Does talking about the McMansions of yachts make sense?

Purchase a luxury yacht – a “floating McMansion” – or you can choose one below that level yet still expensive:

The four-bedroom, three-bathroom luxury cruiser offers three floors of light-flooded living space, sundecks galore, two full kitchens and no shortage of closet space. The bedrooms are surprisingly spacious — more-so than most New York City apartments — and a gyro built into the hull keeps the boat so level at sea it hardly feels like a boat at all, even when it tops out at 25 miles per hour, Curry said.

“They are like a house and that’s what they are for these people — vacation homes,” said Chris Broadbent, a salesman for Grande Yachts. “You can buy a vacation home in Montauk for $1.6 million or more and you’re stuck there — which there are worse places to be stuck — but you can pay almost the same price for one of these and go anywhere.”

While the Norwalk Boat Show offers impressive examples of a luxury life at sea, not every boat needs to feel like a floating McMansion and run upwards of $2 million to be realistically livable for an extended period of time.

Mike Bassett, co-owner of Louis Marine in Westbrook, said the essentials for comfortable on-board living include heat and air conditioning, hot water and a microwave. Typically these boats are 35 to 40 feet, and can run anywhere from $130,000 to nearly $500,000 depending on the level of luxury, detailing and features that are added. The larger the boat, the more maintenance required, so really, it’s all about the lifestyle one is willing to live.

I am always intrigued to see what other consumer or luxury goods are compared to McMansions. Using the term implies more than just an expensive item: it is a mass-produced, gaudy or garish item of questionable quality intended to flash the status of their owner. Does a luxury yacht fit this bill? I would say no based on three factors:

  1. The price of the yachts said to be “floating McMansion[s]” costs more than the average American McMansion. (The average price would include a rough estimate based on housing markets across the United States.) This puts what is truly a more unusual consumer good already (how many Americans can purchase boats after their other expenses) out of reach of many people.
  2. These expensive boats are not mass-produced on the same scale as McMansions. There are plenty of boats in the United States – nearly 12 million registered boats according to Statista – but how many of them are these more expensive boats?
  3. The architecture or design of an expensive boat receives less attention than houses. Are new expensive yachts garish or poorly designed compared to older big yachts? It is hard to know what people’s perceptions are of this if the conversation is not as public or the conversation does not exist.

I’m open to hearing arguments for why this comparison – expensive boats are like McMansions – makes sense.

Historical irony: Naperville magazine suggests “discover Hinsdale”

Naperville’s size, wealth, accolades, and amenities make it a suburban behemoth outside of Chicago. Yet, when Naperville Magazine features in its current issue the story titled “Discover Hinsdale” (see the cover image below), it is a reversal of history regarding which community was more desirable.

NapervilleMagazineSep17

Naperville was founded first in the early 1830s though Hinsdale was not far behind (and the community was originally known as Brush Hill and then Fullersburg). The two communities share a rail line in and out of Chicago, originally the Chicago, Burlington, & Quincy, which opened in the mid-1860s. While the two communities were similar in size until the postwar era, Hinsdale was the wealthier town. It had a hospital. It attracted executives as residents. It was at the eastern edge of DuPage County and just 15 miles from downtown Chicago. Naperville, in contrast, was seen more of a farm community, there wasn’t much development between it and Aurora (and little at all to the south or southwest), and it had lost some luster after losing the county seat to Wheaton in 1867.

Long-time Naperville resident and real estate agent described the relationship between the two suburbs in Is it Eden? Is it Camelot? It is Paradise? Better yet…It’s Naperville.

I discovered an overlooked “fact of life” one Saturday afternoon when a well-dressed, house-hunting couple entered our office. Both were quite disappointed to learn that our town had no tree-lined street full of gracious, period-type houses built in the 1920’s and 30’s, the likes of which they could find in some affluent suburbs east of us. They were also shocked to find we had so little “speculative” building and that our listings were generally of very old homes. The wife then made a biting comment that raised the hairs on my neck. She said, “Did you know that Naperville is rated a class ‘C’ town in some Hinsdale real estate offices?” “What in the world do you  mean!” I sputtered through clenched teeth. “Oh, don’t get made,” she replied, “Just in the area of ‘income per capita’.” “What in the world do you mean!” I sputtered through clenched teeth. “Oh, don’t get made,” she replied, “Just in the area of ‘income per capita’.” Well, Hal, I admit that I was truly deflated. Deflated because, even though it seemed such a minuscule area to me in light of all of Naperville’s ENDURING values, it was a fact of life, and there would be more people of this bent for us to deal with in the future. Hinsdale today is probably still the “class” community of the western suburbs. Time, effort and planning have earned it its reputation. Housing costs in Hinsdale are, on average, 30% higher than in Naperville. However, by now we must have about caught up in “income per capita”. I would (secretly) like to challenge Hinsdale to a rating battle based on “percent of residents with advanced college degrees.” Maybe then I might be able to walk into a realty office in their town and square a long-remembered rebuke by saying, “Did you know that in Naperville, some real estate offices rate Hinsdale a Class ‘B’ community?” I wonder if they’d squirm a little, as I did?” (“Dear Hal” column, Aug 28, 1981, The Naperville Sun)

A later story:

For as long as I can recall, having a Hinsdale (Ill.) residence address had the same effect on others as did the car, wristwatch, or college on attended – it “made a statement.” Aesthetic Hinsdale, with a population of only 17,000, has the highest income per capita of any community in DuPage County… ((“Dear Hal” column, May 17, 1981, The Naperville Sun)

The Naperville Magazine piece is similar to many you can find in suburban magazines. Here is the primary text that then leads to a list of attractions:

Just about halfway between Naperville and Chicago you’ll find the village of Hinsdale, known for its stop-and-stare-worthy homes along tree-shaded streets and a cute, compact downtown lined with shops and restaurants. Though the abundance of women’s clothing boutiques and pampering salons make it a popular destination for a ladies’ day out—no question—there’s a little bit of something for everyone in Hinsdale.

Hinsdale is now the quaint and wealthy suburb to visit. There are upscale restaurants and shops to explore as well as a few historical sites. The community is still wealthy and on average has higher incomes and housing values than Naperville. The teardown phenomenon seems to have begun earlier in Hinsdale in the 1980s before spreading to Naperville (according to several late-1980s columns by Herb Matter). Local celebrities seem to live more in Hinsdale than Naperville.

Yet, Naperville is the more vibrant place. It is clearly bigger. The downtown is more lively. Hinsdale is older money, Naperville more emblematic of the late-twentieth boom among the white-collar and educated.

More (pricey) senior housing units in the (expensive) city

Several developers are constructing luxury senior housing in Manhattan and trying to tap a new market:

Senior housing has traditionally been suburban-focused because land is so much cheaper outside cities, and developers hadn’t seen a big enough market to justify paying more, and charging more, for urban locations near transportation and nightlife, Knott said. The aging members of the massive baby-boom generation helped change their minds. Now, he said, many living in cities have the means to pay a premium to remain in familiar environments.

And many will need special care. In New York state alone, about 460,000 residents aged 65 and older are expected to be living with Alzheimer’s-related dementia in 2025, some 18 percent more than there are today, according to the Alzheimer’s Association.

To serve the wealthiest of them, senior-housing developers are taking cues from their tony-apartment building counterparts and putting extra emphasis on finishes and flourishes, to make their facilities look like the places residents left behind…

It is, of course, a rather small group of any age or mental ability that can handle the monthly rents these kinds of places will command. They’ll start at $12,000 at the complex that Maplewood Senior Living and Omega Healthcare Investors Inc. are putting up on Second Avenue and 93rd Street. Some will top more than $20,000 at the building Welltower Inc. and Hines are about to break ground for on the corner of 56th Street and Lexington Avenue.

The top 10% ages as well.

If this catches on, will it make it even harder to construct senior housing for average Americans (those who lived as adults around the median household income)?

I had a somewhat radical thought: many community leaders suggest that their residents should be able to age in their community, if they so desire. Would it be possible to set aside plots of land to be used for senior housing? The community would not necessarily have to designate what kind of housing is placed there but setting aside or zoning certain land might take away some of the market-rate pressure for land. Communities and developers regularly do this for other important uses such as parks or schools. Why not get out ahead of the aging population and make a tangible contribution to allowing senior residents to stay?

Can the housing industry survive by only catering to the wealthy?

In the short-term, it appears the housing industry is aiming at the wealthy. Can this work in the long run?

It’s possible to get rich if your business only caters to rich people. But it’s hard to have a massive and really successful industry in the United States today if you only cater to rich people. There are only so many people in the country with good credit and lots of cash sitting around. And this week, we got evidence that one of America’s largest industries may be running into trouble because its products appeal only to the upper crust. I’m not talking about jewelry or apparel. I’m talking about housing.

And yet the article goes on to provide little evidence that the housing industry will be in trouble if it continues on this path. The profit margins are higher. The big builders, like Toll Brothers highlighted in the story (as they almost always are when there is a story about luxury housing), and the big investors who swooped in during the housing crisis are doing fine. There are not that many smaller builders left. A loss in building volume would probably mean some job losses in real estate, construction, banking, and other related services. But, perhaps the housing industry in the future is leaner and aimed at the upper end?

As I mentioned in Friday’s post, if markets work as they are said to work, there are plenty of opportunities here for businesses to jump in. Newer technologies can lead to cheaper housing units and lower construction costs. There is a huge need for affordable housing so there shouldn’t be a shortage of demand (even if it may be difficult to find sites where neighbors aren’t opposed to it). Doesn’t someone want to grind out profits at a lower margin? The question moving down the road is whether the housing industry will react in such a way or not. There is no guarantee that it will.

A downside of private streets: who exactly owns it?

There is a dispute about the ownership of a wealthy private street in San Francisco:

Tina Lam and Michael Cheng of San Jose said that in 2015 they were looking at parcels being auctioned online by San Francisco’s tax office when they saw a description of “this odd property in a great location.”

“Part of Pacific Heights, the right location, land in a good neighborhood. We took a chance,” Cheng told the San Jose Mercury News. He said they bought the land sight-unseen, beating out 73 other bidders and dropping $90,000 for the street and its common areas…

The Presidio Homeowners Association, which has maintained the space since 1905, blames a wrong address for the misdirected tax bills at $14 a year, bound for an accountant who had not worked for the association since the 1980s. The debt grew to $994, and the street was sold to recoup additional fees and penalties.

But the association did not know the back taxes threatened ownership of the street, the suit against Lam said. No notices were posted on the street, and no one on Presidio Terrace knew it changed hands until May 2017, when an investor representing Lam asked whether the association wanted to buy it back, according to the suit.

Is an odd case like this enough to suggest that having private streets is a bad idea in the first place? While the municipality does not have to pay the same costs to maintain the infrastructure, it seems like the private street is often an attempt by wealthier residents – whether homeowners or firms – to control their settings. And then there is a compelling reason for local government to make a claim to the street, there is a fight from the owners who felt that this property was theirs.

Why might Americans be interested in the most expensive homes?

Here is one segment of the housing market that is again doing well:

Sale prices of luxury homes in the second quarter of this year were up 7.5 percent from a year ago, the first time luxury gains have outpaced the rest of the market since 2014, according to Redfin, a real estate brokerage which defines luxury as the top 5 percent of the most expensive homes sold in each city in each quarter.

While some point to the recent runup in the stock market, the real reason for the luxury recovery may be a shift in the mind of sellers. They were asking too much, and now that they’re asking less, there is more action in the market, in turn boosting prices again…

Luxury home sales have been rising steadily, causing the supply of those homes for sale to drop. Sales of homes priced above $1 million jumped 19 percent in June compared with a year ago, according to the National Association of Realtors. That was a much larger sales gain than in any of the lower price points.

The sales surge has caused a decline in the supply of luxury homes. Listings at or above $1 million fell 9.4 percent compared with the same period last year, according to Redfin. Those priced at or above $5 million were down about the same. This after five consecutive quarters of double-digit inventory growth.

This change in the luxury market is unlikely to help many Americans though a number of these expensive properties get a lot of media attention. Come to think of it, what exactly is the purpose of media outlets regularly showing expensive homes? Here are a few options:

  1. This could be the curiosity of the masses regarding the practices of the wealthy. How does the other half (or top 10%) live?
  2. Or, is it intended as a critique of the well-resourced by holding up their lavishness up for public display? Look at those wealthy people with their ostentatious homes.
  3. Alternatively, might it encourage class conflict and social change since these expensive homes are out of reach of most Americans? For the many Americans who struggle to find decent housing, highlighting the luxury of the wealthy might serve as a reminder of the distance between groups.
  4. At the least, such regular stories might display the important place real estate and homeownership play in American wealth. It is one thing to own financial instruments but another to purchase more tangible items like property and housing.

This all might be different if the housing market as a whole was booming, particularly if the lower end of the market with smaller homes or starter houses was growing. I suppose this could be a research question: during periods of rising economic boats for all (such as the several decades after World War II), are there fewer media stories on homes and properties of the wealthy compared to homes for the average person?

The houses of Donald Trump

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.