Monthly Archives: August 2018

Multiple factors behind why younger Americans may purchase fewer homes in their lifetime

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A report on the real estate market in the Chicago region hints at a possible trend to watch: Americans will buy fewer homes in their lifetime.

Many first-time buyers share the Joshis’ perspective that it’s smarter to find the right house to grow into than to get a toehold in the market with a starter house, only to see much of that early equity sapped by transaction costs a few years later when moving up to a larger house.

“When we started looking, I had in mind a starter house, but it was so exhausting to look that we thought, no, one and done,” says Vrushank Joshi.

There are numerous societal changes that contribute to this:

  1. People are getting married later and going to school longer. This means they are not buying a home in early adulthood as often and are waiting longer to purchase their first place.
  2. With more education, increasing student loans means it takes longer for potential owners to save money for a down payment.
  3. Fewer starter homes have been constructed in recent years.
  4. Mobility is down in recent years as Americans seem interested in staying in places for longer.
  5. The specter of the late 2000s housing bubble haunts possible buyers.

A system that used to rely on people starting with a smaller product and then working their way up over a lifetime may have to make some major adjustments if Americans buy fewer and different homes compared to before.

Building and buying larger homes leads to “McMansion envy”?

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Here is the full Bankrate.com headline of the story I discussed yesterday about Americans buying larger homes:

McMansion envy spreads as Americans demand more bedrooms, baths

What is “McMansion envy”? The common sense interpretation seems clear: people see and desire McMansions. Yet, this gets complicated fairly quickly for a number of reasons.

  1. The data then presented in the story does indeed tell a tale of Americans buying larger homes. But, not all large homes are McMansions.
  2. There is no other mention of the term McMansion. While the term seems to be a stand-in for large homes in general, there are also references in the story to homes with more and flashier features (including more bedrooms and bathrooms as well as higher-end finishes, though this last part is difficult to defend with Census data).
  3. McMansion is a pejorative term and few real estate listings or homeowners proudly use the term to describe their homes. Instead, the term typically refers to tacky or garish large homes (see McMansion Hell for an example).
  4. Indeed, the exact definition of a McMansion is more complicated than just a big home or a poorly-designed home. I argue McMansions have four possible traits.

I do not expect this concept of “McMansion envy” to spread except for critics of larger homes and McMansions who want to describe some sort of sickness from which Americans suffer.

 

Suburban culture and voters summed up by Furbys, soccer moms, and two minivans

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Alexandria Ocasio-Cortez made recent comments about who Democratic House members are and who are they are trying to appeal to. Her argument about these leaders being stuck in “90s politics” included this bit:

Their heyday was in the ’90s when kids had, like, Furbys, and soccer moms had, like, two vans. That’s not America anymore!

While a number of suburbanites and right-wing commentators have suggested her comments are off-base and are attacking a suburban way of life, she is both right and wrong:

  1. The American suburbs have changed. They are more non-white and poorer than they were in the 1990s. Ocasio-Cortez’s own life story is a testament to these changes. The suburbs today are much more diverse.
  2. She cites several material markers of suburban culture from the 1990s: Furbys and minivans. These were indeed real and to some degree are not as popular today. However, replace the minivan with the hipper SUV and there is little difference. (Additionally, she could have strengthened her case by adding McMansions to the 1990s mix since they arose as a term in this decade.)
  3. The “soccer moms” claim is the most interesting one to me. On one hand, it was political shorthand from the 1990s to describe a group that both parties wanted to target: women in the suburbs who drove their kids to soccer games and other activities. Those people still exist and, if anything, the number of suburban activities kids normally pursue has probably only increased. On the other hand, rarely do political candidates or prognosticators talk about soccer moms even as the current battleground is the middle suburbs. While Ocasio-Cortez has to think about her own potential constituents, there are still plenty of suburbanites who would be turned off by talk claiming that their time is over. Even if soccer moms is not a valid category (nor is NASCAR dads), suburban voters in their multiple strata are still worth courting.

To sum up, the majority of Americans still live in suburbs. Suburban communities and culture may have changed but the interests of suburbanites still matter in local, state, and national races.

“Americans demand more bedrooms, baths”

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I argued a few days ago that the American system is set up to encourage people to purchase bigger homes. Look, the system is working! Americans continue to build and buy bigger homes.

The latest numbers from the U.S. Census Bureau show newly-constructed homes in 2017 are 4 percent larger on average than a decade ago. And they come with a larger price tag — the average price of a new home jumped 23 percent from $313,600 in 2007 to $384,900 last year. Meanwhile, the average family size in the U.S. continues to shrink, from 3.33 persons in 1960, to 2.54 in 2017…

Below are some takeaways from the Survey of Construction data released in June. Based on the most common features, the most popular home built in 2017 was a two-story, two-garage home with more than four bedrooms and three bathrooms.

Several graphs highlight the proliferation of bedrooms and bathrooms in recent years:

Chart: Number of bedrooms in new single-family houses completed

Chart: Number of bathrooms in new single-family houses completed

Even with plenty of critics, American builders and buyers still seem to want larger homes. Perhaps the market is primarily open these days to wealthier buyers and builders may not be interested in constructing starter homes but this is not an isolated blip in the data: for decades, Americans have sought larger homes.

 

Census income figures misreported based on gender norms

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The Census measures numerous important features of American life. Yet, accurate measurement is difficult. A new report suggests reported income can not be the most truthful when women make more money than their husbands:

Researchers found that when wives are the bigger breadwinners, husbands report making an average of 2.9 percent more than what’s in their tax filings. Meanwhile, women who make more than their husbands report earning 1.5 percent less than their actual income…

So why does this phenomenon happen? Researchers say they suspect societal expectations about the roles each person plays in a marriage could be a main factor.

“When married couples . . . violate the norm that husbands outearn their wives, the survey respondents reporting the couples’ earnings appear to minimize the violation by inflating the earnings of the lower-earning husbands and deflating the earnings of the higher-earning wives,” researchers wrote in their findings.

If the misreporting is due to gender norms, might we expect this to go away as more women earn more money? Already, “In about one out of four couples surveyed, wives made more money than their husbands.” Give this a few decades and this misreporting might disappear.

On the other hand, social norms can be last a long time even after society has changed quite a bit from when the social norm arose. If the misreporting continues or even increases, it would be interesting to see how the Census and other surveyors adjust their figures.

If one survey option receives the most votes (18%), can the item with the least votes (2%) be declared the least favorite?

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The media can have difficulty interpreting survey results. Here is one recent example involving a YouGov survey that asked about the most attractive regional accents in the United States:

Internet-based data analytics and market research firm YouGov released a study earlier this month that asked 1,216 Americans over the age of 18 about their accent preferences. The firm provided nine options, ranging from regions to well-known dialects in cities. Among other questions, YouGov asked, “Which American region/city do you think has the most attractive accent?”

The winner was clear. The Southeastern accent, bless its heart, took the winning spot, with the dialect receiving 18 percent of the vote from the study’s participants. Texas wasn’t too far behind, nabbing the second-most attractive accent at 12 percent of the vote…

The least attractive? Chicago rolls in dead last, with just 2 percent of “da” vote.

John Kass did not like the results and consulted a linguist:

I called on an expert: the eminent theoretical linguist Jerry Sadock, professor emeritus of linguistics from the University of Chicago…

“The YouGov survey that CBS based this slander on does not support the conclusion. The survey asked only what the most attractive dialect was, the winner being — get this — Texan,” Sadock wrote in an email.

“Louie Gohmert? Really? The fact that very few respondents found the Chicago accent the most attractive, does not mean that it is the least attractive,” said Sadock. “I prefer to think that would have been rated as the second most attractive accent, if the survey had asked for rankings.”

In the original YouGov survey, respondents were asked: “Which American region/city do you think has the most attractive accent?” Respondents could select one option. The Chicago accent did receive the least number of selections.

However, Sadock has a point. Respondents could only select one option. If they had the opportunity to rank them, would the Chicago accent move up as a non-favorite but still-liked accent? It could happen.

Additionally, the responses were fairly diverse across the respondents. The original “winner” Southeastern accent was only selected by 18% of those surveyed. This means that over 80% of the respondents did not select the leading response. Is it fair to call this the favorite accent of Americans when fewer than one-fifth of respondents selected it?

Communicating the nuances of survey results can be difficult. Yet, journalists and other should resist the urge to immediately identify “favorites” and “losers” in such situations where the data does not show an overwhelming favorite respondents did not have the opportunity to rate all of the possible responses.

Americans are conditioned and enabled to buy large homes

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Findings regarding how Americans use the space in their homes may show they do not use all the space equally but evidence may not matter much. Americans want larger homes and the society and system is set up to push them towards this. Some of the factors involved:

-A consumption heavy culture where people enjoy shopping and buying items to signal their worth and for their own enjoyment. People want bigger homes like McMansions to impress others. Owners want a bigger home for all their stuff (and not necessarily for larger families).

-A lending industry that often requires relatively small down payments and repayments of a mortgage over three decades. Even if borrowers pay more in interest over time, they can afford a bigger home up front. Mortgages are socialized.

-A building industry that can make more money per house on selling a larger house. Building starter homes – a smaller house a couple might start with – or smaller single-family homes is a minor part of the industry.

-An emphasis on private family space as opposed to thriving public life on streets, urban public spaces, or third spaces. Additionally, Americans like their personal space.

–An emphasis on suburban culture and spread-out settlement.

With these conditions, making a choice to have a smaller home is going against the grain. Perhaps this is why the tiny house movement is small.

 

The missing microwaves and countertop kitchen appliances on HGTV

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In watching a recent episode of something or other on HGTV, I realized something: very few of the renovated homes featured on the channel have visible microwaves or other kitchen appliances on surfaces.

I suspect this is similar to the clean, open concept kitchen that has no mess: the aesthetic is modern and minimalist. Appliances beyond the stove, refrigerator, and dishwasher (which are often emphasized in discussions and visual shots because of their size and finishes) should be out of sight and avoid cluttering the beautiful surfaces. To some degree, this is common when showing houses that are for sale: the thinking is that people do not want to see the clutter of everyday life.

Yet, I would guess that most American kitchens have plenty of countertop appliances that they regularly use. How many home cooks can survive without a toaster or toaster oven, blender, food processor, mixer, coffee makers, crockpot, and so on? And that does not even include the microwave, an indispensable tool for decades.

I suspect that clearing the countertops for the final reveal of homes is akin to the sketchy before and after shots provided by weight loss products. The difference might look substantial but the image is misleading. Is a clear surface that few people can actually live with really desirable versus a kitchen that displays where people can keep some of the stuff they regularly use? The countertops should not be full of junk but a well-placed appliance can both recognize the realities of most American kitchens and hint to the viewer what is possible in the kitchen.

Chicago suburb to sponsor college bowl game

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The competition between suburbs can be intense and Elk Grove Village has a new way to stand out: sponsor a college bowl game to be played in the Bahamas.

The village and ESPN announced Tuesday that Elk Grove will be the title sponsor of the Makers Wanted Bahamas Bowl, to be played Dec. 21 in Nassau, Bahamas, using the village’s business marketing tag line. The village is spending $300,000 to sponsor the game, which will air on ESPN. The game had previously been sponsored by Popeyes.

It marks the first time a non-tourist municipality has sponsored a bowl game, the village and ESPN say…

Johnson wanted a way to expand the reach of the village’s “Makers Wanted” campaign, which launched in 2015 to promote the village industrial park — at 6 square miles, the largest contiguous one in the country. The campaign has included a website, billboards, TV and radio commercials, and print ads…

The fee to sponsor the bowl game is part of a $400,000 increase the board approved in its contract with Lombard-based Red Caffeine, the marketing company that developed the Makers Wanted campaign. The other funds will pay for new Elk Grove TV commercials set to air regionally on cable news channels this fall.

It is not uncommon for states to mount such campaigns. For example, see efforts by Texas, Indiana, Florida, and isconsin to draw residents and businesses from Illinois. It is more rare for a single suburb to mount such a campaign on a national scale.

However, conspicuously missing from this article is any evidence that such campaigns work. Can the village conclusively show that the campaign started in 2015 has (1) increased the number of businesses in the community and (2) revenues have increased because of the moves?

This could also be about the status of the suburb. The Chicago area has scores of suburbs and communities often want to stand out. This is why they might seek to change a motto, a logo, or run campaigns to distinguish themselves from others. Such a marketing campaign can make a suburb feel better about itself and local leaders can show they are being proactive regarding growing their community (and growth is good).

It will be very interesting to see whether the football audience helps advance the goals of the suburb and if they are willing to renew their sponsorship for another year past the first. The mayor is claiming the news about the campaign has already helped the suburb (suggesting 95% of the value has already been realized) but the long-term prognosis will take some time to sort out.

American land uses in a number of interesting maps

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Bloomberg put together a set of graphics to illustrate how Americans use land. Here are a few of the maps interspersed with information. First, the general patterns of land use:

AmericanLandUseGeneral

The U.S. is becoming more urban—at an average rate of about 1 million additional acres a year. That’s the equivalent of adding new urban area the size of Los Angeles, Houston and Phoenix combined. U.S. urban areas have more than quadrupled since 1945…

AmericanLandUseComparative

More than one-third of U.S. land is used for pasture—by far the largest land-use type in the contiguous 48 states. And nearly 25 percent of that land is administered by the federal government, with most occurring in the West. That land is open to grazing for a fee.

There is some data here that could be viewed as conflicting: urban areas are the fastest growing land use – watch out for sprawl! – but the biggest land use overall is pasture and range – open land yet given over to creatures that are land and resource intensive!

One nice feature of these maps is that they are helpful for making comparisons between land uses. Given the size of the country plus the limited day-to-day experiences of many in different parts of the country, it can be hard to get a handle on all the land uses.

After looking this all over, I wonder what Americans and policymakers would say an ideal land use mix is for the entire country. This is a difficult question to answer, particularly since many people would not necessarily regularly encounter all the uses. If people want more protected land, what other land uses should be reduced and how would this affect individual lives as well as the American way of life?