Roughly 6.8 percent of single-family homes started in 2017 qualify as tear-down starts, according to NAHB’s latest estimates. This is down from 10.2 percent in 2016, due primarily to the sharp reversal of a 2016 spike in tear-down percentages reported from the western part of the country.
The abovementioned results come from special questions appended to the February 2018 survey for the NAHB/Wells Fargo Housing Market Index (HMI). For purposes of this post, a tear-down start is defined as a home built on a site where a previous structure or evidence of a previous structure was present before the new home was started. The reason for defining tear-down starts this way is because there are few alternatives. The information has to be collected from builders, and the question formulated in a way the typical builder can understand and answer. After failing to persuade the government to add this question to one of its builder surveys, NAHB decided to incorporate it into its own HMI instrument. NAHB has been collecting and reporting data on tear-down starts in a consistent fashion since 2015.
The 6.8 percent of tear-down starts described above for calendar year 2017 is a weighted percentage that takes into account the number of homes started by each builder that year. Applying this weighted percentage to the Census Bureau’s preliminary estimate of single-family housing starts for the year produces an estimate of 58,600 tear-down starts in 2017, down considerably from the 79,300 reported last year, even though single-family starts overall increased by 8.5 percent during the period.
Regionally, the 58,600 tear-down starts break down as shown below:
Between 2016 and 2017, the number of single-family tear-down starts remained relatively constant in the Midwest and South Census regions, nearly doubled in the Northeast, and declined by nearly 75 percent in the West (after increasing by more than 200 percent the year before). The estimate of 58,600 tear-down starts in 2017 was somewhat higher than the 55,200 estimated for 2015, however, and the 2015-2017 change was not drastically different from the increase you would expect based on general growth in single-family production. Moreover, after the year-to-year rise and fall, the number of tear-down starts in the West was similar in 2015 and 2017, making 2016 look like an anomalous spike—to the extent it is possible to detect an anomaly in an annual series only three years long.