Tag Archives: real estate

McMansions come to Levittown

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Levittowns are well known for its mass-produced homes but plenty of change has come to these homes and communities in recent decades. There are now even McMansions:

Take a ride down any Levittown street, and you will see the changes. I suppose, after 60 years, some change is to be expected. Apparently, even a complete tear down and re-build. That’s what happened over in Levittown’s Kenwood section.

This super-sized,’McMansion’, juxtaposed next to an asbestos-sided Jubilee, is the talk of Kentucky Lane. To my knowledge, there was no camera crew or shouts of ‘move that bus!” for this renovation. This prominent 3-story home is a sore thumb on a quiet street of  neatly lined Levitt built 2-story specials. It’s a monster of a house, complete with 5- bedrooms and 4-bathrooms. And? It is for sale. The asking price? Over 600-grand.

In.

Levittown.

Who will buy this house?

I posed this question to local realtor, Jen Mandell-Sommerer, of RE/MAX Advantage. She shared, “It’s not going to help the sales in Kenwood, nor do I think it is going to really hurt the sales in Levittown. The home just does not fit the area. I feel if a buyer has $650,000 they are not going to look in the Levittown area, especially in Bristol Township for that price range. Our houses are selling just in the $200,000 range.”

The listing for the house, which is down to $495,000, is here. Looks like a possibility for a McMansion: 3265 square feet, some odd architecture in the front, and a teardown that dwarfs original (yet altered) Levittown homes. The red sports car in the front driveway (both uncovered and covered) is an interesting touch, there is an interesting walk-through shower, and an extra-wide (leather?) chair next to a jacuzzi tub.

Chicago helped lead the way in northern residential segregation

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A blog post from Chicago magazine tells part of the story of how Chicago helped lead the way for northern segregation:

In his new book Segregation: A Global History of Divided Cities, Carl H. Nightingale traces the phenomenon back to Sumer, but narrows down to a focus on Johannesburg and Chicago. In the former, segregation was explicit. In the latter, it couldn’t be; in 1917, the NAACP challenged a segregation ordinance in Louisville, leading to the decision in Buchanan v. Warley, in which “a multiracial team of attorneys led by a black professional had forced a white supremacist judiciary to choose between racism and a basic premise of laissez-faire capitalism—and property rights won out, at least in the case of neighborhood segregation.” But there was profit to be had in racism, and it would soon find ways around “laissez-faire capitalism,” with curious allies in the Progressive movement.

About a decade before Buchanan, the National Association of Real Estate Boards grew out of the Chicago Real Estate Board; it would coin the term realtor, and set professional standards for the sale of real estate (now the National Association of Realtors, it remains one of the most powerful lobbying organizations in the country). In the 1920s, its general counsel was Nathan William MacChesney, a former president of the Illinois Bar and a co-founder of Northwestern’s Journal of Criminal Law and Criminology. MacChesney was considered a progressive; in the words of David Roediger, “the principal figure in the ‘progressive’ reform of real estate.”

The NAREB, and MacChesney, had a powerful progressive ally in Richard T. Ely, then an economist at the University of Wisconsin; in the mid-’20s, he moved to Northwestern. Ely, a proponent of the Social Gospel, had ties to Chicago progressives—he was the first president of the American Association of Labor Legislation, a “useful synechodoche for progressive economics,” which had Jane Addams on its board.

But Ely and MacChesney also represented troubling strains in the Progressive movement, as Nightingale writes:

Though neither elaborated a full-fledged theory of race in print, both had swum in a similar soup of racialized and imperialist reform politics for most of their careers…. several times [Ely] advocated measures to slow down the reproduction of people he deemed part of the “sad human rubbish-heap”—the “feeble-minded,” welfare recipients, and criminals…. MacChesney, whose list of board memberships in reform organizations was legendary, likewise wrote a eugenical tract advocating sterilization programs for the mentally ill and for prisoners…

The Great Migration continued to increase Chicago’s black population, but the city now had a powerful tool to control it. By 1940, according to historian Beryl Satter, Chicago had more racial-deed restrictions than any other city in the country; half the city was covered by such covenants. Nor was it limited to Chicago, Satter writes: “Real estate boards across the nation recognized CREB’s pioneering work in maintaining all-white communities and looked to CREB for advice as they crafted their own racially restrictive plans.” The fear that Johnson—himself a child of the Great Migration—and his colleagues had warned about in 1922 came to fruition, encoded into law.

Chicago is a global city but also has a checkered past. I don’t think many Chicagoans today would like the comparison to Johannesburg.

This history should be familiar to those who know America’s past: real estate interests and others, including the federal and local governments, developed a system of racially-restrictive covenants, discriminatory mortgage lending practices, and other practices like blockbusting in order to limit where blacks and other minorities could live. When these techniques were struck down and fair housing laws became common by the late 1960s, whites responded by leaving many urban neighborhoods and moving to the suburbs.

Century 21 survey suggests many Americans would cut back in other areas to buy their “dream home

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A new survey from Century 21 looks at what other purchases Americans would be willing to sacrifice in order to afford their “dream home”:

69 percent of homeowners who don’t own what they described as their “dream home” would be willing to make sacrifices to their personal lifestyle to be financially able to purchase it. Non-homeowners are more willing to make sacrifices, and 80 percent indicated they are willing to make changes to their personal lifestyle in order to be financially able purchase their dream home, including:

  • 50 percent: would cut back on dining out,
  • 49 percent: would cut back on their shopping for non-essential items (e.g.,
    clothing, accessories, gadgets, etc.),
  • 47 percent: would give up luxuries (e.g., expensive cable packages, trips to the
    salon, etc.),
  • 39 percent: would cut back on vacations, and
  • 10 percent would contribute less to their 401(k) in order to be able to purchase
    their dream home.

This suggests buying a home is still an important priority for many Americans. At the same time, the questions don’t really get at how much people might be willing to cut back (5% on dining out? 50%), how this compares to other purchases (would people say similar things if they were asked about purchasing a new car or some other big purchase), and how much people would need to cut back if they bought a house (there could be a big difference here if people bought a $220k home versus a $450k home). Also, I’m curious about that 50% that wouldn’t cut back on dining out or the 61% who wouldn’t cut back on vacations; do they not need to or would they seriously not do so in order to buy a dream house?

Another note: this was a web survey.

Harris Interactive® fielded the study on behalf of Mullen Communications from April 24-26, 2012, via its QuickQuerySM online omnibus service, interviewing 2,213 U.S. adults aged 18 years and older, of which 1,416 are homeowners and 734 are renters. This data was weighted to reflect the composition of the general adult population. No estimates of theoretical sampling error can be calculated; a full methodology is available.

Two issues here: this was not a random sample (hence the need for weighting) and if there can’t be any estimates of the sampling error, how trustworthy are the results?

Trulia survey: an increased number of Americans are looking for bigger homes

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Perhaps the McMansion is indeed making a comeback: a Trulia survey suggests more Americans are looking at bigger homes.

In Trulia’s latest American Dream survey, 17 percent more homebuyers said they envisioned buying 2,600 sq. foot homes this year than in 2011. What’s more, the number of people who set their sights on super-sized digs (3,200 sq. foot-plus) has nearly doubled from 6 percent to 11 percent.

“It turns out that new-home builders spotted this growing appetite for size,” Trulia notes. “The Census recently reported the average home constructed increased from 2,392 square feet in 2010 to 2,480 square feet in 2011.”

The only problem is our eyes might be bigger than our budgets…

There’s also the housing market itself to consider, as Trulia points out:

“Although newly constructed homes are getting bigger, most inventory is existing homes, including foreclosures, and the current inventory of for-sale homes skews smaller than most people’s idea…Meanwhile, the super-sized category –3,200-plus–is pretty much on the money, but the majority of available homes fall in the smaller size categories–800 to 2,000 square feet. That means many Americans may have to downsize their dreams to fit a smaller reality.”

Granted, this is still a small segment of the market (under 20% of homebuyers) but there does appear to be more interest in larger houses. I wonder if this suggests the housing market will continue to be bifurcated: wealthier homebuyers will look for larger new homes with amenities while the lower end buyers will scour smaller homes, short sales, and foreclosures.

Study: home values increase several percent very near a Walmart

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A new study suggests that the value of a home increases a few percent if it is located within a half-mile of a Walmart:

It turns out, according to their recently published research, that values increase an average of 2 to 3 percent for homes within half a mile of a Wal-Mart store and 1 to 2 percent when the home is a half mile to 1 mile from a store…

The duo studied more than 1 million home sales between January 1998 and January 2008 near 159 Wal-Marts that were built between July 2000 and January 2006. They compared the prices of homes within four miles of a store that sold up to 21/2 years before an opening or 21/2 years afterward. The long time frame was picked on purpose, after the researchers discovered that the median number of days between when Wal-Mart announced a new store and when it opened was 516 days.

The study also noted that Wal-Mart’s entry into a market often acts as a beacon, generating other economic development nearby…

“On average, the benefits to quick and easy access to the lower retail prices offered by Wal-Mart and shopping at these other stores appear to matter more to households than any increase in crime, traffic and congestion, noise and light pollution or other negative externalities that would be capitalized into housing prices,” the professors wrote.

One interpretation of these findings: people are willing to pay a little more to be located near some commercial development. They may not want to live right next to it evidenced by the fact that most municipalities have some strong guidelines about how commercial areas to demarcate the space between development and residential areas, often with some combination of a berm, a fence, and trees/bushes. But, being a few moments away from a place where you can quickly buy groceries (and Walmart is the country’s biggest grocery store) and other goods is a plus.

One thing that is likely ironic about this data is that while homes close to the Walmart are a little higher, it is unlikely that residents walk to Walmart even though they could. You could interpret this data as evidence people want to live closer to some denser commercial development but having a Walmart nearby is probably not about walkability.

I wonder if these researchers could also tell how much development Walmarts tend to attract. Do they tend to act as anchors for one corner of a busy intersection? Is it enough for development on multiple corners? How many square feet of retail space, on average, can be successfully operated once a Walmart moves in?

I’m now going to look for real estate ads that mention the proximity of a Walmart…I’m not holding my breath.

No agreed-upon standard on how to measure a house’s square footage

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You might think this would have been settled some time ago but apparently not: builders, real estate agents, and assessors do not have a common standard by which to determine the square footage of a house.

Many shoppers blindly trust that the size of a new home featured in an ad or brochure is accurate. But the reality is that no official industry standard exists for calculating residential square footage, nor is there widespread consensus on the correct measuring methodology.

Some builders and agents, for example, tally a home’s total footprint, including uninhabitable space (such as areas between walls), while others round off calculations to the next highest number…

Steve Carr, president of Naperville-based Carr Building and Development LLC, said in new construction the builder or architect usually determines square footage calculations.

For resale homes, square footage is typically determined by the seller’s real estate agent (who will measure the dimensions or obtain predetermined measurements from the county assessor’s office) or by an appraiser, who is enlisted by the seller or, if an appraisal is ordered, the buyer’s lender, Wittman said.

So it sounds like the square footage is determined by whoever has a financial interest in the number. It would be interesting to do a study and look at a sample of homes and see whether the square footage fluctuates depending who is doing the measuring (a buyer, seller, or assessor).

There is some interesting discussion later in the article about how homes cannot strictly be compared on the price per square foot as there are other factors involved. This is true but I think this is misleading: there are few figures that people start with when looking for a home and square footage is one of them (perhaps alongside how many bedrooms the home has). I have thought in the past that people who buy homes for their square footage are different kinds of people (social class, taste) compared to those who buy for the architecture of the home or perhaps the neighborhood.

All together, square footage matters for everyone involved in the building, buying and selling, and taxing of homes and I’m surprised that there is no single standard. Who would lose the most by doing this?

Walmart increases nearby home values

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The Atlantic reports on a University of Chicago working paper (subscription req.) that having a Walmart nearby noticeably affects housing prices:

Home values within a half mile of a new store got a 2 and 3 percent boost. Within a mile, the store pushed up values 1 to 2 percent. That translated to a $7,000 average bump for nearby homes and $4,000 for houses a little further away.

Unfortunately, I don’t have a subscription and thus cannot look at the paper directly, but I have a few questions:

1.  Do other big-box retailers (e.g., Target) similarly boost nearby housing prices?
1a.  Is Walmart’s boost larger?

2.  Is there a corresponding drop in housing prices if/when a particular Walmart closes (often only to reopen at a new location a few miles away)?
2a.  If yes, is the drop greater than the boost?

Real estate wisdom: don’t build the nicest McMansion on the block

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An oft-cited piece of real estate wisdom is that you shouldn’t buy or build the nicest home in a neighborhood. Here is an update on that tale: especially don’t do this when you are building a McMansion.

For example, consider the fate of what became a conspicuously large house for sale in an Atlanta suburb.

A few years ago, at the top of the market, the owners purchased a small fixer-upper, then renovated and significantly expanded it. Once completed, the owners tried to sell their McMansion in one of the worst real estate markets ever. After a year without success, they had to lower the asking price multiple times — and ultimately walked away with a big loss.

The fact that they bought at the top of the market and tried to sell during a decline in values certainly didn’t help. But it wasn’t the only factor by any means. On one side of the house was an apartment building. On the other sat a home that was an eyesore.

The proximity of these two properties should have been a warning to the owners: Don’t super-size your house when it’s surrounded by properties that aren’t at least equal in value. Instead, the owners had gotten caught up in the market frenzy. They didn’t think about what would happen when it came time to sell…

A better strategy, no matter what kind of market, is to buy the worst house on the best block. You can always improve the property and therefore increase its value. And because it’s on a great block, improvements you make to the home will be practically guaranteed to give you a top return on your investment.

I wonder if there aren’t two factors here that could mitigate the reduced selling price of the McMansion:

1. The owners really really wanted to be in this particular neighborhood. And if they have the money to build the bigger home and absorb the loss more easily (the article doesn’t say), perhaps this was more about the block than the particular house. Sure, they may have not made the most money they could have on their property but perhaps that wasn’t the most important thing.

2. If one does pursue the strategy of buying the worst house on the block, might one have to pay more to buy into a nicer block compared to buying a nicer house in a worse block? In other words, this advice partly depends on the context of the neighborhood. To buy into a nicer neighborhood at the start, one is likely to have to overpay, particularly in neighborhoods that are really hot or where there is a lot of pressure to tear down the existing home and build something bigger and better.

Overall, I’m intrigued by the general logic here from real estate agents: all that matters is the spread between what an owner paid (plus what they end up putting into the house) and what they get when they sell the home. In a perfect real estate world, all homeowners are told that they too can make money off their homes. Is this really possible? Is it even realistic for most owners? There are other reasons people buy homes and wealthier homeowners have more financial latitude to do what they want.

McMansions are so big you need staging to define the rooms for potential buyers

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A New York firm talks about why staging is needed in McMansions:

Staging is a concept that started on the West Coast, and was virtually unknown when Guest and Kramer started introducing it to real estate brokers 12 years ago.

“The advantage is huge,” says Guest. “People walk in to these McMansions. There are so many rooms they don’t know which one is used for what. Is this the family room? Parlor? Great room? We define it. It lets them see that they could live there.”

“We would try to explain to the real estate brokers,” says Kramer, “giving them figures and excerpts from articles in San Francisco and London. It was a difficult idea to sell to a seller.”…

But since then, times have changed. From the real estate boom to the recession that followed, house staging has continued to grow.

“The worst year for everyone was out best year ever,” says Kramer. She acknowledges that perhaps, as it gets harder to sell a house, people are willing to put a little more effort into the process. In addition, people have gotten more involved in the process.

McMansions are so large that people don’t know what to do with the space! Why not get prospective homebuyers maps or at least architectural plans in order to make it through the house! On one hand, this seems to reinforce some stereotypes about McMansions: they have a lot of unnecessary space and Americans, for some reason, really like to have that kind of space. I can imagine Sarah Susanka would have a good time talking about why people should go with smaller homes rather than have to have their spaces defined for them.

On the other hand, staging seems to be pretty common today across housing types. It can be difficult for homebuyers to envision what a space can become without a little help. What does it cost to stage the typical McMansion (let’s say between 3,500 and 6,000 square feet) these days? And what staging touches in McMansions work the best for selling the house?

Customizing your luxury home too much might make it harder to sell

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Arguing against McMansions and mass-produced homes, architects (like Sarah Susanka), environmental psychologists, and other argue that homes should be more customized for individual homeowners and residents. But could this customization make the home harder to sell? The New York Times investigates:

That, at least, has been Mr. Rooney’s experience, as potential buyers seem to find amenities he lovingly included in his dream home “more of a disadvantage,” he said. In fact, they try to use the custom extras as “a negotiation weapon,” claiming no use, for instance, for his personal salon or sports court…

Peggy Moriarty, an associate broker with Daniel Gale Sotheby’s International Realty, says that when it comes to high-end properties with lots of amenities, golf courses and the like “get beaten up by the weather” after the first year, and homeowners “get bored.”…

Similarly, home theaters are attractive, fun and “an added plus,” but often tucked down in a basement corner. “People like to hang out near the kitchen and watch TV in the family room,” she said. Except for teenagers or “basement dwellers,” even the most magnificent theater “after the initial creation doesn’t get used that much.” The lesson here, according to Ms. Moriarty: “The toys aren’t selling the house.”

Not all brokers agree. Mr. Elliott, a broker who owns his own firm, says there is demand for amenity-laden properties among foreign buyers. “When you get to houses over a certain level,” he said, “the more amenities, the better.”

Here is the trade-off: if you customize the home while living in it, some would argue that the home becomes more personal and relaxing while the best is utilized more effectively. On the other hand, certain customizations can limit your market or can lead the seller to have to make concessions.

Three other things strike me:

1. I assume that the people who buy these larger luxury homes also theoretically have the money available to convert the space they aren’t thrilled with into something they would rather have. Does this suggest that the wealthy don’t want to undergo many home renovations? In other words, are the wealthy more or less likely to want move in ready homes?

2. I would argue that the homes mentioned in this article, a $4.25 million home, a $14 dollar home, a $1.789 million home, and a $9.475 million home (and check out the luxury details of these homes such as a par-3 golf course or a 33-foot ballroom), are clearly mansions. Early on in the article, here is how these features and homes were summed up: “idiosyncratic extravagances that supersized homes in the McMansion era just had to have.” These homes may have been built in the McMansion era but not are not McMansions; these kinds of features are ones only the truly wealthy could afford.

3. How much does staging matter when selling one of these luxury homes and how much does it cost? There is a lot of space to cover…