Weekly Economic Update - Lot Sizes Shrinking

Welcome back from summer. It appears the housing newsmakers haven’t yet unpacked their pens and calculators from their beach bags, but there were a few interesting info-bits floating around. 

It isn’t your imagination that you neighbors seem closer than ever. New home lot sizes are shrinking, and nowhere more than in the West.

Also, while everyone knows that good schools are associated with higher housing prices, did you guess that a nearby Starbucks might be related as well?

Always wanted to live in a “close knit neighborhood?” Chances are good that buying a newly built home will insure that you do. Especially in the West.

The National Association of Homebuilders says data from the Census Bureau’s 2017 Survey of Construction (SOC) shows that new homes are being built on increasingly smaller lots. The nationwide median lot size of new single-family homes sold last year was 8,560 square feet (sf) or just under one-fifth acre. While this is only 2 sf smaller than the 2016 number, lot sizes have been shrinking gradually since SOC started tracking them in 1992. Back then the median size was 10,000 sf but it had shrunk to 9,000 sf by early this century. The size shot back up again near the end of the housing boom and especially during the recession but dropped under 8,600 sf for the first time in 2015.

The regional variation is surprising. While one might picture the northeast as densely populated, the median lot size in the New England census division is .4 acre, twice the national average. The adjacent Middle Atlantic division (NY, NJ, PA) comes in at just under a one-third of an acre. Contrast this with the Pacific division where half of the new house lots are under .15 acre. Lots are also tight in the Mountain and West South Central (TX, OK, LA, AR) divisions with a median of 0.17 acre. Custom built homes aren’t included in these figures, but the SOC says those lots are much larger, about an acre.

2BR + a  View of Starbucks

As if finding the right home weren’t hard enough, now it seems a buyer also needs to consult Starbuck’s grand opening announcements. A Harvard Business School study found that when a new designer coffee emporium opens, houses prices in that Zip Code increase by 0.5% within a year. Further, every 10 Yelp reviews of the shop is associated with a 1.4% increase.

The researchers say they don’t think the presence of Pumpkin Spice Lattes is driving the increase (although they draw no firm conclusion). It is more likely that the more affluent customers who patronize the chain have moved into the area. The paper concludes, "The most natural hypothesis to us is that restaurants respond to exogenous changes in neighborhood composition, not that restaurant availability is driving neighborhood change."

They also note that Yelp, the app which identifies and rates local services especially restaurants, appears to be a useful new way to measure gentrification and track home price changes.

09.07.2018

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