Tag Archives: single-family homes

The houses of Donald Trump

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I was recently looking into what Donald Trump has said about the single-family home – arguably the cornerstone of the American Dream – and found this article on his six personal homes (including pictures and video tours). Two quick thoughts:

  1. Not surprisingly, Trump does not go small with his homes. No McMansions here. These are all expensive, luxurious properties.
  2. His homes are all on the East Coast or in the Caribbean. For a man who built his candidacy for president on support from forgotten America, his homes are from the elite areas.
  3. His style seems to be more traditional. This may be to project that his relatively new power – several decades of money and influence – are connected to traditional sources of power. There is not a modernist structure here. The Manhattan penthouse maybe comes the closest but even that is more opulent than modern or edgy.

Were McMansions ever for everybody?

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There is an idea out there that McMansions were everywhere at some point, invading the countryside and were within the financial means of all Americans. A recent Australian headline reminded me of this: “Small, smart, sustainable: Why a ‘McMansion’ isn’t for every Canberra homeowner.” The article goes on to argue that market forces are pushing people toward large houses that they don’t need.

I’ve never seen hard numbers on this – nobody is really measuring McMansion construction – but we can make some guesses based on Census data about the number of new homes of certain square feet. Between 1999 and 2016, the percent of new homes over 3,000 square feet was between 17% and 31%. Not all of these homes are McMansions for a variety of reason: some are too large (over 10,000 square feet or so), some are not architecturally garish or discombobulated. Based on this, maybe 15-20% of all new homes since 1999 were McMansions? That is a sizable amount but not a majority.

Additionally, how many Americans could afford such homes? At the peak of the housing bubble, not everyone could buy a large new home in a nice community. Could everyone in the middle class access such a home at some point over this time period? Maybe. And that doesn’t even account for whether those who could afford McMansions wanted one (maybe 50% of Americans at most would want one?) or had other considerations when purchasing their home that led to another housing option.

McMansions have certainly exerted influence over the last few decades, particularly among the upper-middle class, in certain communities (generally whiter and wealthier communities), and in depictions of newer housing on TV and in movies. But, I don’t think they have been pervasive as sometimes is suggested.

Predicting the “great senior sell-off” to come

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Here is an update on one event that might be coming down the road: the time when the Baby Boomers decide to sell their homes.

Nelson pointed to the affordability issue as well as the fact that about a quarter of Millennials prefer urban housing, such as condos or townhouses, over the detached suburban homes that were the Boomers’ preferred habitat. Younger buyers, he said, will also be looking for starter homes—smaller than the big Colonials and split-levels that line America’s cul-de-sacs. “We can predict the next housing crash,” he said at the time. “That’ll be in about 2020.”

Four years later, Nelson tells CityLab that that he believes the sell-off will still occur—but later, in the mid- to late 2020s. This has to do with people deciding to defer selling their homes, hoping to get a better price later than settling for a lower price now. “Home values in much of the country are still less than those before the Great Recession of 2007 to 2009,” he says. Prior to the recession, the typical homeowner would sell a house about every six years. “It was like clockwork,” says Nelson. “This drove a lot of planning and development projections.”…

Nelson predicts that the fringe areas surrounding cities will bring the biggest headaches for Boomers looking to unload their houses. Because Millennials will be looking for small homes when they finally start to buy in larger numbers, the sprawling McMansions of the exurbs won’t be desirable to many of them. “The Boomers in the exurbs are going to be in a real pickle,” says Nelson. “Even in a dynamic market like Washington, D.C. or other booming cities, the market for those homes is going to be soft.”…

But many analysts do agree on one thing: More housing will need to be built for Millennials—and it needs to be scaled to their desires, not their parents’s. “Millennials are likely to prioritize different features in their homes, such as greener materials or in-law suites,” says Molinsky. And according to the Harvard Joint Center’s projections, nearly 90 percent of those looking for homes in 2035 will be under 35 or 70 and over—and both groups tend to buy less square footage.

I suppose we’ll see what happens. I tend to think that Millennials might not be as transformative as some have suggested in regards to where they want to live or in what kinds of houses they inhabit. At the same time, there may be fewer Millennials than Baby Boomers in the market for housing – both due to different sizes of the various cohorts as well as the limited purchasing power of some Millennials  which means it could take some time for those Baby Boomer dwellings to find buyers.

It is also interesting to consider what might happen if these homes, particularly those on the metropolitan fringes, can’t be sold. Would they be demolished? Converted? The community retrofitted? Drop to a low enough price that they become very attractive to certain groups? We have plenty of history as a country of people spreading out but not much experience with any serious contraction.

Zoning trade-off: privacy vs. adverse effects

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The conclusion of Sonia Hirt’s book Zoned in the USA sums up the advantages and disadvantages of a zoning system that privileges the single-family home:

Arguably, zoning – the kind of zoning that makes explicitly private space the formative compositional element of America’s settlements – does deliver the gift of privacy to American families. But put all the other arguments mentioned in the previous paragraphs together, and one begins to wonder whether the original promises of zoning were either highly suspect from the beginning or have since been turned on their heads. Paradoxically (from the viewpoint of zoning’s founders), we may not have more pollution and worse public health with our current zoning that we would have if we had modified our land-use laws more substantially over the last hundred years.

As Hirt discusses, residents can have their own private homes – the largest new single-family homes in the world – but that comes at a cost of traffic and commuting, worse pollution and using more land, and worse health as well as some unrealized dreams of zoning including reduced crime. Some would argue that the privacy is overrated as well: compared to many other countries, Americans have given up on public life.

While it is easier to imagine mixed uses in dense urban neighborhoods – imagine Jane Jacobs’ vision of a bustling mixed use New York neighborhood – it is harder to imagine mixed use or zoning throughout the vast expanses of American suburbs. Even New Urbanists have tended to design neighborhoods or shopping centers dropped into suburban settings rather than the whole fabric of suburban communities. From the beginning of American suburbs, there was the idea that the urban dweller was escaping to a cottage in nature. The home out there offered refuge from people, dirt, and bustle. Today, this legacy lives on when suburban residents oppose certain land uses near their homes for fear of a lower quality of life and subsequently reduced property values.

Ultimately, would the American suburbs even exist without the fundamental desire for privacy?

Closing on a house feels like…

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Based on my limited experience and scholarly interests, here are some possibilities for what closing on a house can be:

–Fulfilling the American Dream of homeownership. On the positive side, owning your own property and providing space for a family. On the less positive side, establishing your class status.

-Agreeing to a sizable debt to a large financial institution. On one hand, you probably couldn’t buy that home without a long mortgage (thank goodness for the 30 year loan). On the other hand, you don’t really own your property for a long time and those mortgage payments just keep coming. Overall, a home is going to be the single largest investment/outlay of money for many.

-The end of a complicated process. I’ve seen several surveys suggesting many Americans dislike applying for mortgages (here is one example). It is one of those things in life many people don’t do more than a few times and it often requires a lot of paperwork (both to submit and to read).

-The start of a new era. (1) Even with the mobility of Americans and our relatively low attachment to places, we get used to the physical structures in which we live. (2) A new home often means new social arrangements as we navigate changing families and new neighborhoods and communities.

-Keeping another house occupied. Obviously, no one wants a lot of vacant properties – with lots of discussions of this in recent years involving foreclosures and particular locations like Detroit – but we can push the idea further: just how long will American homes last? Will post-war suburban homes be worth rehabbing when they hit 40-80 years of existence?

-Helping a community continue to exist. With your home purchase, you are making a commitment, if not socially (you could just retreat to the private world of your new home), then at least through your taxes. Even if we put too much emphasis on high population growth as a sign of success, communities can’t afford to lose too many residents and taxpayers.

Explaining why Americans desire larger homes

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Here are several possible explanations for why Americans want bigger houses:

But there’s no real “normal’’ when it comes to desired home size — except the persistent perception that size equates to prestige, said Dak Kopec, director of Design for Human Health at Boston Architectural College. “Throughout all cultures, bigger is better and associated with wealth and power.’’…

“It’s clear that the American dream of living in a big house on a large lot has not gone away,’’ said Ralph McLaughlin, Trulia’s chief economist…

One reason American homes are so big, Powell argued, is that we have more disposable income. “You’re not just buying a 2,000-square-foot house, you’re also going to fill it with a whole bunch of stuff,’’ she said. The larger house and its contents soon become your new baseline, she said, as the furniture, paintings, and lamps you buy blend into the background to become part of your environment. “And then you can only upsize from there if you choose to keep your possessions.’’…

Dunn speculates that a larger home could boost happiness if it reduces conflict. “If you have a house that enables you to get along well with your spouse, if each person has a little of their own space, that might reduce conflict,’’ she said, “but I suspect there are seriously diminishing returns on that.’’

With these four factors – the status of a larger house, the American Dream, more disposable income and more stuff, and finding more happiness – perhaps we could argue that it requires some effort for Americans to live in a smaller place. It is not impossible to do so and certain factors, such as living in an expensive metropolitan area like New York City or San Francisco, can override the cultural conditioning to have a larger house. But, the American inertia may just be to have a larger dwelling.

We could also add some additional factors leading to larger homes in the United States:

  1. Suburban sprawl leads to more room for larger homes.
  2. Americans privilege private spaces over public spaces.
  3. Over the decades, the government and other actors helped make it easier for more people to own homes.
  4. Americans don’t necessarily need the space but they like the flexibility that more room provides such as having a hobby room or having children, parents, and/or relatives live with them.

Sales of luxury homes continue to slump

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Several new reports suggest the luxury housing market is not doing so well:

Sales in the Hamptons, Aspen and Los Angeles fell by double-digit percentages in the fourth quarter, as the supply of unsold homes grew and prices came under pressure, according to market reports Douglas Elliman and Miller Samuel Real Estate Appraisers & Consultants.

Separate research from Redfin found that luxury properties nationwide under-performed the broader housing market for the eighth consecutive quarter. The supply of homes priced at $1 million or more rose 1 percent in the fourth quarter, while the number of $5 million-plus homes was up 15 percent.

The article starts with the suggestion that the election limited sales. But, that doesn’t do much to explain the issues over eight quarters. Perhaps there is a bit of a luxury home bubble? I mean, how many multi-million dollar properties can be bought and sold? I also feel like I have seen numerous news stories in recent years about the latest home that is breaking the record for asking price. But, such homes are only within reach of the wealthiest people.

It would be interesting to hear what experts think this slump means. Builders shifting away from super expensive homes to cheaper homes? The wealthy looking to invest in other kinds of real estate? Any problems with vacant properties in these communities?

A zoning paradox: sacred residential spaces are dependent on their market values

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The last page of Sonia Hirt’s book Zoned in the USA lays out a key paradox in the American zoning system:

Isn’t it ironic that American residential space is so sacredly residential (so protected from intrusion through land-use law, that is) only because it is so commercial (because it is an object of trade rather than an object of our sentiments)?

Perhaps this another piece of evidence that single-family homes are one of the biggest objects of American consumption as well as key pieces in the American economic system.

Builders turning from McMansions to smaller housing units?

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Alongside recent news of reduced price premium for McMansions, data from the second quarter suggests builders are constructing more townhouses and smaller units:

Reversing years of ballooning home sizes aimed at upper-bracket buyers, builders have begun refocusing their efforts on entry-level and more modest-sized homes. According to new data from the National Association of Home Builders, the median floor area in new-home starts dropped during the second quarter of this year by about 3 percent.

Meanwhile, townhouse construction has been increasing fast — up 25 percent over the past year as of the second quarter. New townhouses, which typically are smaller and cost less than detached single-family homes, now account for 13 percent of all single-family starts, the highest it’s been since 2008.

NAHB chief economist Rob Dietz told me the quarterly decline is no fluke and the trend is likely to persist. “What you’re seeing is the beginning of builders trying to expand the market” and pull in first-time and other buyers who are frustrated by the lack of affordable alternatives in the resale arena, he said. Many shoppers, especially those with or planning on children, now find growing opportunities in townhouse and entry-level detached-home communities in the suburbs and exurbs compared with closer-in, higher-cost homes.

Critics of McMansions as well as advocates for affordable housing have been asking for years why builders have been focusing so much of their efforts on larger homes. The short answer: such homes can generate a lot of profit while building smaller homes lead to less profit per unit. Yet, this article also suggests that demand has increased for smaller homes as entry-level buyers haven’t been able to find much thus far.

One point to note: even as builders and buyers are looking for smaller spaces, I suspect builders will do what they can to raise the values/prices of these units. Smaller doesn’t necessarily mean that much cheaper once numerous features are added and locations are considered. This doesn’t necessarily mean that builders are going to be constructing bare bones, cheap units – unless they are significantly farther away from city centers and job centers.

Claim that McMansions have proportionally lost resale value

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A recent study by Trulia suggests McMansions don’t hold their value:

The premium that buyers can expect to pay for a McMansion in Fort Lauderdale, Fla., declined by 84 percent from 2012 to 2016, according to data compiled by Trulia. In Las Vegas, the premium dropped by 46 percent and in Phoenix, by 42 percent.

Real estate agents don’t usually tag their listings #McMansion, so to compile the data, Trulia created a proxy, measuring the price appreciation of homes built from 2001 and 2007 that have 3,000 to 5,000 square feet. While there’s no single size designation, and plenty of McMansions were built outside that time window, those specifications capture homes built at the height of the trend.

McMansions cost more to build than your average starter ranch home does, and they will sell for more. But the return on investment has dropped like a stone. The additional cash that buyers should be willing to part with to get a McMansion fell in 85 of the 100 largest U.S. metropolitan areas. For example, four years ago a typical McMansion in Fort Lauderdale was valued at $477,000, a 274 percent premium over all other homes in the area. This year, those McMansions are worth about $611,000, or 190 percent more than the rest the homes on the market.

The few areas in which McMansions are gaining value faster than more tasteful housing stock are located primarily in the Midwest and the eastern New York suburbs that make up Long Island. The McMansion premium in Long Island has increased by 10 percent over the last four years.

Read the Trulia report here.

Interesting claim. After the housing bubble burst, some commentators suggested that Americans should go back to not viewing homes as goods with significant returns on investment. Instead, homes should be viewed as having some appreciation but this happens relatively slowly. This article would seem to suggest that return on investment is a key factor in buying a home. How often does this factor into the decisions of buyers versus other concerns (such as having more space or locating in the right neighborhoods)? And just how much of a premium should homeowners expect – 190% more than the rest of the market is not enough?

This analysis also appears to illustrate both the advantages and pitfalls of big data. On one hand, sites like Trulia and Zillow can look at the purchase and sale of all across the country. Patterns can be found and certain causal factors – such as housing market – ca be examined. Yet, they are still limited by the parameters in their data collection which, in this case, severely restricts their definition of McMansions to a certain size home built over a particular time period. As others might attest, big homes aren’t necessarily McMansions unless they have bad architecture or are teardowns. This sort of analysis would be very difficult to do without big data but it is self-evident that such analyses are always worthwhile.