The Building Boom Arrives

Tom Brezsny
- Tom Brezsny

The Building Boom Arrives

Continuing the conversation… exploring the history of homeownership, looking for the roots of our current housing crisis…

We’re in the postwar era of the late 1940s and the government is beginning a sustained program of  intervention  in the housing market.  Over the next two decades, a massive system of subsidies and incentives will help drive the demand and the supply sides of the market and make homeownership synonymous with the American Dream.

Last week we looked at the Fed’s efforts to bolster demand by making mortgages more affordable for average wage earners. New FHA and VA loans pioneered favorable loan provisions like: expanded 30 year terms, amortized payments, lower interest rates and lower down payment requirements. Suddenly, homeownership was accessible to millions of new middle class Americans.

But during the Depression and the War Years,  home construction had all but stopped. By 1945, there was a severe shortage of existing homes and the market needed a radical infusion of new supply to meet the newly minted demand. Enter the Levitt Family,  who had purchased thousands of acres of farmland on the outskirts of New York City,  where they could apply the assembly-line techniques they’d learned in the Army, to residential development..

Ground was broken in 1947 and the first home sold for $6,990 with no money down. Over the next four years 17,447 more were built and the success of Levittown became a model for thousands of new subdivisions that would change the landscape, both literally and figuratively.   

The formula was simple: buy a large tract of cheap land just outside a major city, employ a no-frills approach to home design, standardize all necessary construction materials and hone repetitive manufacturing techniques. All of those things made home building faster, a lot less expensive and way more lucrative.  

And since there were tax incentives that went along with obvious economies of scale, a number of regional developers quickly stepped in to fill the supply gap. Their target market was a ready-made audience of homebuyers with young families, who were drawn to detached homes with private yards, on neighborhood cul-de-sacs within easy commute distance to high-paying jobs.

In 1945 there were only 142, 000 homes built nationwide but by 1948 that number had soared to 1 million and by 1950, the number had doubled to 2 million. In the span of a few years an entire new industry centered around suburban development,  experienced explosive growth and exercised a huge impact on the economy.

That wasn’t all due to the lumber, cement and roofing materials that houses required. Every home built and purchased also meant a shopping spree for  new appliances, furnishings, consumer goods and television sets.

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