Nonmetro Areas Gain

In New Housing Marlcet

Melanie Roth and Peggy Matthews Nilseti

DRR-38

ecember 1983

Abstract

The nonmetro share of total U.S. housing completions,

declining since 1976, began to grow in 1981. Both metro

and nonmetro areas, however, have seen housing

completions drop by about 46 percent since 1979.

Median size of new nonmetro homes increased in 1982,

while new nonmetro home size decreased. The 1982

price of new nonmetro homes sold increased slightly,

while prices of new metro homes declined for the first

time in a decade. The proportion of housing financed by

conventional sources decreased 35 percent in metro

areas, but only 28 percent in nonmetro areas. FHAinsured financing and cash payhnents increased dramatically in both areas. Use of less conventional heating fuels

and heating systems is increasing in nonnhetro homes,

while electricity, as a fuel source, has increased in metro

homes by close to 20 percent since 1976.

Introduction

Nonmetro areas now see changing trends in the new

housing market, with a slightly growing share of housing

completions, a narrower gap between metro and

nonmetro new home prices, and lower costs per square

foot compared to new metro homes. Both metro and

nonmetro areas have shifted types of financing: use of

Government-insured loans and cash payments have risen

dramatically, while conventional financing has declined.

New nonmetro housing now swings more to honconventional heating-cooling fuels and systems, while new

metro housing more often features electrical systems.

This bulletin compares the recent metro and nonmetro

housing markets in terms of housing completions, sales

prices, costs per square foot, type of financing, and

heating-cooling sources.^

^ Data in this report were compiled from "Charaeteristics of New

Housing: 1980," Construction ÄepoHs,C25-80-13, Bureau of Census,

Department of Commerce, and the Department of Housing and

Urban Development, August 1978, and "Housing Completions,"

Construction Reports, C22-83-13, Bureau of the Census, Department

of Commerce, and the Department of Housing and Urban Development, June 1983.

Housing Completions

Total new housing units completed in the United States

between 1979 and 1982 declined by 46.3 percent,

reversing a previous growth trend of housing completions

(fig. 1K The decline was similar between nonmetro (44.8

percent) and metro areas (46.8 percent). The percentage

of total new housing built in nonmetro areas declined

steadily from 1976 to 1980, but the trend reversed in

1981 (table 1).

Sales Price

Just as income levels differ by nonmetro-metro location,

so does the price of new housing. Sales price reflects

differences in size and amenities as well as location, and

the price of the lot as well as the structure. Until 1982, the

price of new housing sold in metro areas was rising faster

than in nonmetro areas.^ The median sales price of new

one-family housing units sold in metro areas increased by

^ The remainder of this report includes only data on new,

one-family housing units.

Figure 1

New Housing Units Completed^

Mil. units

Í.4

1.2 -

T.O -t

0.8 -

0.6 -

0.4 -

0.2

1976 1977 1978 1979 1980 1981 1982

^Includes all privately owned new housing units completed.

Source: CharaGteristics of New Mousing (see text footnote 1).
Table 1—Total new housing completions

\f.iM

Privately owned new housing units'

Year

m

^ C fWNonmetro

Number Percentage of

total

Metro

Number Percentage of

total

Total

1976

1977

1978

1979

1980

1981

1982

Thousands

427

495

554

539

423

377

297

Percent

31.0

29.9

29.7

28.8

28.2

29.8

29.5

Thousands

950

1,162

1,314

1,332

1,079

888

708

Percent

69.0

70.1

70.3

71.2

71.8

70.2

70.4

Thousands

1,377

1,657

1,868

1,871

1,502

1,265

1,005

^ Data unavailable for publicly owned units completed after 1976. Total for new housing units includes both one-family and multi-family units.

56.5 percent from 1976 to 1982, while the sales price

increased 47.3 percent in nonmetro areas. However,

metro housing prices seem to have been affected slightly

more by the recent recession. They rose by 8.5 percent

from 1979 to 1982; nonmetro prices rose 9.3 percent (fig.

2). The price of nonmetro homes sold continued to

increase between 1981 and 1982, while prices of metro

homes sold decreased for the first time in a decade, thus

narrowing the metro-nonmetro housing price gap.

Cost Per Square Foot

The cost per square foot measure provides a different

view of the cost picture by accounting for house size but

not for the lot or other characteristics. While the median

price per square foot was higher in nonmetro areas than

in metro areas in 1976 and 1977, this trend reversed itself

in 1978. Since then, median metro costs per square foot

have been higher than nonmetro costs and the metro

prices have been rising at a faster rate than nonmetro

prices. Greater increases in price per square foot for

metro areas are thus expected. The median price per

square foot of new homes increased 70.6 percent in

metro areas between 1976 and 1982, compared with 53

percent in nonmetro areas (table 2).

New nonmetro housing units have been consistently^

smaller than metro units, which partially explains the

lower price of nonmetro homes (fig. 3). Between 1981

and 1982, however, the median size of new nonmetro

homes increased slightly, while in metro areas the size of

new homes declined by nearly 5 percent.

Type of Financing

A dramatic shift occurred in the type of financing used in

purchasing new homes in metro and nonmetro areas

between 1976 and 1982. Use of conventional financing

Figure 2

Median Sales Prices of New Homes

$ thous.

75

65 -

55

45

35

-

Metro ^

^^

\ 1

Nonmetro

1 1 1

1976 1977 1978 1979 1980 1981

Source: Characteristics of New Housing (see text footnote 1).

1982

Table 2—Median sales price and median cost per

square foot for new one-family housing units

Metro Nonmetro

Year Sales Price per Sales Price per

pnce square

foot

pnce square

foot

Dollars

1976

1977

1978

1979

45,700

50,900

59,000

65,900

22.25

24.70

28.10

31.55

37,600

41,100

45,300

50,700

22.85

25.10

26.90

30.80

. 1980

1981

1982

68,400

72,800

71,500

33.70

36.70

37.95

51,800

52,400

55,400

32.75

34.10

34.95
declined 35 percent in metro areas and 28 percent in

nonmetro areas, while the proportion of homes with

FHA-insured financing more than tripled in metro areas

and nearly tripled in nonmetro areas. The proportion of

homebuyers paying cash for their new homes increased

78 percent in metro and 34 percent in nonmetro locations

during these years. The majority of metro and nonmetro

houses sold in 1982 were purchased using conventional

financing, 47 and 42 percent respectively. The second

most often used type of financing in nonmetro areas was

cash payments (35 percent), followed by FHA-insured

funds (11 percent). These sources were reversed in metro

areas, with FHA-insured funds second (25 percent),

followed by cash payments (16 percent). Farmers Home

Administration (FmHA) insured funds accounted for 10

percent of all financing in nonmetro areas, compared

with only 1 percent in metro areas. VA-guaranteed funds

comprised 2 percent of financing in nonmetro areas, but

10 percent in metro areas.

Energy

New construction has been influenced by an increasing

emphasis on energy conservation. Recent changes affect

the heating fuel and heating and cooling systems used.

Use of nonconventional fuels and heating-cooling systems is on the upswing in nonmetro areas, while the more

conventional electrical systems are used more often in

new metro housing.

Heating fuel

Use of oil has declined in metro and nonmetro areas since

1976, while gas use has remained essentially steady in

metro areas and has continued to increase in nonmetro

areas (table 3). Electricity as a fuel source has increased

by 18.5 percent for metro locales since 1976, serving

close to 50 percent of the new homes built. In nonmetro

areas, however, electricity as a fuel for heating declined,

while the proportion of homes using other types of fuel,

such as wood and coal, quadrupled. Nonmetro consumers and builders find these fuels to be more viable

alternatives than nonrenewable fuels because they are

generally less expensive, are readily available in rural

parts of the country, and, used properly, provide

adequate heat for the home.

Figure 3

Median Square Feet of Floor Area in New Housing

Square feet

2000

1500 -

1000 -

500

Metro

M Nonmetro

1976 1977 1978 1979 1980 1981 1982

Source: Characteristics of New Housing (see text footnote 1).

Table 3—Heating fuels used in new one-family housing units

Metro Nonmetro

Fuel 1976 1977 1978 1979 1980 1981 1982 1976 1977 1978 1979 1980 1981 1982

1,000 homes

Gas 321

(48)

382

(46)

411

(45)

398

(46)

301

(48)

258

(49)

190

(46)

86

(24)

94

(22)

100

(22)

114

(26)

93

(29)

82

(28)

61

(27)

Electricity 273

(40)

364

(43)

415

(46)

394

(46)

300

(47)

247

(47)

195

(48)

227

(63)

271

(64)

295

(64)

268

(60)

182

(56)

160

(55)

120

(54)

Oil 77

(11)

84

(10)

70

(8)

55

(6)

19

(3)

13

(2)

13

(3)

34

(9)

35

(8)

38

(8)

31

(7)

10

(3)

3

(1)

4

(2)

Other types

or none

4

(1)

7

(1)

11

(1)

11

(1)

13

(2) m

10

(2)

15

(4)

21

(5)

29

(6)

30

(7)

39

(12)

44

(15)

38

(17)

Total 675 837 907 858 633 530 409 362 421 462 443 324 289 223

Note: Number appearing in parenthesis refers to that fuel's proportion (percentage) of the total.

^ U.S. GOVERNMENT HUNTING OFFICE: 1983-420-930:ERS-50
United States

Department of Agriculture

Washington, D.C.

20250

OFFICIAL BUSINESS

Penalty for Private Use, $300

Postage and Fees Paid

U.S. Department of Agriculture

AGR-101

FIRST CLASS

Heating and cooling systems

Metro area central heating systems were installed in

approximately 92 percent of the new homes built

between 1976 and 1982. Such systems include warm air

ducted systems (heat pump, furnace), hot water, or steam

systems. Central heating was less widespread in nonmetro areas, with an average of 69 percent, while 31 percent

of new homes contained built-in systems, such as

electrical baseboard, panel and radiant systems, room

and space heaters, solar heating, and others. A significant

shift occurred in the type of built-in system used. New

installations of electric heating systems declined by 54

percent in nonmetro areas between 1976 and 1982, and

the new installations of woodburning stoves, space

heaters, and solar heating almost tripled.

The number of homes built with fireplaces in both metro

and nonmetro areas increased slightly between 1976 and

1978; however, use of fireplaces has declined steadily

since 1979. In nonmetro areas, 49 percent of homes built

in 1976 had at least one fireplace, compared with 41

percent in 1982. These figures in metro areas declined

from 64 percent in 1976 to 61 percent in 1982. This

decline is probably due in part to attempts by builders to

cut production costs by eliminating extra features. The

decline may also be due to the fact that fireplaces are an

inefficient means of heating.

Data on central air conditioning are inconsistent with the

emphasis on energy conservation. Of all metro housing

units built in 1982, 72 percent had central air conditioning, compared with 53 percent in 1976. Fewer new

housing units in nonmetro areas had central air conditioning, 54 percent in 1982 compared with 42 percent in

1976. The increase in central air conditioning may,

however, primarily reflect the geographic distribution of

new housing construction with more new units built in

the South than in the other regions.