At least 12 reasons Americans have the biggest houses in the world

Why do Americans have the largest houses in the world? A lengthy list of reasons:

  1. Americans like private homes. This often means they desire detached single-family homes in the suburbs. So why not have a lot of private space? Similarly, Americans place a lower priority on pleasant public spaces or spending time in public.
  2. The trend toward larger homes really took off in the postwar suburban era. At the time, this could be linked to growing family size with the Baby Boomer generation. (Interestingly, as household sizes decreased in recent years, homes continued to get bigger.)
  3. Americans like to consume. With relatively large amounts of disposable income, Americans need space to store their stuff, ranging from clothes to media to new technological devices to cars. The answer is not to get rid of stuff but rather to have a big house to store bulk goods. Garages are important parts of homes since driving is so important.
  4. Americans have increasingly viewed housing as an investment rather than just a place to live and enjoy. If the goal is to get a big financial windfall later in selling the home, it could pay off now to buy as much as possible.
  5. Compared to some countries, Americans have a lot of land to build and sprawl. Americans have also made different land use decisions to prioritize lower densities and sprawl.
  6. There are regional differences regarding large homes. McMansions are everywhere in the United States but more culturally acceptable in Dallas than in New York City. Many metropolitan regions have housing prices that make having a big house possible (compared to New York, San Francisco, LA, and Seattle).
  7. Developers and builders are less interested in constructing starter houses as there are more profits in bigger homes.
  8. A number of communities will only allow homes of a certain size in order to maintain their character and status.
  9. The government has provided funding and support for mortgages, suburbanization, and driving over the last century.
  10. Americans have a bigger is better mentality as well as believe that growth is good. This applies to population growth and also applies to houses.
  11. McMansions are popular with some but America has plenty of large homes that would not qualify as McMansions. From large urban condos and homes to large rural properties, Americans can find plenty of big homes to purchase.
  12. The space in homes does not have to be used to be desirable. For some owners, the space itself is just worth having.

(This post was inspired by this recent article. Also, see this earlier post “Explaining why Americans desire larger homes.”)

Counterarguments to the claim that people should not waste money on a big house

Economist Robert Shiller argues Americans do not need large houses:

“Big houses are a waste. People are still in a mode of thinking about houses that is kind of 19th century. As we modernize, we don’t need all this space,” Shiller told the Journal…

Shiller said advanced technology has replaced the need for extra space in our homes.

“For example, we don’t need elaborate kitchens, because we have all kinds of delivery services for food. And maybe you don’t need a workshop in your basement, either. You used to have a filing cabinet for your tax information, but now it’s all electronic, so you don’t need that, either. And bookshelves, for people who read a lot. We have electronic books now, so we don’t need bookshelves anymore,” Shiller said.

“Having a big house is a symbol of success, and people want to look successful. People have to know about your achievements. How do you know, really? Who knows what people are doing in their day job? But you do see their house.”

The counterargument for a typical owner of a large house might look like this:

1. What else could be such a worthwhile investment over time? Many people assume their home will appreciate in value and a big home purchased today means not only more space but more money down the road when the home sells.

2. Private space is still important. The kitchen may not be just about cooking. Of the spaces Americans do use in their homes, the kitchen is one. Or the idea of a workshop: there can be public spaces where people could come together to share tools and use common space but how many Americans are ready for that?

3. Shiller may overestimate the rate at which people are willing to get rid of stuff in favor of electronic copies or technology-aided alternatives. Shiller cites paper and books above. But, Americans simply consume a lot, ranging from video games to decor to furniture to electronic gadgets. Don’t they need bigger houses to fit all their stuff?

4. Status symbols matter in American society. A home is a very tangible expression of status, particularly compared to smaller items like watches, smartphones, jewelry, clothing, and other items.

All of these reasons may not be the most efficient or rational but they are a product of decades of social and cultural action and values. For more reading, see an earlier post: “Explaining Why Americans Desire Larger Homes.”

New apartments in the US also getting smaller

As the median size of new homes in the United States drops, so does the size of new apartment units:

According to a recent analysis of apartment sizes by RentCafe, newly built apartments, in general, are 5 percent smaller than those built 10 years ago. The average U.S. unit built in 2018 boasts 941 square feet, down roughly 52 square feet. According to the study, Chicago ranks third in the nation for the smallest average apartment sizes (a tie with Manhattan at 733 square feet).

Census Bureau data from 2017 on the median square footage of multifamily units suggests something similar with a drop from a peak in 2007.

Three quick responses:

  1. While the square footage is dropping, I assume the rental price has not dropped at the same rate. Fewer square feet for the same or a higher price?
  2. According to the same Census data, more multifamily units were constructed in 2017 than in any year in the table (going back to 1999). Do smaller units mean builders and developers can now squeeze in more units?
  3. This data from RentCafe is connected to a rise in microapartments. The Census data suggests the percent of multifamily units under 1,000 square feet has not increased over 10 years between 2007 and 2017.

So is there a significant trend toward smaller rental units? Maybe a small one that could be worth watching but it could take quite a bit of change for microunits to really be built in large numbers.

Could giga-mansions relieve the negative attention directed toward McMansions?

The term McMansion is likely to stick around (even if is used poorly at times) but more interest may be shifting to the giga-mansion.  A Motley Fools podcast provides some information:

First we had mansions. Then we had mega-mansions. And McMansions. Now we have giga-mansions. Yes, it’s a growing trend of massive houses usually built in the LA area on spec. They are massive, expensive, and outrageously ostentatious. Let’s see if you two can answer some trivia around some of the most expensive pieces of residential real estate on the market…

The One will be America’s largest house on the market at 100,000 square feet. It will be the most expensive private residence when it comes to market. It boasts four swimming pools, a nightclub, a room where the walls and ceiling are filled with jellyfish. It will have a 30-car gallery. Because of this price you don’t call it a garage. Of the 20 bedrooms, how many are in a separate building just for your staff?…

Let’s move on and talk about the house called Billionaire. It’s 38,000 square feet. It was America’s most-expensive house on the market when it was listed for $250 million in 2017. The property is in the exclusive Los Angeles suburb of Bel Air. It has 12 bedrooms, 21 bathrooms, three kitchens, a 40-feet James Bond-themed cinema, six bars, two fully stocked champagne cellars, and the helicopter from what 1980s television series? Rick knows this. He can’t wait to say it…

Southwick: A $1 billion lot. Now we’re going to go to The Manor. The largest home in LA was actually built in 1988 by the TV show producer Aaron Spelling and his wife Candy. The 56,000 square foot, 14-bedroom, 27-bath home originally was built for $12 million. They sold it all in a cash deal for $85 million in 2011 to the 23-year-old daughter of someone wealthy. Don’t worry about it. She renovated much of the house, since it had some very quirky spaces, including a flower-cutting room, a humidity-controlled silver storage room, a barber shop, and three rooms for doing what common birthday and Christmas activity?

One of the major critiques of McMansions involves their symbolic nature: they are associated with sprawl, wealth, and conspicuous consumption. All of these appear to be in play with the examples from the Los Angeles area cited above: a region known for cars and highways, entertainment celebrities and executives along with other wealthy people, and a constant need to stand out from the rest of the area.

But, McMansions have key differences from this supersized homes. They are generally smaller – roughly 3,000-10,000 square feet – and more often found in “typical” neighborhoods. They are often mass-produced. They are often criticized for their architecture while megahomes take more flak for their size. Perhaps most importantly, McMansions are within the reach of more Americans. Depending on the housing market, an upper-middle class household can acquire a McMansion but these giga-mansions are only for the wealthiest.

If the ultimate concern behind critiques of McMansions is their unnecessary size and flaunting of wealth, then the spread of giga-mansion might relieve some of the pressure. Granted, there will always be more McMansions but it is easy to focus on these outsized homes and their owners. Why criticize the top 10-20% of American homeowners for their McMansion choices when the giga-mansions of tomorrow constructed and owned by the top 0.1% of homeowners are so ridiculous and unnecessary?

The bigger and feature-filled “New American Home”

What the National Association of Home Builders displays as the “New American Home” just keeps getting bigger and bigger:

The first New American Home that N.A.H.B. built, in Houston in 1984, was 1,500 square feet and cost $80,000. By 2006, at the peak of the housing bubble, the N.A.H.B. home – a lakeside McMansion in Florida with a tri-level kitchen island and a waterfall off the master suite – was over 10,000 square feet and listed for $5.3 million in what is today one of the nation’s foreclosure capitals, Orlando.

That 1984 project was the smallest; square footage hasn’t dipped below 2,200 since 1985. The 2018 version, also in Florida, is “Tuscan”-inspired and is close to 11,000 square feet, with eight bathrooms and both an elevator and a car elevator in the garage. The 2019 version, to be unveiled soon, is 8,000 square feet and has an “inner sanctum lounge” and a view of the Vegas strip.

NewAmericanHomeSquareFootage

The N.A.H.B. house may be meant to highlight trends, but they’re not necessarily the trends homeowners want (and certainly not what most people need). Instead, they’re what builders, kitchen and bath manufacturers and real estate agents would like to sell them: Think cathedral ceilings, granite countertops, gift-wrapping rooms and, more recently, “smart” appliances like a refrigerator that can text you when you’re low on milk and eggs.

Many builders will tell you that though these houses are large, they are more efficient – even that they have a small carbon footprint. But this is like bragging about the good gas mileage of an S.U.V. While a 10,000-square-foot house built today uses less energy than a 10,000-square-foot house built a decade ago, a home of this size requires a phenomenal amount of energy to run. (And most likely has an S.U.V. or two in the garage.)

I see enough from the NAHB to guess that they have some influence in the housing industry, particularly among national or larger builders. That their show home put together each year keeps getting bigger on average and with more and more features suggests the emphasis is on new and profits. At the same time, it might be hard to show a direct causal link between these annual productions and what homes are actually built. Builders in the United States have constructed many large homes in recent decades but the median square footage has dropped slightly in the last few years.

I suspect it would also be interesting to analyze the architectural and design choices for the New American Homes. Americans may like big homes but not necessarily modern ones. How many of these homes are modernist, Craftsman, or Mediterranean (and which styles are studiously avoided)? Are they all open concept in the main living areas? Is storage a priority and/or large garages? This sort of project could then be expanded to model homes in different areas or among different builders to think about how what builders present influence buying patterns.

New Bel Air homes of over 17,500 square feet cannot be called McMansions

In recent years, a number of extra large houses have been constructed in Bel Air. But, these are not just regular McMansions:

Rosen rallied his neighbors in a mini-revolt against City Hall. The result was 2017’s Bel Air mansion ordinance, a more rigid version of the ordinance imposed on the rest of Los Angeles. While many of the hauling trucks are now gone, the wealthy enclave is still grappling with the legacy of its McMansion years. Between 2014 and early 2017, the city issued 28 permits for mansions in Bel Air of 17,500 square feet or larger, most of which are still under construction, according to an analysis by The Real Deal. The projects are exacerbating a spec-home building spree that rattled longtime Bel Air residents and is dramatically altering the landscape of the area, not to mention its real-estate market.

As of Wednesday there were 12 homes in Bel Air of 15,000 square feet or larger currently sitting empty and unsold in, according to MLS data cited by Steve Lewis, President of CORE Real Estate Group in Beverly Hills.

These are not regular McMansions in suburban neighborhoods: these are megahomes going for megaprices and constructed by and for the ultra-wealthy.

Meanwhile, on Chalon Road, Thomas Barrack Jr., the Colony Capital CEO and pal of President Donald Trump, is nearly done building out an eight-acre compound with a 77,000-square-foot mansion being designed by Peter Marino. Barrack is building it on behalf of the royal family of Qatar. Other competing giant offerings, including the Mountain, a 157-acre plot in Beverly Hills Post Office now listed for $650 million, and a 120-acre site owned by an entity linked to the late Paul Allen asking $150 million, don’t have plans or permits in place for mega-mansions, Blankenship said.

Massive spec mansions on the market right now include Bruce Makowsky’s 38,000-square-foot estate at 924 Bel Air Road, asking a much-reduced $150 million, and the Mohamed Hadid-developed mansion at 901 Strada Vecchia, which is the subject of an FBI probe and a lawsuit from neighbors who want to see it torn down.

Granted, it sounds like some of the activity in Bel Air may be consistent with several features of McMansions: big homes, teardowns, and status symbols for the wealthy. For those who live in Bel Air, it could be disconcerting to see the scale of new construction. But, this article focuses primarily on the really big homes, the ones that are not just someone upgrading from a 2,000 square foot ranch to a 5,000 square foot home with a mishmash of architectural features. The last example in the piece illustrates this difference between a McMansion and mansion: a billionaire/actress couple want to tear down a home under 8,000 and more than double the square footage in a new home. Again, that is a scale far beyond the average upper middle-class American (and that does not even include the price it takes to buy into this particular neighborhood). Perhaps the real goal of using the term McMansion here is to denigrate the new homes and not grant them the status of mansion.

I would argue McMansions are roughly 3,000 square feet to 10,000 square feet. The bottom end may seem rather small but this size home could be quite large if constructed in a home of small homes. The upper end is a rough cutoff when a home goes from regular big home to extra large/wealthy big home. Size is a critical factor in defining a McMansion and these Bel Air homes are way beyond McMansion limits.

New American homes continue to get smaller

Data from 2018 shows new homes in the United States are getting smaller:

NAHB data shows the average size of new houses fell for the third straight year in 2018. Median square footage of single-family houses decreased to 2,320 last year after peaking at more than 2,500 square feet in 2015.

Although still above the sub-2,200-square-foot medians hit during the Great Recession, the numbers suggest that entry-level buyers and those looking for starter homes might finally have more options in the coming years. It’s also good news for those who have had problems getting a mortgage because of credit issues.

Robert Dietz, NAHB’s chief economist, said the data probably indicates that home builders are turning toward middle-class housing after spending much of the current economic growth period focused on the high-end development.

In the aftermath of the housing bubble and the economic crisis, builders focused on higher-end buyers. With money to be made there and the limited ability of those with fewer resources to purchase new homes, bigger homes were the primary focus.

So what has changed? Lower class and middle class buyers may now again have the resources to purchase new homes. With a steady economic recovery (stock market up, unemployment down, wages relatively flat), homeownership may be attainable again for more people. The homeownership rate has been down during the last decade though up a little recently.

Just one reminder: the decreased median may not mean that fewer large homes are under construction – Americans do seem to want big homes – but rather that more smaller new homes were built.