Tag Archives: McMansions

McMansion owners in the Chicago suburbs get cheaper ComEd rates than city-dwellers

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Crain’s Chicago Business highlights an interesting part of the regulations for ComEd: a suburban homeowner pays a more advantageous rater than a city resident.

The reason: The price to reserve “capacity”—the right to buy electricity during peak-demand periods—will soar next June. That rising cost, which is embedded in the energy price on customers’ electric bills, will hit households consuming small amounts of power far harder than owners of large homes using a lot of electricity. Residents of wealthy suburbs with larger, high-consumption homes could well pay 1 to 2 cents per kilowatt-hour less for electricity than city residents.

Why? ComEd allocates the capacity charge evenly among all residential customers regardless of their usage. So the owner of a city bungalow consuming 500 kilowatt-hours per month pays the same dollar amount for capacity as the owner of a McMansion in the suburbs using three times as much. The McMansion owner’s total electric bill will be higher than the bungalow owner’s, but the McMansion owner will pay less per kilowatt-hour because the added capacity charge makes up a much smaller percentage of the total.

This disparity hasn’t been an issue to date because capacity costs have been unusually low over the past two years. But the price for capacity in PJM Interconnection—the 13-state power grid that includes northern Illinois—will rise 350 percent for the year beginning in June 2014. That will have a bigger impact on towns and cities with lots of small-usage households such as Chicago than it will on suburbs featuring larger homes…

Evidence of “have” and “have-not” municipalities already is starting to appear. Two wealthy north suburbs with many large homes, Bannockburn and Kildeer, last month locked in an energy price for their residents of just below 5 cents per kilowatt-hour for the next two years beginning in September. By contrast, under the Integrys contract, Chicago residents pay 5.42 cents, or 8 percent more. And next May, when the city must reprice the deal, it’s expected to struggle to beat a ComEd price that will approach 7 cents.

The article doesn’t answer the most basic question: how did this disparity end up in the regulations in the first place?

The article suggests that people in the city or suburbs should be paying the same electricity rate. It is only fair to pay equally. But, I wonder if some wouldn’t argue that the suburbanites who are more spread out, require more infrastructure to reach this larger area, and tend to live in bigger houses should actually be paying higher rates. Couldn’t that be written into the regulations? This may not be politically popular but I imagine the argument could be made. Indeed, using the term McMansion in comparison to the humble Chicago bungalow leans in this direction by referring to unnecessarily large homes.

Some wealthy US zip codes don’t have enough mansions to sell

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This may be related to a supposed McMansion comeback: some wealthy US communities have a limited inventory of big homes available for purchase.

While housing inventory is falling throughout the country, it’s falling especially fast in some of the country’s richest ZIP codes. A study from Altos Research, the Mountain View, Ca., real-estate research firm, found that inventory in the nation’s 90 wealthiest ZIP codes fell 15 percent over the past year, slightly faster than the broader market.

But in the richest ZIP codes, inventory is down more than 50 percent. In a ZIP code in Carmel, Calif., inventory fell 76 percent over the past year. There were only four homes left on the market priced at $1 million or more as of the end of May, according to Altos.

In Palm Beach, Fla., the number of $1 million-plus homes has plunged by 70 percent, falling from 89 to 26. And in the Old Greenwich, Conn. ZIP code, there are only 10 homes left priced at $1 million or more, down 58 percent, according to Altos.

“I don’t recall seeing the market like this, and it’s come so quickly,” said Cristina Condon of Sotheby’s International Real Estate in Palm Beach. She said buyers have poured into the market in recent months, many from overseas. American buyers are also piling in—some from higher-tax states like California, lured by low taxes and still-low prices in Florida.

The phrase “mansion shortage” sounds funny. It may be true in a business supply and demand sense but shortage is a term often reserved for more essential commodities, not luxurious homes.

This is more evidence that there is a bifurcated housing market: the wealthy, whether Americans or residents of other countries, seem to be doing fine with their real estate.

Five kinds of new houses that are non-McMansions

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A recent discussion thread started with this statement: “I don’t think it should cost $500K or 5,000 square feet for a body to live. Show me the opposite of the McMansion that is still sexy.” So what might this look like? Here are some common options today of non-McMansions, homes intentionally built not to be McMansions:

1. Tiny houses. These are opposites of McMansions because of their size. While McMansions are known for having 3,000 square feet or more, tiny houses have several hundred square feet or less. The tiny house is not just about having less space; it is a completely different way of life as it is hard to accumulate much in the house.

2. The Not-So-Big House. Promoted by architect Sarah Susanka, these homes are not necessarily much smaller than McMansions but are built more to the personal interests and tastes of the individual owner. In other words, these houses are built to fit the owners while McMansions are seen as being mass-produced homes that owners have to fit themselves into.

3. New Urbanist homes. These homes could look quite different depending on the area of the country in which they are located as New Urbanists argue homes should follow regional architectural styles. But, there would be some common features: front porches, closer placement to the street, alleys if possible. The New Urbanist home might have the same square footage or similar features compared to McMansions but is intended to be better connected to the surrounding neighborhood, encouraging more social life.

4. Very energy-efficient homes including passive homes and net zero-energy homes. Again, these homes may be like McMansions in features and size but they are seen as less wasteful and have more quality construction.

5. Modernist homes. I’m not convinced many Americans would choose this option but it seems to be a regular favorite of architects and designers. These homes are not necessarily smaller than McMansions but have much more architectural credibility and are often one-of-a-kind.

Uptick in SUV/light truck sales alongside increase in big houses

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Following up on a supposed McMansion comeback, Jordan Weissmann notes that SUV sales have also increased:

And how about those gas guzzlers? They’re on the rebound too. More than 51 percent of new autos sold today are light trucks, a category which includes SUVs. That’s right where we were in the Spring of 2007, though below the all-time peak of around 6 percent.

Truck_Sales_Fred.png

Now some caveats. The light truck category also includes increasingly popular crossover vehicles, which share some of the space and styling of SUVs, but are more fuel efficient. So the big cars being bought today aren’t quite the same as the big cars that were being bought yesterday. Meanwhile, mortgage credit is hard to come by, and perhaps as a result, the average new home buyer is a bit richer than before the crash, according to the NAHB’s data. That might partly explain our growing abodes, since wealthier families tend to buy larger homes. And as recession-scarred Millennials start entering the home market, there’s a chance they’ll start opting for smaller houses, as some real estate experts believe they will.

But sometimes it just feels like we never learn.

This builds on one of the most common critiques of McMansions: they are part of a package deal of excessive consumption that includes SUVs, bulk purchases at big box stores, and oversized food portions. There is little doubt that Americans consume a lot, particularly in comparison to many other nations, but it is not just about having a lot. This critique also is about being green and asking whether these levels of consumption can continue or could be extended to all that many other humans before resources run out. And, it often seems that there is a moral argument underlying this critique: should people have this size house and this size vehicle? This is why I think it would get really interesting if McMansions could be much greener (sustainable materials, low energy usage, less reliant on automobiles and built in denser areas) and SUVs could be more fuel efficient (is 40 mpg doable?).

Assessing “The Return of McMansions” in the NYT

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Following up on the same data behind the CNN story on the McMansion comeback, the NYT looks more closely at the characteristics of new houses in 2012. Here is my summary:

-Housing starts were still down in 2012. Looking at the graph with housing start data since 1973 shows that the last few years have been quite different.

-The homes built in 2012 were bigger: the highest median square footage ever of 2,306 square feet, 41% of the houses were four or more bedrooms (a new record), and 30% of new houses had 3 or more bathrooms (also a new record).

My thoughts on this data:

1. This is not a big surprise. While housing starts are way down, wealthier Americans and others have still been able to buy large new homes. Again, Toll Brothers is doing just fine. On the other hand, the lower ends of the housing market are not doing well.

2. It is interesting again for people to pick up on the highest-ever median square footage for new houses. For years, journalists and others have looked at the average square footage which is bit down from its high several years ago. Perhaps the median is now alluring because it is at its highest point and therefore can be linked to McMansions and American excess?

3. More houses have more bedrooms and yet the average family size in the United States has decreased in recent decades and more Americans are now living alone. So what are these bedrooms being used for?

 

CNN says “McMansions are making a comeback” but the data is limited

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CNN reports that McMansions just may be on the way back:

During the past three years, the average size of new homes has grown significantly, according to a Census Bureau report released Monday. In 2012, the median home in the U.S. hit an all-time record of 2,306 square feet, up 8% from 2009.

During the recession, Americans downsized and the average new home shrunk in size by 6% over two years to 2,135 square feet. At the time, many industry experts said the days of the McMansion were over.

The shrinkage was supposed to indicate that a new era had begun, with young buyers seeking to live closer to urban cores and settling for smaller places and baby boomers downsizing after their kids had flown the nest.

But it wasn’t that consumers wanted less space, many just couldn’t afford more, said Jeffry Roos, a regional president for home builder Lennar. And now that the economy is improving, they’re demanding bigger homes again, he said.

This is what I suspected might happen: once the housing market picked up again, some Americans would go back to buying bigger houses. But, this article has a few problems as it relies on (1) the median home size and (2) talking to several large builders.

Regarding home size: the figures cited more often is the average home size. The average size for new houses went from roughly 900 square feet in 1950 to nearly 2,500 in the mid-2000s. The median home size might be more accurate as the extra big homes can’t skew the data as much but the average is used more often. Also, the median hasn’t changed all that much in the last few years – this is only a difference of 150 square feet, a 12×12 room. Why can’t we see figure about the number of big homes that have or have not been built rather than relying on these overall figures that are a snapshot of a varied housing industry?

Relying on just a few large builders also does not reveal the big picture. The builders cited, particularly Toll Brothers, are big players but the housing market has a lot of different builders and developers. Overall, how are lots of different builders feeling about big houses? Are they actually building these bigger houses? What do real estate experts say? The news for Toll Brothers has looked good recently but there is more to the big house market than just Toll Brothers.

This seems like an article that would benefit from better data and also may not really be able to be written until some more time has passed and the trend is more clear. In the meantime, simply invoking the term McMansion and discussing a possible trend is apparently enough…

UPDATE 6/5/13: As the CNN story is repeated across the web, there is some confusion. For example, look at how this retelling mixes the idea of an average or median:

A new Census Bureau report says the average size of a new home has grown eight percent in the last three years, up to a record 2,300 sq. ft. in 2012…

According to the National Association of Homebuilders, buyers prefer a median home size of just over 2,200 feet, in line with the Census average.

Two different figures for the “middle” size mean two different things…

Wait, the good episodes of Arrested Development are like fully furnished McMansions?

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One commentator suggests fans of the new season of Arrested Development should be patient and then makes an interesting comparison:

Stay cool, Internet. Arrested Development‘s new Netflix-delivered season may prove to be great yet.

Within hours of the streaming service dropping a 15-episode Bluth bomb, critics and fans rushed to proclaim the new episodes as substandard. Mere model homes instead of the fully furnished McMansions that they had watched and rewatched over the past few years. And while I certainly count myself amongst the fans who feel at least a wee bit disappointed by the new episodes, it’s still far too early to jump to conclusions about the episodes’ quality or legacy.

You see, Arrested Development is a unique show. While most sitcoms rely on simple setups and punchlines for their laughs, this is one show that runs amuck on the formula.Punchline often come before setups, and it’s not uncommon for objects to regularly flash across the screen and get call-backs several episodes (or even seasons) later. Basically: Many of the show’s jokes were simply not designed to make any sense the first time you see them.

As someone who has studied the use of the word McMansion, it is unusual to see someone making a favorable reference to McMansions. In this article, fans of Arrested Development are waiting for the “fully furnished McMansions” which are compared to the good episodes of the show. This is odd enough in itself. But, there is an extra twist. The show itself has commentary about McMansions. As Wikipedia puts it, “The Bluth family of the television series Arrested Development is in the business of building opulent-looking sub-quality housing.” Part of the show’s comedy is that this family who involved in a quintessential American industry, building homes, is so dysfunctional. They provide the American Dream but live a wacky version of American family life.

I also suspect that many fans of Arrested Development would not be fans of McMansions. The sort of arcane and long-form humor (see the running jokes here) of the show doesn’t exactly endear itself to the masses.

Housing recovery more than just the McMansions of Toll Brothers?

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One analyst suggests the housing recovery in recent months is more than just an uptick in McMansions and big homes:

The housing market appears to have recovered from the depth of its decline. Toll Brothers (TOL) reported a whopping 46% jump in its latest earnings report and Home Depot’s (HD) earnings soared 18%. Today the National Association of Realtors reported that April existing home sales surged to their highest level in more than three years…

Michael Santoli, senior columnist for Yahoo! Finance, says the housing recovery seems to have a new leg based on a scarcity of supply coupled with low interest rates and growing demand.

“This can feed on itself for a while,” says Santoli, “not just with regard to Toll Brothers, which makes higher end McMansion-type houses, but across the industry.”

Santoli says not to expect a steep rise in prices from here despite a “bottleneck of demand.” And don’t expect all housing-related stocks to surge.

It would be helpful to see more exact housing figures at different levels of the market. Big homes seem to be doing okay as evidenced by the strength of Toll Brothers. But, the lower ends of the market don’t seem to be recovering as much as underwater mortgages lead to limited supply and hold the housing market back. When the housing market is truly recovering, shouldn’t a broad swath of Americans benefit? Or, are we seeing a fundamental shift in American housing where middle and lower-class residents have continuing difficulty in purchasing homes?

One way to destroy the planet: “heat a McMansion”

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Heating a McMansion is part of a list of 12 ways of “how to destroy the planet”:

The easiest way to waste extra energy in a large home is to keep the air conditioning and the heater on all the time, and adjust them both up until you’re comfortable. Space-heating makes up nearly half of the average home utility bill.

Heating water uses up more energy than anything other than heating air. For the profligate, that means long showers and always setting the washing machine for whites.

Perhaps this is why there is more interest in energy efficient homes or even net-zero energy homes. This argument would be even stronger if there were some numbers to compare larger and smaller homes. How much more energy does an average 3,000 square foot require compared to an average 1,800 square foot home? Or a 5,000 square foot house versus a 2,5000 square foot home?

One way around this would be to have home sellers include average utility bills as part of the documentation or listing of the property. Think of it like a MPG rating for a car – homeowners should also have the ability to assess the energy usage. Going further, home sellers might also list comparisons to other nearby homes. I’ve seen reports that using smart energy meters that give homeowners comparisons to their neighbors helps reduce usage so why not also make it part of the real estate process?

New buyers looking for luxury amenities rather than giant homes still focused on consumption?

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More home buyers today may be choosing amenities over big houses:

Oversized McMansions are history. Instead of big houses with rooms that might seldom — if ever — be used, builders are offering luxury amenities that add to comfort and enjoyment for years to come.

How about a Woman Cave? Other innovations include separate suites for in-laws or “boomerang” children who return home for a time after college or maybe a divorce, luxury walk-in closets and gourmet kitchens that make even a microwave dinner feel special.

“Two things sell homes — baths and kitchens,” said Peder Jensen, director of sales for Nashville’s Jones Co., which recently introduced the Woman Cave…

In addition to lots of granite, Dock Street offers kitchens with double ovens and gas cooktops. Master closets have a California Closet organizer.

“It’s sexy to have a nice master closet,” said Dan Kingsbury, project manager and principal broker at Tollgate Village. “It adds a ‘wow’ factor.”…

“Years ago it was all about square footage. The more the better. Now people want to downsize but upgrade,” he said.

Critics of McMansions have argued for years that the homes are more about being impressive rather than being useful. Additionally, McMansions have been viewed as symbols of excessive consumption. Yet, do these smaller homes with upgraded amenities really get away from this? While the amenities might be more understated and more functional, these amenities are likely not cheap and builders and developers can boost their profits on all sorts of upgrades. In the end, aren’t both the McMansions and upgraded amenities still about consumption, whether it is directed at visitors and possible buyers versus turned in on the homeowners themselves?