"The Incredible Shrinking Yard": Growing McMansions Are Increasingly Devouring Backyards

America"s obsession with the ever-growing McMansion, combined with a perpetual lack of funding for said McMansion, has resulted a unique phenomenon which Trulia has dubbed "The Incredible Shrinking Yard."  Analyzing public records to compare residential lot sizes to home footprints, Trulia says that homes built over the past two years occupy a staggering 25% of the land on which they sit, compared to roughly half that amount in 1975. 

Here are some of Trulia"s key findings:

• Nationally, single family homes occupy 17.4% of the lots on which they sit, regardless of the year they were built.

 

• Homes built since 2015 occupy 25% of the land on which they sit, while homes built in 1975 occupy just 13.9%. This is being driven by a combination of lots shrinking by 36.2% and home footprints growing by 15.2% size.

 

• Meanwhile, some of the oldest homes in the country, built in the early 1800s, occupy less than 5.0% of the large lots they are built on. The last time lot usage was nearly as high as it is now was during the early 1900s.

 

• Don’t mind the neighbors? Single family homes in places like Philadelphia, and San Francisco, which are both geographically small but dense, have the highest lot utilization at 57.7%, and 44.2%, respectively.

 

• Want plenty of yard space? Head to New England. Three Connecticut metro areas, Worcester, Mass., Hartford, Conn., and Bridgeport, Conn. make up the places with the smallest amount of house occupying lot space, at less than 7.5%.

 

• While most metro areas have seen lot usage grow since the mid-70s, with Oakland, Calif., and Miami seeing the largest upward swings, six metros have bucked the trend with San Francisco, Memphis, and Long Island, N.Y. moving toward less lot usage.

When national home price growth charts start to look like an Amazon stock chart, despite the fact that wage growth remains non-existent, but you know your family of 4 can never find a way to survive in a house even an inch smaller than 4,000 square feet, it only makes sense that lawn sizes would have to shrink to keep purchase prices somewhat "reasonable"...and by reasonable, of course we mean below FHA lending limits so that those McMansions can be purchased with minimal money down and backstopped by the American taxpayer.

As Trulia notes, since the mid-70s, when the proportion of lots used by new construction hit a national low of 13.6%, it climbed 11.3 percentage points to 25% of the lot of homes built in 2015 or later. Most metro areas have seen lot usage grow similarly. Oakland, Miami, and Indianapolis have seen the largest upward swing in lot usage, with homes built after 2015 occupying 25.6, 24.9, and 20.3 percentage points more, respectively, of the lots they are built on than they did in the mid-70s.

Meanwhile, 7 of the 95 metro areas analyzed by Trulia managed to buck the trend, with San Francisco, Memphis, Tenn., and Long Island, N.Y. actually seeing a 12.9, 11.6, and 6.0 percentage point decrease, respectively, in the percent of lot usage by homes constructed after 2015 when compared with homes built in the mid-70s.

 

With that, here"s a helpful chart depicted just how small the "American Dream" has become in your neck of the woods:

Americans Are Flipping Houses Like It's 2006 All Over Again

How quickly the sins of the past are forgotten.

Roughly 10 years ago, a Mexican immigrant working as a strawberry picker in Bakersfield, California, making $14,000 per year, was lent every single penny he needed to purchase a $720,000 home.  And, as crazy as that sounds to most of us, stories such as that were all too common leading up to the 2008 housing crash as everyone, and their brothers, became expert real estate investors buying and flipping multiple houses every month...which worked really well, until it didn"t.

Now, and quite unfortunately for those of us that prefer not to day trade our primary residence, America"s home flippers are making a come back.  According to a new study from Trulia, home flips accounted for 6.1% of all U.S. home sales in 2016, which is the highest share since 2006, when flips accounted for 7.3% of sales.

As Bloomberg points out, the cities where home flipping seems to be the most pervasive are all the same ones that suffered the biggest boom/bust during the last cycle.  Perhaps we could suggest that the people of Las Vegas need to just do all their gambling INSIDE the casinos from now on.

Of course, rising home prices are responsible for luring Americans back into the home flipping game...because everyone gets to look like a genius real estate investor in a rising market.

Flipping has become more common as home prices have increased, said Ralph McLaughlin, chief economist at Trulia. Whether that’s cause for concern is an open question.

Local housing market investors can bid up prices in a speculative frenzy, as recent history has shown. When flippers crowd into a market, meanwhile, they compete with buyers seeking a home to live in, deferring the availability of listings and pushing homes out of some buyers’ price range.

But flippers can also provide a valuable service to the housing market by investing in needed improvements that owner-occupiers might not have time for, McLaughlin said. Trulia’s report shows that flippers in Las Vegas are seeking building permits at the highest rate since 2000, suggesting that they’re making substantial repairs and not simply buying homes to ride local price appreciation.

"Is the market going to flip out again?" he said. "I don"t think the signs are there yet."

But maybe it will all work out this time around.  After all, as a Bear Stearns RMBS trader told us back in 2007, "these structures will never break because home prices have never fallen more than a few percent in the history of the United States"...well, except that one time that they did.

American Home Sale Failures Suddenly Double In Q4 2016 - Signed, Sealed, No Deal

A stunning new analysis from Trulia suggests that rising interest rates in 4Q 2016 may actually be having the desired effect of cooling home sales, despite the best efforts of Obama to keep the party rolling at the expense of American taxpayers.  Looking at homes that go from "pending" status back to "for sale", Trulia found that the number of home "sale failures" spiked in Q4 2016, to nearly nearly double the 2015 rate, with "starter homes" being most at risk.  

Nationally, sales have been failing at an increasing rate, rising to 4.3% in Q4 2016 from 1.4% of all listed properties during Q4 2014. On an annual basis, the failure rate has nearly doubled to 3.9% in 2016, up from 2.1% in 2015.

New homes and very old homes are least likely to see deals fail. As of Q4 2016, homes built in 2016 have among the lowest proportion of failed sales at 2.6%. That proportion increases steadily as age increases to an average of 5.2% in homes built from 1959 through 1969, then falls steadily to an average of 3.5% for homes built from 1900 through 1920.

Of all listings in the largest 100 metros, 7.1% of starter home listings failed in the most recent quarter, compared with 6.7% of trade-up homes and 3.8% of premium homes. For all of 2016, the failure rate was 6.3% for both starter and trade-up homes and 3.6% for premium homes.

During the last two years, the places with the most failed sales are predominantly in the West with Las Vegas leading the pack at 7.6% of all unique listings reverting back to “for sale” at least once.

During the most recent quarter, Tucson, Ariz., saw the highest rate of failed deals with 13.9% of all unique listings retrogressing. For all of 2016, Ventura County, Calif., had the highest fail rate at 11.6%, up from 3.1% in 2015.

Considering both the last two years and just the most recent quarter, Madison, Wis., has had the fewest listings fall back to a “for sale” status at 0.1% of all listings.

Not surprisingly, per Bloomberg, the highest rates of failure occurred in the subprime mecca of the American Southwest.

Meanwhile, starter homes performed the worst...

And while any number of things can cause a home sale to fall through, including lower than expected appraisals and bad home inspections, we suspect that rising mortgage rates are more likely the cause of the sudden surge in "failed sales" rather than a national outbreak of termites.  With Americans managing their monthly budgets down to the last penny, because you can "afford it" as long as you can cover the monthly payment, we suspect the 60bps rise in the average 30-year fixed mortgage rate during 4Q was just more than the fragile American budgets could bear.