NAHB: 10% of 2016 Single-Family Home Builds were Tear-Downs

Roughly 10.2% of single-family homes started in 2016 qualify as tear-down starts, up from 7.7% in 2015, according to the latest estimates from NAHB.  As defined here, a tear-down start means a home built on a site where a previous structure or evidence of a previous structure was present before the new home was started, as reported by the new home’s builder.

Tear-downs are defined this way as a practical matter, this effectively being the only way to produce an estimate.  The underlying assumption is that, if a structure had been present on a building site recently, it would usually leave some evidence that a builder should be able to detect. NAHB used the February 2017 survey for the NAHB/Wells Fargo Housing Market Index (HMI) to collect this type of information. The HMI survey is sent to a panel of single-family builders stratified by size and geography.

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Because the goal is to estimate the total number of starts attributable to tear-downs, the builders’ answers were weighted by the number of homes they started in 2016.  The above figure is based entirely on responses weighted by the builders’ single-family starts.

Applying the weighted percentage of 10.2% to the 2016 total of 781,000 single-family housing startsreported by the Census Bureau produces an estimate of 79,300 single-family tear-down starts—up significantly from the 55,200 in 2015 that NAHB reported last year.  Although single-family starts have been relatively flat lately, they were up by about 10% in 2016.  So the increase in tear-down starts in 2016 reflects the continued recovery of the single-family housing market, as well as an increase in the reported tear-down percentage.

The 79,300 single-family tear-down starts in 2016 are divided across the four principal Census regions as shown below:

Note that tear-down starts are not the same thing as infill development (i.e., homes built in an already established neighborhood or community). Vacant land is often available within an established community, and a tear-down can easily occur in an outlying area—for example, if an isolated older structure simply becomes obsolete and needs to be replaced.

Source: NAHB