Tag Archives: American Dream

Watch for more personal appeals from home sellers

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Personal appeals from home sellers may be the next big thing in real estate:

Watch for this to take off in home listings: Sometimes, in a bidding war, you hear about homebuyers writing love letters about themselves — words that explain what wonderful families they have, how they’re crazy about the house, etc., in order to persuade sellers to choose them over other bidders.

Now comes a vaguely comparable feature for sellers: Coldwell Banker Real Estate recently revised its listings to allow home sellers to post personal stories, photos and videos about their homes, with the aim of making their listings stand out. Among the first to take up the offer were actors William Macy and Felicity Huffman, who explained their affection for the house they’re aiming to sell in Colorado: “Felicity and I love to hike up toward Sopris Mountain, right out the back door. … We put a secret door between the kids’ bedrooms, which has been a huge hit.” The brokerage says that all of its seller-clients can add their own content to their listing pages, although it must be approved by their agents.

Positive emotions seem to be the key to such appeals. If the opposite party is touched, the home can be sold for more or bought for less. It all may seem cheesy but selling and buying a home can be a very emotional process. As economic sociologists and others have found in recent decades, such decisions are not just about dollars and cents but often include complex emotional reactions. Buying and selling certainly counts as an emotionally fraught process from the amount of money involved to the transitions involved (changing communities, jobs, etc.) to the commonly-invoked American ideals of “making it.”

I would love to see some data on this: how much does an effective letter change the price? And, on the flip side, how might a poorly worded letter damage the party who wrote it?

Gas prices go down, SUVs and Hummers return. Could the same idea hold for McMansions?

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SUV sales have picked up in recent months as gas prices dropped across the United States:

Over the last month, auto analysts say, consumers have shown a fresh interest in the kind of SUVs — Hummers, Lincoln Navigators, Ford Explorers — that typified America’s bigger-is-better mindset of twenty years ago. The new mindset among some car buyers is one of the most unexpected consequences of a domestic oil boom that has helped cause global crude prices to plummet in recent months, with the cost of a gallon of gas now below $3.

As oil prices hit a three-year low, Americans are starting to see price changes that could ultimately influence everything from their grocery shopping to their heating bills to their travel. The lower prices — should they be sustained, as expected, for the next few months — have the potential to nudge the U.S. further away from its dreary post-recession mindset, leaving instead a nation with more affordable air and road transportation options, higher consumer confidence, and yes, a few more gas guzzlers driving around…

One measure is the share of “trucks” — including pick-ups, SUVs and crossovers — among total vehicles sold. Before the financial crisis, trucks almost always outsold cars, in some months grabbing as much as 59 percent of the market. Post-recession, the industry has flip-flopped; cars are more popular.

But not in recent months. In September, the truck market share was 53.5 percent. In October, it was 53.6. That is the best sustained two-month stretch since 2005.

As for those Hummers? Autotrader.com said interest in Hummer H1s on its site rose 11 percent last month, making it the fastest-growing older model among all vehicles.

As gas prices drop, Americans are returning to some of their consumption patterns from the late 1990s and early 2000s when the economy was doing better. Even though they have seen higher gas prices (which could return soon), gone through a great recession, and government regulations encourage more MPGs across all vehicles in the coming years, some Americans want bigger vehicles that require more gas.

This is interesting in itself but I wonder if the same general concept could apply to McMansions. One argument about reducing purchases of SUVs and McMansions, often paired symbols of excessive consumption, is that Americans needed to be shocked by high gas prices and hard economic times before they would change their behavior. Yet, the recent data about gas prices suggests Americans might just return to their spending patterns once things look better. (And, with the gas prices, it is not like they are likely returning to the $1.20-$2.00 range of not that long ago.) Might the same apply to McMansions? Even with all the fanfare about smaller homes, more reasonable debt loads (whether through mortgages or car loans), and critiques of the kind of sprawling communities in which communities are often built, will Americans return to McMansions once the economy picks up?

I, for one, wouldn’t be surprised. Even during the recession, people with money continued to purchase and build large homes. Homes do require a larger financial commitment than SUVs but they also are highly symbolic and linked to suburbs, all dealing with the American Dream. Perhaps the best hope for fighting these consumerist impulses is pervasive generational shifts, particularly kids, teenagers, and young adults who don’t want cars and suburban houses in the same way over time.

Fortysomethings have more influence on sluggish housing than millennials

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While millennials currently have lower homeownership rates than in the early 2000s, Derek Thompson suggests fortysomethings are the bigger issue for the sluggish housing market:

The economy has a Gen-X problem. It’s a small cohort with a much-smaller-than-usual homeownership rate. And people wonder why the housing market is sluggish.

Update: Read Trulia’s Jed Kolko on why the middle-aged are the true lost generation of homeowners. In short: They bore the brunt of the foreclosure crisis:

In 2005, the year when the true homeownership rate peaked for most age groups, 25-to-29 year-olds were the age group for which homeownership was highest relative to the demographic baseline, followed by 30-to-34 year-olds. These were first-time home-buyers getting easy credit for overpriced homes; then, they bore the brunt of the foreclosure crisis, losing their homes and wrecking their credit history…

The millennial generation was still in their early 20s or younger in the mid-2000s–too young to have bought during the bubble and then to have suffered a foreclosure: Only the oldest among the 18-to-34 year-old group in 2013 would have been of home-buying age during the bubble.

Interesting data. Generation X had bought into the American Dream and the importance it places on owning a home but they were badly burned by the housing collapse. They were in the wrong place at the wrong time: eager to buy homes, able enough to overpay based on decent jobs, and particularly indebted when their housing values tanked.

There is another issue at play here: while millennials may not have been very involved in the economic crisis, they are the generation that could continue the homeownership ideal among Americans. If they choose otherwise – and perhaps they are watching those older than them – then there may not be much of an upward tick compared to Generation X.

Side note: a funny quote from earlier in the article.

It is a truth universally acknowledged that a journalist in possession of a negative statistic must find a way to blame Millennials for it.

Generational blame is alive and well even in our advanced rational and enlightened age. Talking about generations is an easy shorthand for analyzing social trends. Whether such talk holds water compared to other age breakdowns or other data may be another matter…

Argument: homeownership is not worth risky financial situations

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Megan McArdle argues that policies and leaders promoting homeownership for those with less resources are doing a disservice:

Because, I think, most of us still haven’t managed to shed the idea that buying a house is a good way to get some unearned bonus wealth. Too many people managed to do just that for too many years. We think of 2008 as an aberration, rather than reversion to the mean. And that’s a costly mental error.

The long, steep increase in American home prices from 1946 to 2008 was driven by a whole lot of trends that are hard to repeat: the invention of the 30-year, fixed-rate, self-amortizing mortgage, which allowed people to pay more for a house by lowering the monthly payments. The securitization revolution, which lowered mortgage risk by bundling the loans into large, diversified portfolios, thereby lowering rates. Rising inflation, which pushed up the price of houses. Falling inflation, which lowered interest rates and monthly payments still further and allowed people to pay even more for those houses. The credit-scoring revolution, which allowed banks to offer loans to more people, increasing demand for the existing housing stock. And in dense coastal areas, you also had the rise of NIMBY zoning laws, which made housing scarcer and therefore more expensive…

Which is not to say I am against buying homes. I am very much for buying a home — so much so that I went and bought one myself a few years ago. But buying a house is a good idea only if you meet the following conditions:

  1. You can afford a sizable down payment to cushion you from the effects of local economic downturns or you have a super-stable job, such as working for the government or your father-in-law, that makes you unlikely to ever miss any payments.
  2. You can afford the maintenance as well as the payments, insurance and property taxes.
  3. You have good disability and/or mortgage insurance to make sure that you do not miss any payments even if you break your back and can’t do your job anymore.
  4. You are pretty sure you do not want to leave your area or move to a larger, more expensive home anytime in the next five years.
  5. Your payment is a reasonable percentage of your take-home pay (I shoot for under 25 percent; anything over 35 percent is far too risky).
  6. You have a sizable emergency fund to deal with contingencies.
  7. You can afford other forms of savings, rather than counting on your house as a piggy bank for future needs. In general, if declining home prices would send you into a hysterical panic about your financial situation, you are buying too much house.

If you do not meet these conditions, then buying a house is gambling — not just on rising home prices, but also on the continued soundness of your roof, boiler and plumbing. If you wouldn’t borrow the money to go to Vegas, then don’t borrow it for a house, either.

It sounds like McArdle is concerned with two issues:

1. People have not learned the lesson of the housing crash: housing prices do not inevitably go up. They may go up – and generally have over time – but this is not a guarantee. If you don’t accept this premise, then you will treat real estate differently.

2. The general American desire for owning a home is not enough compared to economic realities. Americans generally like owning homes: they are part of the American Dream in symbolizing status, we assume homeowners are less transient and care more about their communities, and they allow for individual freedom. But, if people can’t properly afford them, McArdle says it is not worth stretching financial bounds to make it possible. Instead, we need sound principles like saving up your money over time to make a good down payment on a house.

Both are valid concerns. Generally, Americans like seeing homes as an investment as well as an essential part of a successful life. Telling them otherwise may not be popular for politicians…

“Identical twins find identical houses”

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While the full story is hidden behind a paywall, the picture you can see says it all: two identical twins found identical houses right next to each other.

I know very little about the twin literature but I wonder if anyone has made any connections regarding the housing choices of twins. The American Dream tends to promote individualism in consumption – even among mass market items – and a house that you buy is supposed to say something about you or be your face to your neighbors and the rest of the world. Do twins buck this trend?

USA Today says American Dream costs $130k per year

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Living the American Dream isn’t cheap, according to calculations from USA Today. Here is what went into the cost:

•Home ownership is central to the American dream. So, we took the median price of a new home ($275,000), subtracted a 10% down payment, then projected the annual cost of a 30-year mortgage at 4% interest. We also added annual maintenance costs of 1% of the purchase price. Total: $17,062 a year.

•We used the U.S. Department of Agriculture’s April 2014 figure of $12,659 for a moderate-cost grocery plan for a family of four.

•In May, AAA estimated it would cost $11,039 a year to own one four-wheel-drive sport-utility vehicle.

•The Milliman Medical Index pegged annual health insurance premiums and out-of-pocket medical expenses at $9,144.

•We used various estimates for the costs of restaurants and entertainment; one family summer vacation; clothing; utilities; cable or satellite; Internet and cellphone; and miscellaneous expenses (see table).

•Total federal, state, and local taxes were pegged at 30% for households at this income level, based on a model developed for Citizens for Tax Justice.

•USA TODAY calculated current educational expenses for two children at $4,000 a year and college savings (all of it pretax, we assumed) at $2,500 per year per child, based on various rules of thumb.

•Finally, the maximum annual pretax contribution to a retirement plan for people under 50 is $17,500. That’s slightly less than 15% of this American dream household’s annual earnings, in line with financial planners’ recommendations.

Total: $130,357.

It sounds like a lot — and it is in a country where the median household income is about $51,000. Add one more child and another vehicle and you could easily reach $150,000.

I can see some places where costs could be trimmed, particularly with the car and a more minimalistic approach to retirement savings. I wonder if the emphasis here should be on the overall cost – which is high and the article notes it can vary quite a bit from region to region – or the assumptions about what the middle class is about. I was recently looking at a classic sociological study Working-Class Suburb written by Bennett Berger in 1960. There is a point in the book where Berger juxtaposes the suburban critic frowning at the ills of suburban life and the suburbanite who is happy with his relative comfort of a car, refrigerator, house, and little patch of lawn. In the decades since, expectations about the good life have increased, as Juliet Schor showed in The Overspent American. If Americans need $130,000 a year to have the basics, many of which are good things, then is being middle-class something completely different today?

Want a home with extra amenities? Just buy a condo with hotel services

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Developers are building more condos with hotel amenities:

Developers across the U.S. are reviving a concept that collapsed with the real estate crash in 2008: combining condominiums and hotels. In cities including Miami, New York and Los Angeles, a rebounding hospitality market is joining with rising demand for luxury homes, spurring developers to construct new full-service hotels and ask premium prices for residential units associated with a high-end brand…

“I love the amenities the building will have — a restaurant that can provide room service, a concierge, maintenance, a person that can clean your place, valet parking,” said Viete, 25, who works for his family’s real estate company in Caracas. The $250 million project, scheduled to break ground in August, is already 85 percent sold…

Condo developments with a hotel can be structured in several ways. In some cases, residences may be connected to the lodging segment only so that owners can take advantage of the hotel’s amenities and benefit from the brand’s prestige. That tends to put a premium on unit prices.

In other developments, known as condo-hotels, a portion of the condos are made available to the hotel when owners aren’t using them, producing revenue for residents.

Sounds nice if you have some extra money lying around. On one hand, the story doesn’t say how much extra such units would cost over and above condos available elsewhere but on the other hand, if you have to ask, this isn’t the market for you…

Thinking about these units, they are an interesting contrast to a common American narrative about homeownership that goes something like this: you work hard to put together enough to purchase a home, you work hard to maintain it, you are more likely to participate in local community life, and it is a long-term investment and place for sentimental moments. Yet, the housing options available to those with more money goes against these principles. Instead of putting sweat equity into maintaining the home, you can pay someone else. Instead of getting deeply involved with neighbors and local issues, the wealthy can travel from house to house in exciting locations. Instead of holding onto a home because of family life and memories, housing becomes just another commodity to be bought and sold. In other words, condos with hotel features are far beyond normal American conceptions of homeownership.

Wealthy Chinese seeking out McMansions

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The Financial Times suggests there is one primary reason more Chinese homebuyers are choosing McMansions: they are status symbols. One note: the McMansions hinted at in this article sound opulent beyond the average American McMansion.

Critics of McMansions would often argue a similar process is at work in the United States: McMansion owners want to impress others with their large house. While the price is not so much of an issue (much smaller pieces of real estate in desirable locations can cost much more), the homes show off through an impressive/ostentatious front, plenty of interior space, nice furnishings, and lots of stuff. On the other hand, I suspect a good number of owners purchased such homes because they say they need the space or got a good deal or liked the amenities of the home and neighborhood.

I’m not sure these are mutually exclusive arguments. Homebuyers can want a suburban experience and want to do it in a home that broadcasts their success. After all, the suburban single-family home represents middle- or upper-class success as well as expressions of individualism.

Argument: we’ve sacrificed everything for McMansions

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Critics of McMansions are not hard to find but Thomas Frank takes the argument further: McMansions are behind a whole host of issues including sprawl and inequality.

Of course there was something different this time around. In the 2008 collapse, the real-estate bust wasn’t the result of some larger economic trend but the cause of it. Although we are accustomed to blaming it all on subprime loans, about half of the disaster was attributable to the less-well-known fiasco in Alt-A instruments which fed the McMansion market, the “liar’s loans” which were securitized and sold off stamped with a big Triple-A. The worst recession of our lifetimes, in other words, was in large part the result of our superiors’ longing to get themselves a piece of the grandiose.

That astounding reversal of the usual chain of cause and effect changed the way I thought about the McMansion. I once believed it would be amusing to track stylistic change in the tract-mansion form—how, say, the fake French simplicity of Newt Gingrich’s 1987 McMansion gave way to the complex multigabled fakery of Michele Bachmann’s 2007 McMansion, with maybe a stop in between to contemplate Ricky Bobby’s McMansion in “Talladega Nights.”

But what I discovered is that the form doesn’t really change. Yes, the houses get bigger every year, gables and gazebos come and go, but what is really striking about the McMansion is its vapid consistency as the decades pass…

This is not some absurdity at the fringe of our way of life. This is civilization’s very center, the only thing that really makes sense in “clusterfuck nation,” the tawdry telos at which all our economic policies aim. Everything we do seems designed to make this thing possible. Cities must sprawl to accommodate its bulk, eight-lane roads must be constructed, gasoline must be kept cheap, coal must be hauled in from Wyoming on mile-long trains. Middle-class taxes must be higher to make up for the deductions given to McMansion owners, lending standards must be diluted so more suckers can purchase them, banks must be propped up, bonuses must go out, stock prices must ascend. Every one of us must work ever longer hours so that this millionaire’s folly can remain viable, can be sold successfully to the next one on the list. This stupendous, staring banality is the final outcome for which we have sacrificed everything else.

This is a strong statement: we created and generally buy into a system whose goal is to grant a privileged few the ability to live in private McMansions in nice neighborhoods. The fulfillment of the American Dream at the turn of the 21st century involves living in a McMansion. It is not just about suburbs, 0wning a car, buying cheap goods at Walmart, and sending your kids to nice schools; it is about having the glitzy, architecturally-dubious but spacious home.

What I don’t see in Frank’s piece is how exactly the dots connect. The number of McMansions are still relatively limited due to their cost. Not all gated communities have McMansions. Not all suburbs are edge cities or vacuous tract neighborhoods like the ones highlighted in Suburban Nation. I’d like to see the data where half of the housing bubble of the late 2000s was due to loans for McMansions. In other words, this may be a populist argument today given the status of McMansions but the true story is likely more complicated.

Critic: lack of good suburban novels

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Since World War II, there have been a number of novels that have dissected suburban life but one critic says the genre has suffered in recent years:

Suburban novels, much like many American suburbs themselves, have fallen on hard times.

Yes, there are some terrific books about the ‘burbs, only few lately that feel like they’re trafficking in the great realist tradition of John Updike, John Cheever and Richard Yates, whose novels and stories in the ’50s, ’60s and ’70s defined the quiet despair of the men of Metro-North.

Today, Tom Perrotta’s satires of strollerland feel overly broad. Jonathan Franzen’s “Freedom” brilliantly portrays the dark side of McMansion marriage, but it’s so brutal you want to avert your eyes.

Ted Thompson’s terrific debut novel, “The Land of Steady Habits,” feels like a natural extension of Yates’ classic “Revolutionary Road” or Updike’s Rabbit series. Call this elegant, witty and economical novel “Rabbit, Meltdown.”…

It’s not a stretch to say that this is the first great novel about post-crash American disillusionment, the flip side of “The Wolf of Wall Street.” Inside the ruined heart and soul of Anders Hill is a warning: even the life you think falls short of your dreams must not be taken for granted.

Perhaps the suburban decline novel needs some updating. Many of these stories, whether in novels, in films, or on TV, have a similar narrative: the characters look like they have the good life in the American suburbs with a newer house, family, and other consumers (cars, television, etc.) but the main characters are repressed in some way so they lash out and the suburban facade falls aside. There is some truth to such stories: the American Dream is heavily based on particular notions of success that are more in the reach of some (privileged groups) than others. At the same time, there are a variety of suburbs from wealthy and exclusive towns to more working-class communities and the mythology of the American suburban Dream continues to survive.