per square foot.
Median Sale Price per Square Foot of New Single-Family Houses for Sale Started in 2013
(Price per square foot excludes value of improved lot.)
Lot Size and Value
Various physical characteristics of homes started help explain some of the regional price differences. Single-family homes started in New England where local zoning regulations often require very low densities are built on some of the largest and most expensive lots in the nation. Looking at homes built for sale, the median lot size in New England is 22,863 square feet which is more than three times larger than a national median of 8,712 square feet. Not surprisingly, New England lots are the most expensive in the nation. The median lot value here reaches $100,000 while the national median for speculatively-built homes started in 2013 is $40,000.
The East South Central Division has the second largest lots with the median size of 14,520 square feet but the lowest median value of $30,000 per lot. The Pacific division where densities are high, developed land is scarce and regulatory costs are high has the smallest lots with median size of 6,153 square feet but third most expensive median value of $51,000, resulting in the most expensive per acre costs in the nation.
Nationally, about 30 percent of new single-family homes started in 2013 have a full or partial basement, 54 percent are built on slabs, and 15 percent have a crawl space. The remaining share, including homes built on stilts or pilings, accounted for about 1 percent of homes started in 2013.
The substantial regional differences in foundations reported in the SOC can largely be explained by climate. In colder regions where codes require foundations to be deep the marginal cost of providing a full or partial basement is not that great. So basements are the most common type of foundation in the colder climate divisions. In New England, 87 percent of new single-family homes started in 2013 have basements. This share is similarly high in the two divisions that make up Midwest - West North Central and East North Central – where the shares of new single- family homes with basements are 84 and 71 percent, respectively. In the neighboring Middle Atlantic division, the majority of homes are still built with basements, 63 percent.
In the warm West South Central division almost all single-family homes are built on slabs. Homes started in the other two divisions that make up the South region – the East South Central and South Atlantic –are still largely built on slabs but crawl spaces are also common. In the Pacific Division about 55 percent of homes started are built on slabs and crawl spaces account for additional 40 percent of single-family starts, the highest share in the nation. The Mountain division that stretches from northern Idaho and Montana to southern Arizona and New Mexico reports a wider mix of foundations, with about half of new single-family homes built with basements, 36 percent built on slabs, and additional 11 percent reporting a crawl space.
Number of Stories, Water Supply
Nationally, 58 percent of new single-family homes started in 2013 have 2 or more stories. Once again, these shares show a lot of cross-country variability with two-story single-family homes being more widespread in the areas where multifamily housing is more common. New single-family homes started in Northeast are most likely to have two or more stories. The share with more than one story exceeds 85 percent in New England and reaches close to 80 percent in the Middle Atlantic – two divisions that make up Northeast.
In contrast, more than half of all new single-family homes started in Midwest have only one story. The shares of homes with 2 or more stories in the West North Central and East North Central divisions are slightly under 39 percent and 50 percent, correspondingly.
The share of new single family homes started with two or more stories varies in the South region from the lowest of 47 percent in the West South Central division to the highest of 65 percent in the South Atlantic. More than half of all single-family starts in the West - 54 percent in the Mountain division and 71 percent in the Pacific division - have two or more stories.
The common sources of water supply also differ noticeably by geographic location. The SOC classifies community or shared water supply/well as public and not individual wells. Nationally, only 8 percent of new single-family homes started in 2013 are served by individual wells, and the remaining vast majority of new homes are served by a public water system. In New England, however, 42 percent of new single-family homes started in 2013 are built on individual wells. The reliance on private wells is also relatively common in the East North Central and Middle Atlantic divisions where the corresponding shares are 27 and 18 percent.
Similarly to water supply/wells, the SOC classifies community or shared sewage/septic systems as public. The incidence of individual septic systems among new single-family starts varies by region. More than half of new single-family homes started in New England have private septic systems, while the national share is slightly above 15 percent. Individual septic systems are also more noticeable in the East South Central and East North Central division with the corresponding shares of 36 and 28 percent.
The SOC collects data on principal and secondary exterior wall materials. The principal type covers more than half the exterior. The secondary type, if present, covers the remaining part, not including trim, shutters and woodwork around openings.
Nationally, vinyl is still the most common primary siding material used in close to 31 percent of new single- family homes started in 2013. Its popularity though has been declining since 2007 when its share reached 37 percent. The second most popular siding material is brick with its share approaching 24 percent, followed by stucco (22 percent), fiber cement (close to 17 percent), and wood/wood products (5 percent). The remaining 2 percent of homes use aluminum siding not covered with vinyl, stone materials, poured concrete, steel siding, and other materials.
The regional preferences for various exterior wall materials are quite different (Chart 4). Vinyl is the dominant material in the Northeast, where its share reaches 80 percent in the Middle Atlantic division and close to 71 percent in the New England division. Brick is most popular in the South, especially in the West South Central and East South Central divisions where its share is close to 68 and 63 percent, respectively. The top choice for new single-family homes in the West is stucco, where 58 percent of homes started in the Mountain division and almost half of homes started in the Pacific division used stucco as a primary exterior wall material.
The popularity of fiber cement has been rising in recent years. It is made from cellulose fiber, Portland cement, ground sand, and select additives, mixed with water and formed into siding panels. Nationally, the fiber cement share increased from slightly less than 10 percent in 2005 to almost 17 percent in 2013. It is now the second most popular primary siding material in the Pacific, Mountain and West South Central divisions. In the Pacific division, the fiber cement share reaches 43 percent, the highest share in the United States.
About 48 percent of new single-family homes started in 2013 also report using a secondary exterior wall material. The practice of mixing two different siding materials is quite common in Midwest with two thirds of homes started in the West North Central division and 57 percent of homes started in the East North Central division reporting the use of secondary siding material. The top choices are brick and stone, rock, or other stone materials. In the West South Central and Mountain divisions where the use of secondary siding material is also widespread (60 and 61 percent of homes, respectively) , the most common choice is stone, rock, or other stone materials. Homes started in the Northeast division typically do not mix siding materials, as 92 percent of new starts report only one exterior wall material.
Nationally, 63 percent of new single-family homes started in 2013 had a porch, the most common outdoor feature, followed by patios (55 percent), and decks (22 percent). Chart 5 helps illustrate the regional preferences for outdoor features.
Porches are most popular in the East South Central division where nine out of ten homes started in 2013 have a porch. The East North Central division registers the second highest incidence or porches, 71 percent.
Patios are the most preferred outdoor feature in the West South Central division where three out of four new homes are built with patios. The US West region consisting of the Pacific and Mountain division shows simiarly strong preferences for patios and porches.
Even though decks have been losing popularity nationwide, they remain a top choice for new single-family homes started in New England where 63 percent of new single-family homes are built with decks. They are also relatively common in the West North Central division where 44 percent of new homes have decks. On the contrary, the decks are practically not built in the West South Central division where patio and porches dominate outdoor designs.
The Middle Atlantic division stands out for the least frequent construction of any outdoor feature. About one in three new single-family homes started here do not come with any outdoor feature, while nationally this share is under 15 percent, and in the neighboring New England only 11 percent of new homes do not have any outdoor feature.
The SOC also provides information on type of financing that has been arranged for financing a new house. It is well known that the share of conventional loans (mortgage loans not guaranteed by any government agency) dropped significantly during the recent housing crisis and alternative forms of financing grew in importance. The 2013 SOC data show that mortgage markets remain under stress with shares of alternative forms of financing elevated, though below their current peaks.
For new single-family homes started in 2013, conventional loans account for about two thirds of financing market. Mortgages insured by the Federal Housing Administration (FHA) and loans guaranteed by the Veteran’s Administration (VA) make up slightly under 13 and 6 percent of the market, respectively. Cash purchases account for additional 11 percent. Other types of financing, including Rural Housing Service, Habitat for Humanity, loans from individuals, State or local government mortgage-backed bonds and other types of financing, account for 4 percent.
Availability, access and ultimately usage of various types of financing differ across the nine US divisions. Conventional loans play a bigger role in the neigboring East North Central and Middle Atlantic divisions, where their share is around 80 percent. They are less common in the West South Central and Mountain divisions where their share does not reach 60 percent. Similarly, the share of conventional loans is below the national average in the Pacific and South Atlantic divisions, both under 64 percent.
The same four divisions where conventional loans are hard to obtain stand out for their heavy reliance on the FHA-insured loans. All four have shares of FHA-insured loans well above the national average, ranging from more than 14 percent in the Mountain Division to almost 20 percent in the West South Central division. At the same time, the Pacific, Mountain and coastal parts of South Atlantic divisions contain counties that faced some of the sharpest declines in FHA loan limits that went into effect on January 1, 2014. It is easy to predict that these regions will be hardest hit by the implemented decline in FHA loan limits.
The role of VA-guaranteed loans is most important in the South Atlantic where their share exceeds 9 percent. The Mountain divisions also reports the above national average share of nearly 8 percent. New England stands out for having the highest share of new single-family homes purchased with cash, 22 percent, that is double the national average. The East South Central division where about one third of new homes are built in rural areas outside of metropolitan areas reports the higest share of other types of financing, close to 8 percent, most likely through Rural Housing Service.
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 Lot values are only reported for houses that are built for sale and sold with reported sales prices.