Is the Recession the Best Thing that Could Happen to the U.S. Housing Stock?

This may sound like utter nonsense to anybody who doesn't realize the distinction between the nation's housing market and housing stock. While the housing market is defined by the supply and demand for housing units that create housing prices, the housing stock refers to the actual architectural structure and condition of these buildings. Home prices have fallen 31 percent from July 2006 to December 2008, according to the National Association of Realtors—yet the condition of the housing stock remains largely unchanged. Putting the brakes on new housing construction that has been dominated by larger homes and an inefficient use of space is, arguably, beneficial to the long-term sustainability of the nation's housing stock.

How the Problem Started
The housing bubble was created not only by bad home mortgages but also by the over-supply of new housing generated by home builders. In fact, these two destructive forces fed off each other, as bad mortgages exaggerated the demand for new housing and new housing starts fueled the desire to secure these mortgages. The misconception that housing prices would continue to rise indefinitely not only fueled overbuilding, but created an equally flawed belief that larger-scale homes would essentially "pay for themselves" down the road—a belief that gave rise to the aptly named McMansion.

In economic terms, these homes have become unimaginable boondoggles, as larger home construction gave rise to larger outstanding mortgages for homes that now hold only marginally greater value on the housing market. In terms of sustainability, these homes are, arguably, just as bad, as they waste land, materials, and energy. Worse yet, many of these homes are located in suburbs that have grown further and further from city centers, necessitating greater transportation costs with $4 gas immediately preceding the economic collapse?.

A New Housing Market, New Housing Stock
The home building industry will undoubtedly experience something of a recovery when the economy begins to right itself, but it's unlikely to reach its January 2006 peak anytime soon. As home builders begin to see business pick up again, the housing market and the nature of desirable properties will have almost certainly been transformed. Already the signs have appeared, as the depressed housing market has sapped Americans' desire for bigger, inefficient homes. According to a recent online survey from Better Homes and Gardens, 32 percent of respondents said they were planning for their next home to be either somewhat smaller or much smaller. Said magazine Editor-in-Chief, Gayle Butler, ?Either by necessity or choice, they?re willing to take a step back from the McMansions.? Perhaps even more revealing, 88 percent of builders surveyed in January said they are building or planning to build a larger share of smaller homes, according to the National Association of Home Builders.

The Trade-Off: Home Maintenance and Renovation
While the move toward more sensible housing is a promising trend, a significant portion of the population no longer has the resources to complete such basic projects as roof repair, upgrading heating and cooling systems, and window replacement. Continuously struggling to keep pace with their mortgage—not to mention property taxes and homeowners' insurance—a prolonged economic hardship will undoubtedly see older portions of the nation's housing stock deteriorate, especially in the New England and Midwest regions, where the median year for a home's construction predates 1970.

Of course, the pain of the recession appears to be focused on the millions of Americans who have lost their jobs, but retired homeowners are also finding it much harder to complete basic home improvement projects, according to The Retired Generation, online resource for the retired lifestyle. According to their website, home remodeler Ron Cowgill from Glenview, IL says, "Windows aren't being replaced as fast, old doors are getting weatherstripped instead of being replaced, electrical work is getting done one section at a time, rather than whole houses at a time. I had one homeowner whose heating ducts aren't put on properly, but the heat still comes out, so they're putting that repair off indefinitely."

The Economy vs. Sustainable Construction
Most politicians and policy makers have argued that without economic prosperity we won't have the capital to develop and implement green technology. Yet, a strong economy drives construction and consumption to clearly unsustainable levels from everything to oil to agricultural fertilizer. Meanwhile, scientific innovation continues to progress even now, while the largest financial investment in a sustainable future has come in the form of stimulus package during what will almost certainly become the largest economic recession since the Great Depression.

Declaring the current recession is a good thing for America is folly, but the idea that the recession could have a positive effect on our nation's housing stock is a plausible reality. In the end, the moderating effect of neglected home renovations puts a dent in the recession's positive force on the housing stock. Like anything else, things are rarely as good or as bad as they seem, and while the recession may not be the best thing that could happen to the health of our nation's housing, it's not the worst, either.

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