Tag Archives: real estate

More Chicago area houses purchased with cash

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In perhaps another sign of the bifurcated housing market, more and more buyers are purchasing Chicago area homes with cash:

Some people actually pay cash to buy a house. In fact, it happens more than you’d probably expect—in the first half of 2013, cash paid for 34 percent of all homes bought in the Chicago area, according to data that RealtyTrac released exclusively to Chicago. For the month of June, cash bought 30 percent of local homes, which was even with the national average in data the company released last week.

Many of those cash buyers were investors, either the big corporate type or the smaller individual type. But real estate agents and others say the number of end-users buying homes for their own use and paying cash has risen steeply this year. (I could not find data that breaks down which cash buyers are end users and which are investors.)

And the reasons this is happening more?

-They want to be the sharpest competitor in a multiple-bid situation. A cash offer is “the cleanest offer,” Whelan says. It assures the seller that the deal won’t fall through for lack of financing, and it typically offers a faster closing because it eliminates the wait for the mortgage process.

-They know that sellers sometimes will accept a lower-priced cash offer over a higher-priced offer that will be financed, to avoid the hassle.

-They may believe that the value of the home they want is above what an appraiser would calculate based on comps from the recent past. Paying cash instead of getting a mortgage leaps over a mortgage lender’s requirement of an appraisal, Kawabata points out.

-Although it’s been easing recently, jumbo loans—mortgages for more than $417,000 in the Chicago area—were difficult to get for the past few years so buyers of higher-priced homes had been lining up cash for the home purchases they wanted to make this year.

In other words, if you have the cash on hand, it can give you a leg up on big real estate purchases. But, this option isn’t available to most people. So, it seems like this helps those with wealth to continue to rack up the wealth through larger and/or more valuable real estate portfolios.

Just how much should McMansions cost?

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Curbed San Francisco asks whether a McMansion in the city should sell for $2.16 million. The pictures are interesting and here are a few more details on the home:

The big abode was built in 2011 and features things like “5 luxurious baths” (one of which is photographed with an awkward looking dog in it) and too much recessed lighting. In fact, there’s too much of everything. Too much moulding, too much granite, too large rooms. The 5-bed, 5-bath home clocks in at 4,487 square feet and is asking $2,160,000, which is way more than half of the neighborhood average list price of $869,500.

The main argument here, both in the post and in the comments, appears to be that the home is priced too high compared to the neighborhood in which it is located. Prices for real estate, of course, are relative. But, this could lead to a larger question: how much do McMansions cost? It is assumed that McMansions are big so they will cost a lot. But, just as I have argued that at some point the square footage of a home makes it a mansion rather than a McMansion (perhaps around 7-8,000 square feet?), is there a price point where the mass produced McMansion becomes something only for the wealthy? In addition to being big, another trait of McMansion is that they are more mass produced in terms of architecture and design. Yet, how many Bay Area residents could afford a $2.16 million home? I’m not sure exactly where this price point for a McMansion versus a mansion is, particularly in expensive markets like San Francisco, but there is a line somewhere.

Marketing “McMansions For Sale in Arizona”

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With the general negativity surrounding the term McMansion, it is rare to see those in real estate marketing McMansions. However, here is such a website: MyOwnArizona has “McMansions For Sale in Arizona.”

An Arizona home builder has a model available in a three-bedroom, or a larger four-bedroom version. “The four bedroom outsells the three bedroom all day long,” said Arizona McMansion home builder. “I don’t know if we’ve ever sold a three-bedroom one.”

“But it’s hard not to see the increase in home size as a sign that the economy is recovering,” said AZ builder. “People weren’t buying SUVs during the recession either and they are again.”

Please feel free to contact us and we can provide you with additional Arizona McMansion information to guide you through the buying/selling process in AZ. We look forward to hearing from you and working with you soon!

I’ve quoted the closing pitch. But, how the site gets to the conclusion is interesting as well. The argument is that Americans want bigger homes and homes are getting larger again after a downturn during the recent economic crisis. The whole thing reads as if it is trying to convince potential buyers that purchasing a McMansion is okay. In other words, McMansions may get a bad rap in the media (just like SUVs) but they are exactly what you and other Americans want!

I don’t know if this is the right way to sell McMansions. But, there is clearly quite a hurdle to overcome here.

 

New HUD study shows minorities continue to be shown fewer homes, apartments

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A new HUD audit study shows that compared to whites, minorities are given less access to homes and apartments:

Compared with white homebuyers, blacks who inquire about homes listed for sale are made aware of about 17 percent fewer homes and are shown 18 percent fewer ones. Asians are told about 15 percent fewer units and are shown 19 percent fewer properties. Researchers are unsure why Hispanic buyers were treated more equitably than other minority populations.

Among renters, all minority groups found out about fewer choices than did white consumers. Hispanic testers who contacted agents about advertised rental units learned about 12 percent fewer units available and were shown 7 percent fewer than white renters saw. Black renters learned about 11 percent fewer units and saw 4 percent fewer available rentals, while Asians were told about 10 percent fewer available rentals and shown 7 percent fewer units.

In the Chicago area, researchers found that African-American and white renters got equal access to information and showings of apartments, but African-Americans were less likely than white consumers to see at least one home that had no problems.

Blacks also were more likely than whites to be told that a credit check had to be performed and that particular rental units carried fees. They also were quoted higher fees than the ones quoted to white testers. On average, the extra fees quoted to blacks put the first-year cost of securing a rental unit at $350 more than the cost for white renters.

Hispanic testers in Chicago reported that they heard comments about their credit standing more often than the white testers, and the extra payments quoted to them were $131 more than white testers’.

As the HUD Secretary notes, these actions are less obvious than the redlining, blockbusting, and restrictive covenants of the early 1900s but they still lead to similar outcomes. This kind of study with pairs having the same qualifications and traits except for their race/ethnicity has been conducted for several decades with similar results: whites consistently have better access to housing options. Limiting access to housing options like this is illegal but happens regularly both in cities and suburbs. And housing and patterns of residential segregation is related to all sorts of other important life chances including job opportunities, schools, community resources and services, and social networks.

This article fails to mention what can be done about such discriminatory practices. Housing providers and those in real estate can be sued. However, this takes place on a case by case basis and thus it can take a while to crack down on a large number of offenders.

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…

McMansion owning Vermont governor criticized for real estate dealing with neighbor

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The governor of Vermont has run into some real estate trouble after buying the property of a neighbor:

Soon after the successful real estate investor built his McMansion on a rural dirt road here outside Vermont’s capital, he began throwing his wealth around, striking a deal to bail out his neighbor from a looming tax sale by buying the man’s property for a quarter of its appraised value.

Such a sale is not uncommon and likely would have gone unnoticed. Except the buyer was the governor of Vermont, Peter Shumlin. And the seller, Jerry Dodge, was a hard-luck ne’er-do-well with a criminal record and what his friends and family describe as limited intellect and diminishing prospects.

Since word of the deal surfaced last week, Shumlin has been under intense scrutiny in the state. Real estate lawyers generally conclude that he did nothing illegal, but that the governor might still have held himself to a higher standard of conduct, raising the question of when a savvy business deal becomes bad for his politics…

Some of Dodge’s dissatisfaction appears to have been fueled by family and friends telling him he took too little for his property. He recalled reciting the Pledge of Allegiance as a child, before he left school in the ninth grade. It’s not justice for all, he said. It’s “justice for the rich.”

Sounds like a sticky situation for a politician who doesn’t want to be seen taking advantage of another resident. At the same time, the use of the term McMansion is intriguing. See a picture of Shumlin’s house here and a wider overhead view here. From these far-off pictures, it doesn’t look too much like a McMansion. The house might have a large square footage but the exterior appears understated and the house does not dominate the large lot. In using the term McMansion, the AP might be referring more to the home’s recent construction by a wealthy resident rather than the architecture and design of a home within a suburban subdivision. The rest of the story does seem to play up the angle that Shulmin’s house is a wealthy and luxurious one, particularly compared with the more run-down property of his neighbor.

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?

Is Miami more of a global city because of a booming real estate market?

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The Financial Times looks at the increasing prices in the Miami housing market and suggests this is related to the city’s rising status as a global city. This leads to an interesting question: does an in-demand housing market mean that a city is necessarily a global city or does it simply make it more popular than before? I would tend to lean toward the second – being a global city is related more to a city’s role in global finance and status as a cultural center. Miami may be a regional financial center but is it really on the scale of the major cities in the United States? Check out the 2012 Global Cities Index from AT Kearney where Miami is #36. Miami may be popular these days but it has a long ways to go…

 

Targeting Santa Monica homeowners in order to build mini-mansions

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The housing market in Santa Monica, California is apparently in good shape: homeowners are being targeted by those who want to tear down their smaller homes and build bigger ones.

Santa Monicans are being targeted by real estate agents representing developers looking to turn small homes in desirable neighborhoods into mini-mansions that can be sold for double the original asking price.

The agents tend to single out older homes, often taking up a relatively small portion of the parcel on which they sit, offering a cash purchase and a promise by the buyer to take care of normal closing costs, provided the homeowner does not broadcast their intent to sell.

Residents report notes left on their doors, direct mail bearing a picture of their own home and even direct phone calls soliciting sales.

That practice is called by many names, including off-market listing, pocket listing or quiet listing, and while it is completely legal, it often is a bad deal for sellers in hot markets like Santa Monica, said Don Faught, president of the California Association of Realtors…

Sosin led the charge in the late 1990s against “McMansions,” homes built to the margins of their property lines. They overshadowed neighboring properties, and led to the death of many mature trees that had to be removed so that the home could be built out.

Her work resulted in new rules around single-family homes, requiring set backs and imposing controls over how much of a parcel can be covered.

The attempts to build to even those restricted maximums are unwelcome, she said, because they only succeed in making neighborhoods more expensive to move in to and replace quaint, well-loved homes with larger versions.

It sounds like the resident quoted above is ready for a teardown battle, should one develop, but the article makes it sound like people are generally unhappy with this approach. The real question in my mind is whether these sorts of real estate tactics are successful. Does this suggest developers are worried about how the community will react to more public plans to build bigger teardowns or is this primarily a way to get real estate at a cheaper price before it hits the open market? Either way, I would want to know how many homeowners actually sell their homes in such a way and how they negotiate the peer pressure in the neighborhood versus the offer from developers.

Also, is the use of the term “mini-mansion” intended to avoid using the term McMansion? I would expect McMansion in this sort of situation, particularly from unhappy residents…

h/t Curbed

Getting married in a Going Solo world: more married couples living separately

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More Americans are choosing to live alone but what happens if they want to get married? Here is one solution that appeals an increasing number of couples: get married but live apart.

It may seem unusual, but these non-traditional arrangements are more common than you think. The U.S. Census Bureau estimates 1.7 million married couples in the U.S choose to live apart, and experts say that number is on the rise.

Marriage and family therapist Dr. Jane Greer said the looming 50 percent divorce rate has couples worrying about the future before they even say “I do.” She said living apart allows them to avoid all the daily little conflicts that can lead to big problems down the road…

Ultimately, Haisha said, they avoid all the business of being married and they can just enjoy the marriage…

“We want to be the wind beneath each other’s wings, not clip each other’s wings,” Haisha said.

Judging from the comments made in this article, it sounds like these couples want to maintain the perceived strengths of living alone, which means you can escape from other people and don’t have to get too involved in daily life which might lead to conflict, while still enjoying their marriages. In other words, the ideals of autonomy and individualism are preserved while still committing to marriage. But, doesn’t this redefine marriage to some degree as another relationship that can be had at the time of one’s choosing?

Who should be really happy about this trend? People in real estate as it suggests more couples need two place to own or rent.