Monthly Archives: May 2014

Buying or renting smaller spaces related to less consumer spending

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If Americans turn away from McMansions and toward smaller homes or renting, they may also spend less on other items:

The apartment/renting moves have two implication for consumer spending. First, less space means less stuff. Second, rental units typically aren’t fitted with high-end appliances and finishes.

Looking at real spending for certain home goods, the data show annual increases in spending on items like appliances, furniture and window treatments are averaging less than they did during the boom years. That means that, like home construction, demand for home goods isn’t supplying the boost to economic growth that it did before the recession.

The Demand Institute, a joint initiative of The Conference Board and Nielsen, looked into the shift’s impact on consumer spending in a 2012 study. The DI analysis expected demand for home goods to pick up as housing recovers, but “value-oriented brands are likely to see the greatest growth,” the report said, a short-run trend “driven by landlords and renters who want to spend less on fixtures and furnishings than homeowners [do].”

Renting households also tend to own fewer vehicles, said the DI report, in part because their finances are worse than homeowners but also because parkingspots are limited. That shift will limit future car sales

All together, this links spending in one large area – housing – to spending in other sectors. Take owning a large suburban house. Such a home tends to support a more robust housing industry including construction and real estate. Such homes are often built in more sprawling suburban neighborhoods, leading to more cars and more road construction. Bigger homes require more furnishings, landscaping, and opportunities for improvements and repairs, supporting more suburban big box stores and other retailers.

I do wonder how much this is a case of spurious correlation versus indicating broader shifts: is this all linked to people having less disposable income? If they feel they have less money, they might make different choices about housing as well as consumer goods. Or, due to the economic crisis and relatively stagnant income for many Americans, consumers might be shifting their preferences in a number of ways that could upset traditionally important economic sectors. It could be a move away from expensive and more durable goods (houses, cars) toward electronics (like smartphones) and entertainment (the creative class).

Explosion in car ownership, oil consumption in China

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Driving may have peaked in the United States but more Chinese own cars and are buying gas:

Over the past decade, the number of cars sold in China has jumped from 2 million a year to nearly 20 million. No surprise, then, that oil consumption soared from 250,000 barrels a day to 2.25 million barrels a day between 2003 and 2013, according to a new report from United States Energy Information Agency. As a result, since 2009, China has been forced to import half of its oil.

That hockey stick-like growth has, of course, exponentially worsened China’s catastrophic pollution and so the government’s latest 5-year plan calls for 500,000 electric and hybrid cars to be on the road by 2015, with 5 million by 2020. To hit those targets, China has invested billions of dollars to jump-start the country’s electric car industry. It’s also providing subsidies to get the motoring masses to go fossil-fuel free.

Buying a car isn’t just an isolated decision: it is linked to numerous areas in a society.

1. Gas consumption. This can help drive the oil industry, boost the import of gasoline, and affect the price.

2. Environmental effects. More cars means more smog.

3. An infrastructure of roads and other assorted services like gas stations and repair places.

4. Lifestyles that can be designed around the car. This includes more sprawl, fast food, and big box stores.

5. Perhaps a growing cultural emphasis on the independence and status related to owning a car.

All of this is quite a change.

Cutoff price for luxury home differs by region

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A new survey suggests the point at which an expensive home becomes a luxury home differs by region:

But the starting point for making such a judgment, the price, seems to vary significantly by region. The price tag for a luxury home is perceived to start at $1 million in the Northeastern, Pacific and mountain states (Montana, Colorado, Utah, et al.). But in the Midwest and South, consumers’ notions of luxury begins at $500,000, according to a survey by Realtor.com.

By the way, sales of those million-dollar homes are doing rather well nationally, but a major player in homebuilding is taking an unexpected turn — one that speaks of the real estate world of long ago.

D.R. Horton Inc. is rolling out a new division that plans to appeal to the bare-bones, nothin’ fancy, first-time buyer. Its Express Homes line, to be built initially in Southern and Western states, will range from $120,000 to $150,000. And what you’ll see at these developments is what you’ll get — there won’t be any upgraded features, no optional finishes.

Horton CEO Donald Tomnitz told the Fort Worth Star-Telegram that the company believes the next segment of the real estate market recovery will be led by entry-level buyers, presumably older ones.

The regional differences in price could be due to a variety of factors. It might be linked to relative income levels. It could be tied to housing inventory – less room might lead to higher prices overall. Or, there might be differences in home styles and expectations. The mountain states seem to stick out in amongst these regions as they often have plenty of space and prices aren’t as high as the Northeast or Pacific Coast. However, perhaps there are plenty of luxury mountain homes, whether they are vacation or resort homes.

It would be interesting to know exactly in which markets D.R. Horton intends to build these cheaper homes. Given the need for affordable housing in many areas of the United States plus the need for more good housing at the bottom end of the market, I imagine there could be a market for such homes. Yet, these homes probably can’t be built everywhere as neighbors in more expensive homes would view cheaper homes as threats to their property values.

South Barrington has the “Ultimate McMansion”

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Curbed Chicago highlights a 21,000 square foot South Barrington home as the “Ultimate McMansion”:

If you looked up the word McMansion in the dictionary, a photo of this house would appear next to the definition. And no doubt, South Barrington is a place where folks like to live large. The suburb is known for being the home of the fourth largest church in the country, for having a movie theater that’s the size of most small airports, and a plethora of McMansions that were built in the last couple of decades. And of all the McMansions for sale in South Barrington right now, this 21,000 square foot home may just take the cake. The manse sports a six car garage, four master suites, a 3,000 square foot rec room and a private beach. The huge seven bedroom home also has some pretty interesting interior design going on as well, complete with clouds painted on the ceiling in some rooms and a basement that looks like something you’d find in Vegas from the 90s. For $3.87M, this ultimate McMansion could be all yours.

Quite the interior and exterior. But, this is a classic case of an expensive home that is way past McMansion with its square footage. What would the average McMansion owner do with 21,000 square feet? Most of the photos show rooms that are simply much too large for even a good amount of furniture. I would argue that once you get past nine or ten thousand feet

The connection of the big home to other big features of South Barrington is also intriguing. Do people who live in McMansions tend to like to live in places in large churches or movie theaters? Perhaps the connection is the level of wealth in the community but having a lot of big houses is not necessarily related to having one of the biggest churches nearby

Guide to finding and maintaining love in a tiny house

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Living in a tiny house may just require approaching a relationship in some new ways:

Tip #2: Consider dating exclusively within the tiny house community…

Tip #3: You’re going to need to talk about your stuff…

Tip #7: Let go of any previously held notions of privacy…

Tip #9: Decide how important those precious “child-free” moments really are to you…

Tip #12: There will need to be some indoctrination involved.

Given the propensity of more Americans to live alone plus other indicators (like social media) that suggest Americans prefer relationships on their own terms, living together in such a small space may be asking too much. Tip #8 does provide an out by suggesting two tiny houses can be parked side by side but the larger issue remains: how many Americans want to be that close? Isn’t physical space often viewed as something that is good for modern relationships, something that gives those involved room to be independent and be fulfilled outside of their close relationships?

The tiny house movement is still really small at this point so it would be difficult to look at how relationships in these settings fare compared to relationships lived in larger homes. Additionally, just because one lives in a tiny house doesn’t mean that those involved can’t be elsewhere – this all assumes private home space is the most important space in life (a common American assumption) but people in other countries and societies have some different ideas about how this can work.

“8 Dream Homes That Aren’t McMansions”

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Not all desirable homes have to be expensive McMansions:

When one’s job is to write about incredible homes, one quickly finds out that most of the really incredible pictures are from…really, really, really expensive homes. As in: Homes that have more infinity pools than they have bedrooms; couches that cost the equivalent of a down payment on an actual house; houses with pantries that are bigger than a studio apartment — that sort of thing. But we believe that a “dream home” doesn’t have to be outrageously expensive — or even that big. Here are 8 houses that prove just that.

Two quick points:

1. Most big “dream homes” are far beyond McMansions. If you have an infinity pool, this is usually beyond a McMansion. If you are featured in an architectural magazine because of your interior design, it is usually beyond a McMansion. These homes are usually just plain mansions.

2. The eight homes featured in this story have some commonalities: they tend to be relatively small, green, and well-designed (meaning put together by an architect or adhering to local design). These traits are more often anti-McMansion rather than looking at the number of infinity pools a home has.

More Americans again view owning a home as a good investment

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The burst housing bubble reduced the value of many homes yet more Americans are again seeing a home as one of their best investments:

According to a recent Gallup poll, real estate beats out stocks, bonds, savings accounts and even the Great Recession’s investment darling, gold, as the favored form of long-term investment. A full 30 percent of Americans see real estate as the best investment—up from just 19 percent in 2011.

A new survey by the Pulte Group echoes such sentiments: 35 percent of Americans reported that they would like to buy a home soon in part because they see it as a smart financial investment, said Valerie Dolenga, spokesperson of Michigan-based home builder, Pulte Homes.

This kind of growing confidence should make us all wonder, though: Haven’t we learned anything from the housing crash? One of the big takeaways from the crash was to avoid this exact line of thinking…

Now that the market is recovering, and home prices are growing again—in fact home prices are at an all-time high in nearly 1,000 cities across the country, according to Zillow—the siren song of seeing your home as an investment is becoming tempting once again.

Then four tips are offered to help ensure your home can be a decent investment: location matters, buy a home that needs some work so you can increase its value, “don’t buy the best house on the block,” and expect to stay in the home a while to allow the value to increase. In other words, a house is not automatically a good investment yet good planning can go a long ways.

At the same time, sentiment about seeing homes as good investments is not necessarily related to making bad choices about buying houses. In other words, we need to see how these beliefs become translated into actions. For example, more Americans may want to buy homes but if other pieces are not in place, such as good inventory or readily available mortgage credit, then this may not lead to another housing bubble. The bigger issue may come when everyone involved from buyers to lenders to the media gets caught up in a housing rush and it takes on an inertia of action that goes far beyond consumer sentiment.

Finally, views on homeowership as a good investment are tied to other factors:

Upper-income Americans are much more likely to say real estate and stocks are the best investment, possibly because of their experience with these types of investments. Upper-income Americans are most likely to say they own their home, at 87%, followed by middle (66%) and lower-income Americans (36%). Gallup found that homeowners (33%) are slightly more likely than renters (24%) to say real estate is the best choice for long-term investments.

Social class and wealth matter when determining what are viewed as good investments.

Urban streetcars may primarily serve tourists

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Streetcars once ruled American cities but more recent projects in many cities may primarily be used by tourists:

Some new figures further strain the connection between streetcars and core city mobility. Florida State planning student Luis Enrique Ramos recently led a comparison of ridership factors on U.S. streetcars versus those on light rail. (The work, not yet published, was presented at a recent conference.) What he found was that streetcar ridership was unrelated to service frequency, bus connections, and job proximity — the very factors that make light rail attractive to everyday commuters.

In other words, streetcars serve a completely different population of travelers than light rail does. Which population is that? Ramos and collaborators can’t say for sure, but they have a theory: tourists. Just look at the hours of operation for the Tampa streetcar — beginning at noon on weekdays? — and ask yourself who rolls into work after lunch. (And please do let us know, because we want that job.)

None of this is to say that streetcars aren’t necessarily worth it. Commutes make up a fraction of total travel in metro areas. Trolleys can operate very effectively in dense cores by running along a dedicated track, and when they arrive frequently they can promote a lively pedestrian culture. When paired with mixed-use zoning, trolleys can also lead to significant economic development (though arguably less than other modes, like bus-rapid transit).

That leaves emerging streetcar cities with a mostly-tourist attraction they hope will generate business — an amenity that feels similar in spirit to a downtown sports stadium. Again, sometimes city taxpayers conclude that an arena is worth it, and many cities no doubt feel the same about trolleys, cost overruns notwithstanding. But residents who hope the streetcar will improve mobility should be careful to consider whether they’re paying for a ride, or getting taken for one.

Some interesting factors to consider. Tourism is often seen as a significant force in many cities as it is a way to increase tax revenues as well as improve a city’s image. Streetcars can often be viewed in nostalgic terms, something that often fits a community’s appeal to tourists. Yet, if the streetcars aren’t an integrated part of a larger transportation system that serves residents and tourists, is the money spent worth it?

When streetcar use exploded in the United States in the late 1800s and early 1900s, it was a driver of sprawl: it opened up development in new areas because it could cover more territory than railroads by using roads. In other words, the streetcars were pioneers. Today, building new streetcar systems also requires modifying roads and the neighborhoods already exist. The article suggests buses may be a more appropriate modification to the existing streetscape because they are more cost-effective and might better serve residents. At this point in time, streetcars serve very different purposes and it requires work to implement them into a community.

Link between more foreclosures and higher suicide rates

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A new study suggests a rise in foreclosures is connected to higher suicide rates amidst the economic crisis:

The study, publishing in the June issue of the American Journal of Public Health and available online now, is the first to ever show a correlation between foreclosure and suicide rates.

The authors analyzed state-level foreclosure and suicide rates from 2005 to 2010. During that period, the U.S. suicide rate increased nearly 13 percent, and annual home foreclosures hit a record 2.9 million (in 2010).

“It seems that foreclosures affect suicide rates in two ways,” said co-author Jason Houle, assistant professor of sociology at Dartmouth College. “The loss of a home clearly impacts individuals and families, and can arouse feelings of loss, shame, or regret. At the same time, rising foreclosure rates affect entire communities because they’re associated with a number of community level resources and stresses, including an increase in crime, abandoned homes, and a sense of insecurity.”

The effects of foreclosures on suicides were strongest among adults 46 to 64 years old, who also experienced the highest increase in suicide rates during the recessionary period.

Given the (1) relative importance of owning a home as a means of providing for one’s family as well as signaling one’s status and (2) the relative financial burden of having a mortgage (usually far beyond credit card or student loan debt), this makes some sense. At the same time, this study tackles the issue from a broad perspective without being able to link individual neighborhoods or cases to certain outcomes.

Seeking out internal and external relationships in small towns

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A long-term look at rural life concludes that some of the features that enhance life there also might hold it back:

The Rural Development Initiative Project team, led by sociology professor Terry Besser, has spent the past 20 years studying changes in the quality of life for 15,000 residents in 99 small towns in Iowa…

“Small towns often don’t have much in the way of financial resources,” Besser said. “If they’re able to marshal their social capital, they have a network of people they can call on who trust each other to get things done.” High social capital can mean better economic prosperity, cultural amenities, and high-quality public services.

The researchers have already found certain traits, that seem like they should be positive attributes, can actually be a potential weakness for small towns.

Besser says the feeling of belonging to a tight-knit community could result in excluding newer residents, thus closing off some outside ideas and resources and potentially stunting community growth and development.

Narrow leadership channels, through one person or family or organization, might help in the short term but also can discourage other residents from getting involved. Leaders who can work separately – and as a team – provide more effective, sustainable leadership according to the early study results.

While this comes from studying small towns, it could apply to many in-groups: they often face issues about how many resources should be devoted to building and maintaining internal solidarity versus engaging with outside groups and institutions. Being completely insular may not be ideal but neither might low levels of group togetherness where there is little cohesion. I suspect there is no “ideal level” of balance between these two purposes but rather a range of possible positive outcomes where communities could engage the outside world while also building themselves up.