Argument: “Why more McMansions are bad news for first-time home buyers”

McMansions may be good for builders but not so much for people looking to purchase their first house:

Home building has been steadily picking up this past year after taking a sharp nosedive during the recession, although production is still far below historical norms. Orr said home builders are moving forward with cautious optimism, being wary of their pre-recession mistake of overbuilding.

So to help make up for the slowdown, builders are now making homes larger once again. Bigger homes means bigger sales revenue — and for only a minimal bump in construction costs, Orr said.

The trend has been to the detriment of first-time and lower-income buyers, who are finding both the new and existing home markets offer them very few options today.

“They (home builders) have kind of abandoned that sector,” Orr said.

The existing home market nationwide — but particularly in Phoenix — has been facing a chronic shortage of homes for sale, and the problem is most severe in price ranges below $200,000.

Many buyers have thus turned to new construction out of frustration. But given the sharp price hikes of new homes recently, lower-income buyers aren’t finding the same relief, Orr said.

In other words, builders can make more money on the bigger homes for those who still have money to play with. But is this just about builders? I wonder if there are two other things going on here:

1. The article hints at a depressed existing house market, suggesting that there isn’t enough movement in the housing market for these older smaller homes, what might be called “starter homes,” to become available in large numbers.

2. In addition to not much existing inventory opening up, perhaps there simply aren’t enough buyers for smaller houses for builders to take notice. What numbers are we talking about – how many first-time home buyers in the Phoenix are not able to find a home they want? This reminds me of recent data from the Chicago area: while housing starts may be up a large percent, the housing market is still not operating at normal.

That all said, if people want to get into purchasing a home can’t do so or are delayed, this could contribute to more long-term problems for the US housing market.

0 thoughts on “Argument: “Why more McMansions are bad news for first-time home buyers”

  1. Pingback: Defining what makes for a luxury home | Legally Sociable

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