Last night’s new episode of Flip or Flop, Season 9 Episode 7, featured a home with an ADU (accessory dwelling unit). And this unique feature of the home offers a chance to make more money:
After Tarek and Christina realize the garage in the backyard is now a living space, Tarek lays out the argument: this is not just a studio space or a he/she-shed. It is possibly a rentable unit. This may make this property even more enticing.
This got me thinking. ADUs are supposed to help provide more housing units in more expensive markets like Portland and Los Angeles. Instead of building denser, taller housing in single-family home neighborhoods, ADUs take advantage of existing yard space, garages, or other buildings on residential properties.
But, while the ADUs might provide more housing, they may not necessarily provide housing that is that much cheaper. Take the example from Flip or Flop: with a home valued at over $1 million in North Hollywood, they estimated they could rent the studio ADU with a full bathroom and kitchen for $2,000 a month. How many people could afford this?
Further, such units could become a tool for residents and developers to generate more revenue. In such competitive markets, adding any kind of residential unit presents an opportunity. The ADU could enable a homeowner to generate money from their property. An investor interested in a single home or one with multiple homes could generate even more money with ADUs.
To truly provide housing that is more plentiful and at a reasonable price, it seems like a lot of ADUs are needed. They cannot provide as many units as large multifamily developments might. Yes, they do not disturb the existing character of a neighborhood much. But, if the ultimate goal is to broadly expand housing options, the occasional ADU in an expensive area might not be enough.
The ways in which COVID-19 has pushed more real estate activity online – virtual tours, making offers without physically seeing a home – doubles down on the private dimensions of residences in the United States. Here is my argument:
Putting homes for sale on the Internet just further reduces the community or neighborhood element of a residence. If you look at enough real estate pictures, you see some patterns: lots of interior shots but limited images of how the residence interacts with surrounding spaces or what may be just down the street. For example, you may get a shot of a backyard but it is often facing the rear of the house, not out into the neighborhood. Or, you might get a pleasant image of the downtown of a community or a local park or a common room within an apartment building without much sense of how those spaces are used.
This is similar to how HGTV often shows homes. There may be sweeping shots of a neighborhood or location but the focus is always on the single housing unit. The interior and its features are the focus. The neighborhood or surroundings do not matter unless it has to do with proximity to work or family or to note the character of surrounding buildings (which is often connected to property values and the perceived niceness of the location).
There are some tools that could help potential homebuyers check out the neighborhood and community. A virtual house tour could be followed by a Google Street View drive through the nearby blocks. Instead of just relying on walkability and school scores on real estate websites, a potential buyer could go to local websites or message boards to try to get a sense of community life. Yet, any of these Internet attempts pale to talking to people in the community and experiencing the surrounding area. People should make some efforts to get to know their community before they consider moving there.
Seeing homes and residences as commodities that can be evaluated solely through the Internet downplays civic life or at least pushes it into the background. Divorcing a home from its surroundings can be done but it is impoverishing in the long run for property owners and communities. When we emerge from a COVID-19 pandemic, I hope the online aspect of real estate does not hamper efforts to rebuild community and social life when such work is sorely needed.
In the first three months of 2020, 7.5% of homes sold in the United States were flipped, according to a June report from real estate research firm ATTOM Data Solutions. That’s the highest rate since 2006 and a jump from 6.3% at the end of 2019.
Home flipping rates had dropped drastically in 2007 and began to gradually recover in 2010. The number of flipped homes sold in a quarter peaked around 100,000 in 2005, and while it was on the rise in recent years, a decline began in the second quarter of 2019. In the first quarter of 2020, 53,705 single-family homes and condos were flipped, according to the report.
Profit margins have also dropped since 2019, hitting the lowest return-on-investment since 2011. After plummeting with the national economy between 2006 and 2008, profit margins on flipped homes grew at a steady rate until 2017. But since then, return-on-investment has been on a decline.
Still, it’s too soon to fully grasp how the coronavirus pandemic will impact the house flipping market through 2020 and beyond, ATTOM chief product officer Todd Teta said in a statement.
Flipping homes is by now a well-known process due to TV shows and personalities plus its spread throughout the United States. Yet, alongside other phenomena featured on HGTV and among certain groups (such as tiny houses), it can be hard to know how widespread a phenomena is.
Not surprisingly, these stats suggest flipping homes is connected to broader economic conditions: flipping increases when property values are high and repairs to a home can pay off in a sale. When times are tough and property values stagnate or even drop, there is less money to be made in flipping homes.
In the data above, it would be helpful to see how the national trends compare to patterns in particular places. Does flipping work in the hottest markets where prices are already high (limiting who can flip)? What about Rust Belt communities in good and bad times? Suburbs? Urban neighborhoods? I would guess there is a lot of variation across communities.
It is also worth considering what happens to the housing stock in places where flipping does or does not take place. If flipping happens, older housing stock gains new life. If it does not, do these homes simply keep sliding into disrepair?
Finally, this article starts with an example of a family involved in a flipping business but says very little about the role of small flipping businesses or more corporate operations. Even if flipping activity declines during tougher economic times, does it present opportunities for some to buy up properties to flip later? How do the profit margins differ across different kinds of flippers? Are smaller firms or family-owned flippers viewed more favorably by communities than corporate entities?
I would ask everybody in this call, if you get a second tonight, go on Zillow, go on Redfin, go on, pick your website for real estate. Go look at 100 homes tonight in a price range that you think we might play at. And tell me how many have great architecture, tell me how many have great interior design and how many have great landscape architecture. If it’s 1% — if it’s more than 1%, like you must live in a really great area. But even in the great areas, it’s so low. How many friends’ houses do you go to that you say, “Wow, this is beautiful architecture. This is great interior design. This is great landscape architecture”? Almost never. Almost never. It’s like a completed — completely uncharted world.
When you really look at the big homebuilders, they’re kind of stamping out some — it’s not a McMansion anymore. Call it whatever you want. But it’s a stamp out, right? And it’s a nice organized development, but there’s no one providing completely turnkey homes. Like Eri says to me a lot, like they don’t sell you a car without an interior. You don’t go buy a beautiful Mercedes or whatever brand you like, and it comes without an interior and you got to figure it out yourself.
I don’t know how many people on this phone have tried to do their own interior design or furnished their house. It’s a nightmare. It’s a nightmare for me, and I do it for a living. I have a house in the Napa Valley that I finished remodeling like 3.5 years ago. It’s not furnished yet. It’s that hard. It’s a pain in the ass. And so we know how hard it is. We know we’re good at it….
And I sit here and I go, well, why can’t we — we’re really good at architecture, really good at interior design, really good at landscape architecture. I know we can design and build things and furnishing that people will like. And I think there’s — if you think about people with money, okay, and you think about just what’s the most valuable asset, time, right? By far, the most valuable asset. Everybody on this phone can figure out — if you lose your money, you can figure out how to make more money. If you lose your time, you just can’t get it back, right? So we think a lot about businesses that deliver time value will become more valuable.
Four things stand out to me here:
It is interesting to consider this in light of the increasing emphasis on staging properties. With staging, the design is more temporary but it gives potential buyers a vision for what the property could be. The option discussed above is more long-term.
Generally, Americans act as though homes should be empty boxes filled in by owners to fit their tastes. When people buy homes, they customize them (within the confines of what is possible with the home) to what they desire and what they can afford. What if it could also work the other way around: a fully designed home shapes the owner as they come to grow into it?
This highlights the mass produced nature of many American homes, whether they are McMansions are not. Particularly after World War Two, larger homebuilders started constructing more homes and buyers purchased them more like factory items. Straddling this gap from mass produced home to more customized home is not easy.
I think he is right that there is a market for such homes. Yet, I imagine the market is fairly small given the price that would be involved. It is one thing to stage a home and then take those items back out; it is another to have a fully immersive design process and keep everything. For a business, I wonder what is the lower price point of homes that this makes sense for businesses (particularly if this is meant of more of a luxury product that is supposed to remain exclusive).
In watching a recent episode of House Hunterson HGTV, I was treated to brief scenes of the couple using Zillow:
-I know this is how people shop for houses today. I have done it myself.
-I would guess this means HGTV and Zillow are working together on the show in some capacity. (See a similar clip on ispotTV.)
-House Hunters tries (!) to show what looking at houses might look like.
Even though the scene was brief, I found it odd. It either seemed like obvious product placement (use Zillow rather than Redfin or MLS or other options!), uninteresting storytelling (watch people look at a screen!), or signaled some major change. As the couple then moved to driving around by themselves and looking at houses, I thought for a short moment that they would not even need a realtor: they had found listings online, arranged their own details, and would tour on their own. (Alas, the realtor just met them at the first house tour.)
While there is a lot of potential for HGTV and other similar programming to incorporate devices and screens (mainly smartphones and tablets) into their portrayals of finding property, there is a bigger issue at play for television and film: how can you interestingly portray handheld screens that so many of us are buried in on a daily basis within a story that has to move at a rapid pace? This is not easy.
After publishing two papers in the last few years on TV depictions of suburbs and their houses (see here and here), it leaves me with one big question: do shows like these directly influence what homes people purchase?
Americans watch a lot of television – still an average of about four hours a day for adults – and they see a lot of dwellings. While there is a mix of housing units shown, scholars point out that television since the 1950s does place a lot of emphasis on single-family homes. This includes fictional shows set in single-family homes in the suburbs (think Bewitched or Desperate Housewives), rural areas (think Lassie), and cities (think Happy Days and King of Queens). More recently, viewers can see homes on HGTV and other networks that emphasize home life (plus the shows on other networks that specifically target homeowners, from This Old House to TradingSpaces). This makes some sense in a country that holds up owning a single-family home, particularly in the suburbs, as an ideal.
But, we know little how about all of this watching about homes translates into choosing homes. My study “From I Love Lucy to Desperate Housewives” did not find much evidence that more popular suburban television shows led to more people living in suburbs (or vice versa). Similarly, outside of some interest from Sopranos’ fans in having a home like Tony, there is little to no evidence that Americans flocked to imitate the home or neighborhood of the Sopranos. While the viewers of HGTV might be relatively wealthy, do they take what they see and directly purchase something like that?
It is relatively easy to make claims about how media products affect thoughts and behavior. However, it is harder to make direct, causal connections. I would guess advertisers around such shows hope such a connection is present. If we could examine this relationship between shows and homes more closely in research studies, it could help us better understand how Americans form, maintain, and change their approaches to homes and communities.
The easy answer is that these are not the homes or stories that Americans want to see. People want to get as much as they can within their budget. The overall price of the home and the size makes for interesting viewing across different locales.
Yet, I imagine there is some sort of viewership market for those who would rather emphasize how a home would fit their lifestyle. This occasionally comes through on HGTV but tends to be subsumed under concerns about budget and the size. Where are the people buying smaller homes and or cheaper homes because they appreciate the aesthetics of a particular home or because a smaller home is easier to clean and maintain or that cheaper and smaller home is near friends and family which are more important than their private home? Or, perhaps there could be a show about how relatively normal people purchase homes and then tweak them to fit their particular needs or interests.
If more homeowners are truly interested in long-term well-being, evidenced by interest in decluttering or options like the Not So Big House, it may be a while before they see this reflected on TV. Too many current shows are limited by budget and square feet to truly consider the well-being of the owners.
Stylistically, Tidying Up is gentle. Marie Kondo is a soothing presence—never soporific, somehow, but always engaging. She is twee, almost unbearably so, which is an affect not really seen in American television personalities. About 15 minutes into every episode, Kondo takes a moment to commune with the house, selecting a spot in the residence and kneeling in silent reverence. This goes on for longer than feels comfortable; sometimes the subjects join her, and sometimes they seem like they’re enjoying it. Conflict, when it happens, feels softer than it would on House Hunters, where couples routinely argue with increasing venom over the necessity of a mudroom in the home of their dreams.
The beauty of Marie Kondo’s world is that tidying is not punishment. She subverts the chore of cleaning by imbuing it with a radical sense of self-improvement. Unlike the underlying economic status anxiety that colors all of HGTV’s offerings, Tidying Up is more self-help than self-defeat. The home improvements, and by extension, life improvements, come not from buying a McMansion in Indiana, but from clearing life’s detritus out of your home to make way for something else.
The end of the review posits a dichotomous choice: either buying a McMansion to assuage status anxiety or tidying up to feel better.
One important step to the Kondo life would then be to not purchase the biggest home possible. How many Americans would be willing to do that or is it simply easier to buy into a tidying strategy that could be utilized in any home?
In 2015, they opened Magnolia Market, a home goods store that sells Mrs. Gaines’s mass-produced collections of bohemian farmhouse décor, and quickly followed with a bakery, garden shop and a turf-lawn park built near two old silos that had been constructed in 1950 by the Brazos Valley Cotton Oil Company. They also opened a nearby restaurant, Magnolia Table, in the former Elite Café, a longtime favorite that closed in 2016 after several different owners and renovations. When the Gaineses took it over, they installed subway tile along the walls, exposed the wood beams in the ceiling and stuck an ever-changing marquee sign out front. Naturally, the renovation was featured on their show.
No one’s complaining. The number of tourists to Waco has tripled in the four years since “Fixer Upper” first aired, with some 1.7 million people visiting in the first seven months of 2018 alone, and other local businesses have flourished with the influx. Carla Pendergraft, director of marketing for the Waco Convention and Visitors Bureau, said the appeal of the “Fixer Upper” brand has had a profound impact on the city.
Several quick thoughts::
1. The article touts increased tourism and a few local businesses that have benefited from the popularity of the show. Lacking are numbers about increased jobs and increased tax revenues.
2. The biggest bonus to Waco seems to be less about economics and more about status: the Gaines have helped make the city cool.
3. How long will this effect last? When Fixer Upper is done, will the family still exert the same pull on people? And if this trend dies down, how will the community of Waco respond? My guess would be that this uptick in tourism and interest will fade away if the Gaines are not as visible.
4. The concept of TV driven tourism is an intriguing one. People want to visit popular TV sites, like the Brady Bunch house for the Soprano’s home. Should more cities take advantage of shows that have strong connections to certain locations? Imagine Chicago building a full campaign around the Chicago Fire, Chicago P.D., and Chicago Med galaxy.