Natural disasters provide opportunity to build even bigger homes

In the spirit of “never let a good crisis go to waste,” homeowners in five areas that experienced natural disasters in recent years ended up with larger homes:

To estimate the mean change in real estate, Lazarus and his team gathered satellite data, from sources like Google Earth, of five hurricane-prone places: Mantoloking, New Jersey; Hatteras and Frisco, North Carolina; Santa Rosa Island, Florida; Dauphin Island, Alabama; and Bolivar, Texas. They looked at images taken before the most recent hurricane and compared them to satellite data gathered post-recovery.

Even with conservative study inclusion criteria (any structure that experienced a 15 percent or smaller change in size was excluded, Lazarus says, because with “satellite imagery, there’s tilt, the sun can glare in places, and you have to be careful with what you’re digitizing”), the results were striking. The study found that rebuilds were between 19 and 50 percent larger than the original structure. New construction increased in mean size between 14 percent and 55 percent compared to the buildings that stood before a given storm…

“This is where the moral hazard comes in: the risk of some choice you make is not entirely yours, it’s distributed to other people,” he says. In the United States, for example, taxpayers fund the National Flood Insurance Program, a financially-beleaguered federal entity that insures many of these enormous beach constructions. As a result, every taxpayer is inadvertently “supporting development in risky places,” he says.

There’s also concern that such disasters may be displacing poor and middle-class homeowners, allowing developers to swoop in after a catastrophe and build a wealthy renter or buyer’s dream McMansion from the ashes. In a blog post accompanying the study, Lazarus cited several such events, documented by newspapers around the country. “The one that really continues to hold my attention is the New York Times piece on the Jersey shore,” he says, citing a story about developers who were able to buy bigger lots at depressed prices, permanently changing the community.

I can see why this seems odd. An argument can be made that homes constructed in disaster-prone areas should be more modest. Perhaps homes should not be rebuilt in these locations at all. Building even bigger homes may appear to be throwing caution to the wind.

At the same time, the trend in the United States for a long time has been toward bigger and bigger homes. Regardless of the reason a home is destroyed, would a majority of Americans respond by building a larger home? And this might be especially true in this areas near the beach where homes and land can have a high value (even if there is a threat of disasters).

If a bigger home equals a better home for many Americans, it will be difficult to argue otherwise, regardless of the situation.

Building and buying larger homes leads to “McMansion envy”?

Here is the full Bankrate.com headline of the story I discussed yesterday about Americans buying larger homes:

McMansion envy spreads as Americans demand more bedrooms, baths

What is “McMansion envy”? The common sense interpretation seems clear: people see and desire McMansions. Yet, this gets complicated fairly quickly for a number of reasons.

  1. The data then presented in the story does indeed tell a tale of Americans buying larger homes. But, not all large homes are McMansions.
  2. There is no other mention of the term McMansion. While the term seems to be a stand-in for large homes in general, there are also references in the story to homes with more and flashier features (including more bedrooms and bathrooms as well as higher-end finishes, though this last part is difficult to defend with Census data).
  3. McMansion is a pejorative term and few real estate listings or homeowners proudly use the term to describe their homes. Instead, the term typically refers to tacky or garish large homes (see McMansion Hell for an example).
  4. Indeed, the exact definition of a McMansion is more complicated than just a big home or a poorly-designed home. I argue McMansions have four possible traits.

I do not expect this concept of “McMansion envy” to spread except for critics of larger homes and McMansions who want to describe some sort of sickness from which Americans suffer.

 

“Americans demand more bedrooms, baths”

I argued a few days ago that the American system is set up to encourage people to purchase bigger homes. Look, the system is working! Americans continue to build and buy bigger homes.

The latest numbers from the U.S. Census Bureau show newly-constructed homes in 2017 are 4 percent larger on average than a decade ago. And they come with a larger price tag — the average price of a new home jumped 23 percent from $313,600 in 2007 to $384,900 last year. Meanwhile, the average family size in the U.S. continues to shrink, from 3.33 persons in 1960, to 2.54 in 2017…

Below are some takeaways from the Survey of Construction data released in June. Based on the most common features, the most popular home built in 2017 was a two-story, two-garage home with more than four bedrooms and three bathrooms.

Several graphs highlight the proliferation of bedrooms and bathrooms in recent years:

Chart: Number of bedrooms in new single-family houses completed

Chart: Number of bathrooms in new single-family houses completed

Even with plenty of critics, American builders and buyers still seem to want larger homes. Perhaps the market is primarily open these days to wealthier buyers and builders may not be interested in constructing starter homes but this is not an isolated blip in the data: for decades, Americans have sought larger homes.

 

Americans are conditioned and enabled to buy large homes

Findings regarding how Americans use the space in their homes may show they do not use all the space equally but evidence may not matter much. Americans want larger homes and the society and system is set up to push them towards this. Some of the factors involved:

-A consumption heavy culture where people enjoy shopping and buying items to signal their worth and for their own enjoyment. People want bigger homes like McMansions to impress others. Owners want a bigger home for all their stuff (and not necessarily for larger families).

-A lending industry that often requires relatively small down payments and repayments of a mortgage over three decades. Even if borrowers pay more in interest over time, they can afford a bigger home up front. Mortgages are socialized.

-A building industry that can make more money per house on selling a larger house. Building starter homes – a smaller house a couple might start with – or smaller single-family homes is a minor part of the industry.

-An emphasis on private family space as opposed to thriving public life on streets, urban public spaces, or third spaces. Additionally, Americans like their personal space.

An emphasis on suburban culture and spread-out settlement.

With these conditions, making a choice to have a smaller home is going against the grain. Perhaps this is why the tiny house movement is small.

 

Americans can spend a majority of their time in a few spaces in their home and still want large homes

Americans may not need such large homes if a recent study is correct in showing where they spend their time inside their house:

A research team affiliated with UCLA studied American families and where they spend most of their time while inside their homes. The results were fascinating, but really not all that surprising. Here’s one representative example:

As you can see, most square footage is wasted as people tend to gather around the kitchen and the television, while avoiding the dining room and porch.

This is part of the reason newer homes do not need formal living rooms or dining rooms and instead often focus on open floor plans connecting kitchens with living areas.

However, while this study may have measured where people actually spend time in their homes, it does not necessarily mean that homeowners do not desire extra features. I can think of at four additional arguments homeowners might often make:

  1. They need significant amounts of space to store their stuff. Indeed, why get rid of stuff when you can just purchase a larger house?
  2. Even if the family or household members do end up in certain spaces more than others, this does not necessarily mean that they do not need separate spaces occasionally to have their own space away from each other.
  3. Certain spaces may be highly specialized and helpful, such as a dining room that accommodates large family meals or a hobby room where a homeowner can pursue their interests or a quiet and comfortable space.
  4. A larger home is a sign of success or tied to a particular lifestyle. For example, many homeowners may no longer use a porch but still prefer that look.

I’m also reminded of a recent survey that suggested the largest regret homeowners have is that they did not purchase a larger home.

See also a February 2017 post titled “Explaining why Americans desire larger homes.”

Patterns across the ten metro areas with the most big homes

While the article I discussed yesterday did not provide a helpful definition of a McMansion, it did provide five trends regarding which metropolitan areas had the largest homes:

Supersize trend No. 1: Outdoorsy types need plenty of space

Supersize trend No. 2: Seeking space in the suburbs

Supersize trend No. 3: Southern cities are churning out jobs and big homes

Supersize trend No. 4: Big homes are all that’s left in tight Midwestern markets

Supersize trend No. 5: Tech hubs + deep pocked buyers = more McMansions available

And, like the McMansion definition, another important caveat:

And if it wasn’t for the fact that we limited our ranking to one housing market per state, Colorado and Utah would’ve had all five top metros.

And a third caveat: this is based on only homes that are on the market.

Even with these significant limitations, I wonder if an analysis could reveal some underlying patterns behind these noteworthy metropolitan areas:

  1. They have a growing population and thus a growing stock of larger, new homes, particularly in suburbs.
  2. They have relatively low housing prices paired with enough higher income jobs. (Seattle and Portland are the ones that stick out here but perhaps this is relative: those same buyers could find higher prices in the Bay Area, LA, Vancouver, etc.)
  3. These places have looser zoning restrictions on the whole that allows for more and/or quick construction. (I imagine there is some variation in these top 10 places. Portland and Bridgeport, for example, likely have some tight restrictions compared to an Indianopolis or Provo.)

This could be worth pursuing though the data needs to provide a more complete picture of the housing stock.

List of cities with the most McMansions does not actually look at McMansions

Realtor.com asks an intriguing question involving McMansions – “So which are America’s housing markets with the biggest cribs, and why?” – but then does not follow through because of a limited definition of which homes count as McMansions:

We sifted through realtor.com listings to figure out which of the 150 largest metros had the highest percentage of homes on the market that are 3,000 square feet and above. (The average square footage of a new single family home is 2,627, according to the National Association of Home Builders’ analysis of U.S. Census Bureau data.) Sure, this includes some tasteful, large homes and legit mansions. But it was impossible to separate those from the McMansions—it’s rare to see the word “tacky” in a home listing.

There are plenty of big homes in the United States – the median square footage of a new home is over 2,400 square feet – but not all big homes are McMansions. The article provides a different definition for McMansions than the one they actually use with the data:

The imposing, ostentatious structures looming over surprisingly wee plots of land. The crazily mismatched architectural styles. The hipped roofs, gabled roofs, and pyramidal roofs—all on the same house! The bank columns. The front yard Romanesque fountains. The puzzling profusion of window sizes and types. The gigantic, two-story front doors.

I can understand how the real estate listings do not easily allow for the easy categorization of homes as McMansions. Few, if any, homeowners and realtors want to advertise their homes using such a pejorative term. Yet, if you are going to use a headline involving McMansions and then talk about the poor architecture of McMansions, then your measure should take these features into account.

How might this be done? A few ideas:

  1. Take random samples within each metropolitan area and look for specific features.
  2. Do a survey of realtors, architects, and others who might be able to identify McMansions to get their sense of how many McMansions are in particular areas.
  3. Train a computer program to scan thousands of images of homes for sale and determine whether the homes are McMansions or not. (The coding scheme would be very similar to the one used in #1.)

These approaches are not necessarily easy but would be essential for actually getting at which AMerican cities have teh most McMansions.

For a more complete definition of a McMansion – including but also beyond their size and architecture, see my summary here.