Tag Archives: price

Can a $10 million home really be a McMansion?

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I’ve worked on defining a McMansion before but after seeing a recent story about a new house listing few times, I stumbled into a new definitional issue: is there a price point where a home can no longer be considered a McMansion?

Location: Los Angeles, Calif.
Price: $10,000,000
The Skinny: Just weeks after closing on a 9,000-square-foot McMansion in Bel Air and reported plans for a gut renovation, hip-hop star Kanye West and reality TV regular Kim Kardashian have decided to cohabitate elsewhere. According to recent reports, the duo have flipped the property for around a million more than they paid. Redfin lists the previous sale price at $9M, so it seems Kim and Kanye have unloaded the place for somewhere around $10M. The mansion, completed in 2010 on less than an acre in the Holmby Hills neighborhood, features five bedrooms and seven bathrooms, but that wasn’t enough for the celeb couple, who were planning to gut the place and expand to 14,000 square feet.

Several features of this home would seem to put it in McMansion territory: it is 9,000 square feet (though this is getting close to regular “mansion” status), it is on a fairly small lot for a house its size, and it may be located in a neighborhood with a number of similar homes.

Yet, the price for this home may be way beyond the typical McMansion at $10 million. This is not just a mass produced home for the American masses; it is a home that from the beginning was only available to the wealthiest in global society. In this case, two of the biggest entertainment stars were able to flip the house. Because of this, I argue this home isn’t really a McMansion at all even though it might exhibit some McMansion traits. It should fall more in the mansion category because its price makes it quite inaccessible.

Deciding whether to buy or rent

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One of the New York Times blogs discusses whether residents should buy or own. The decision could be based on a ratio for metropolitan areas that gives some indication of whether owning or renting is a better choice:

A good rule of thumb is that you should often buy when the ratio is below 15 and rent when the ratio is above 20. If it’s between 15 and 20, lean toward renting — unless you find a home you really like and expect to stay there for many years.

While the metropolitan average is 15.1, 17 metro areas have ratings over 20 (led by East Bay, CA, Honolulu, HI, San Jose, CA, San Francisco, CA, and Seattle) and 14 metro areas have ratings below 15 (with the five lowest being Pittsburgh, PA, Cleveland, OH, Detroit, MI, Phoenix, AZ, and Dallas – Fort Worth, TX).

The blog writer come to this conclusion about the data: “It’s pretty amazing when you think about it. The country has suffered through a terrible crash in home prices, yet buying a house remains an iffy proposition in many markets.”

While this may be true, what is even more remarkable is that homeownership is still such a widespread goal. If this measure is reliable and valid (meaning that it is consistent and it really tells us something about buying vs. owning), then homeownership might never really be about an economic improvement over renting. Rather, Americans have made owning a home an important cultural value and then use economic rationales to justify their decisions.

What exactly is it that appeals to people about owning their home? They get to make their own decisions, they don’t have to pay a landlord or wait for them to take care of repairs, they get some separation from their neighbors, and overall, they feel like they have made it on their own. If renting was a cheaper option but people could still afford to buy a home, how many Americans would decide to rent?