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May 26, 2018

Aging Housing Stock Sparks Teardown Boom

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Aging Housing Stock Sparks Teardown Boom

Home teardowns are growing more common in suburbs across the country, as developers raze the nation's older housing stock in major employment hubs looking for where they can stick a luxury home in its place.

Read more: Cities Use Demolition to Fight Blight

Builders tore down and reconstructed about 32,000 homes– or 5 percent of all single-family housing starts last year, according to the National Association of Home Builders. The teardown trend is surfacing in locales across the country, most evident in places like Washington, D.C., but also in suburbs of cities from Boston to Minneapolis to Los Angeles.

For example, Merion Homes recently purchased two dozen homes for about $450,000 each in a 65-year-old neighborhood in Northern Virginia called Pimmit Hills. The sole purpose of the buy was to tear the homes down. In its place, the developer is building customized homes that are triple the size and at a price of more than $1 million.

"The original homes don't fit today's market," says Ryan Bensten, a principal of Merion Homes told Bloomberg. "They don't have enough bedrooms -- they're too small."

As the housing stock continues to age and builders are hard-pressed to find suitable lots, the teardown trend is expected to grow. In 2013, about 47 percent of owner-occupied homes in the U.S. were at least 40 years old, according to Census Bureau data.

Casey Margenau, a broker in Northern Virginia’s Fairfax County, an area that saw 455 single-family homes demolished last year alone, says that the new homes in its place often sell for about $4 million. The teardown trend is growing because the older homes in some communities are becoming "functionally obsolete" -- the kitchens are enclosed, the ceilings are low, closets and windows are too small, Margenau says.

Source: "The Mansions That Are Swallowing Suburban Homes," Bloomberg (May 27, 2015)