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at higher cost or at sacrifice of space. Also, those whose occupational characteristics require a high rate of mobility are at a similar disadvantage-because of the risk of short-term home ownership and the high cost and uncertainty of remarketing a housing unit when it is no longer needed. Typical costs of 10% to 20% attached to the resale of an existing home --when real estate commissions, closing and settlement costs, accrued interest and taxes during vacancies, mortgage prepayment penalties, etc. are all added up. A less costly, more efficient, secondary marketing system appears to be sorely needed--if real estate liquidity is to be maintained at a level favorable to home ownership. This liquidity has been provided during the past two decades by a steady' upward climb of prices. But continued inflation is neither a certain or desirable way to maintain a liquid market.

RENTER CHOICES ALSO NEED TO BE BROADENED... Consumer choice should likewise not be slighted in the rental housing markets. While the limited measures of consumer preference have consistently shown a high ma jority desire for ownership--they likewise have indicated that among home owners, there is a significant minority who would have preferred to rent.

The gradual decentralization of urban employment centers has no doubt made the 1-family dwelling the only available housing choice in many instances. A 1 mited number of these are, of course, on the rental market, But the rental prospect's choice is obviously limited in these areas--both quantitatively and qualitatively.

Householders may well prefer to pay the premium of renting --in order to be free of the responsibilities and risks of ownership. And a free market should permit and provide for that choice.

There are ample indications that many who could easily qualify for home ownership exercise their preference for renting.

But on both sides of the buy versus rent issue--the main unanswered question is to what extent the exercise of eference may have been for location, type of structure, or community facilities, rather than for tenure.

SOME NOTES ON CONSUMER PREFERENCES

Most available evidence suggests consumer preferences favor ownership in high proportion over rental. This fact is acknowledged by Louis Winnick in his ACTION series book Rental Housing --Opportunities for Private Investment--even though a principal conclusion of the book was (in 1958) that the rental housing market was being underbuilt. He cites several surveys which typically show preference for ownership by well over two out of three household heads.

Table XII

PREFERENCE FOR OWNING AND RENTING AS EXPRESSED IN VARIOUS SURVEYS

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Consumer preferences are important, but it must be recognized that their fulfillment depends on both financial capacity and occupational mobility requirements, and perhaps others as well. Supply factors are likewise important-including not only what homebuilders are providing and where, but on lender policies, zoning, transportation, community facilities and others.

In this perspective, it would be legitimate to ask if the 1960 rate is not "abnormally" high. And the answer would have to be somewhat conjectural. But consumer preference for ownership is still indicated as higher than fulfillment. It is also quite likely that home ownership was held to unduly low levels during the 1890 to 1940 period by the heavy waves of immigration and then by the depression. Low wages, lack of assets for equity purchase, and the tendency to concentrate in large urban centers where rental housing was the type primarily available--probably all combined to preclude most immigrants from the home ownership markets during first and second generations.

But the historical evidence should not be summarily dismissed. The high wages during the World War II period, rationing, and price controls probably created a somewhat "artificial" situation in reverse. The result of these factors was an accumulation of financial savings by occupational classes who might otherwise have been unable to accumulate them.

High levels of savings plus new generous terms provided by government underwritten housing programs added considerably to effective demand for owneroccupied homes during the late 40's through the mid-50's.

One of the questions in looking to future markets is whether or not this "new market is becoming saturated--and the extent to which the climb in land and construction costs has erased "effective" demand ("effective" demand as used here means that which is economically feasible from the standpoint of equity assets and income --as contrasted to potential demand resulting from preference and need).

IS THE SALE HOUSE MARKET FULLY SUPPLIED? One of the answers here seems to be that there likely remains a very substantial untapped market at lower Income levels than are presently being reached at the current "market floor". The problems that have to be solved in tapping this market are tough ones but they are not insurmountable. The cooperation of many parties other than builders is required if substantial inroads on this market are to be made--and if the market is to be prevented from going the public housing route by default.

But the progressively lower rate of building in the low-cost home market plus the sharp upward shift of homebuilders turning toward the rental and apartment markets raises the question of whether or not we are avoiding the solution of hard, but essential market problems and are taking the "easy-wayout". Rental housing construction is not necessarily the most satisfactory diversion of productive capacity made idle by the shrinking of the ready-made sale home market of the 50's.

THE CHALLENGES: Inadequate zoning for small house and town house sites; high land costs; outmoded lending practices; improper credit qualification standards; high construction costs; overly conservative FHA mortgage underwriting policies; excessive building codes; rising closing and settlement costs; climbing real estate taxes; and many others.

Some tough-minded builders and not all of them giants--have succeeded in breaking through enough of these barriers to succeed. Many more who have the talent for it should give it a try.

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COLLAPSIBLE HOUSEHOLDS ... It should be noted that a substantial portion of recent new household formations have been of the non-family type--households headed by unrelated individuals as compared to the more usual family type-consisting either of married couples or of a single parent with other dependents.

These would include unmarried adults and persons separated or divorced, They also include elderly persons where one spouse is deceased. These households tend to be largely concentrated in the rental market. These are perhaps as much a sociological phenomenon as an economic one, since they suggest the desire for independence and a life apart from relatives. Yet whether or not this represents new sociological trends, it is certainly a product of economic prosperity--and the financial capacity to permit sociological change to occur was an essential ingredient. It should be suggested that by and large most of these householders would have other--though perhaps less desirable--alternatives, mainly moving back with other relatives.

It should be considered seriously that many of these households could be readily collapsed in the presence of a significant adverse turn in the economy. This part of the demand component for rental housing should thus be regarded as somewhat less stable--and could be viewed as adding an extra hazard to the potential dangers of an overbuilt rental housing market --if the two were to combine simultaneously.

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NEED FOR MARKET ANALYSIS There is a tendency among businessmen to imitate successo-often as a substitute for sound market analysis. Under the right circumstances, in the right kind of market this may not be severely critized. It is less expens ive and sometimes may even prove as reliable as market analysis--particularly if the latter is of poor quality.

In the sale house markets, it often works--builders will imitate a successful subdivision--by design, price class, location, size, and marketing technique. But it is questionable whether apartment building and investment can afford the obvious risks of the invitation techniques. Longer lead times from decision to completion, a smaller and more specialized market, and an investment objective rather than a merchant objective--all combine to create special hazards.

By comparison, the size of a sale house subdivision is somewhat flexible and can to an extent be adjusted to meet underestimates or overestimates of net supply and demand, But an apartment project decision becomes fixed and largely irreversible at some point well ahead of completion.

In particular, it is difficult to assess the projected or future supply side of the market. When the success of a new apartment project induces another builder or investor to follow suit, he may have little knowledge of how many others have simultaneously made similar decisions --for this reasons, or for any reason. It may be three years, five years, or even longer before the investor could suddenly be confronted with a heavily overbuilt market--hurting the prudent investor as well as the careless one.

This places a substantial burden on builder, lender, and investor--to insure that the investment is based on sound analysis. And it is essential that careful attention is directed to the elusive supply side of the market. Such advance indicators of construction as architectural plans in work, real estate assembly activity, site clearances and demolitions, rezoning applications, mortgage and construction loan applications, etc. should be carefully checked out. Often, the

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