Tag Archives: wealthy

Wealthy homebuyers don’t want McMansions; they want large, expensive homes with custom finishes

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Wealthy homebuyers may not just want McMansions; they are also willing to pay for interior upgrades.

So long McMansion, hello lifestyle. These days buyers who can afford to pay millions of dollars for a house expect plenty of room for living, but they also expect rooms that fit the way they live…

Granite, marble and hardwoods are expected, but homes in that price range have to offer comfort and livability “beyond the finishes,” said Fridrich & Clark Realtor Richard Bryan…

The 6,500-square-foot home, created as a rustic retreat, balances livability and fine design in a way that Allen believes is becoming a requirement for luxury homes…

The house features an infinity pool, a hot tub and lush landscaping. An open floor plan is designed for entertaining, as are the two outdoor kitchens and three expansive covered porches. The home will be sold with custom furniture and drapes, lighting fixtures and potted plants.

Hidden features, out of sight or at least not readily noticeable, enhance the home’s livability.

Rain gardens that capture water for use in watering the lawn are popular in Nashville’s neighborhoods. Allen took the concept further and installed an underground cistern that collects thousands of gallons of rainwater.

When I saw the headline for the article, I thought it was about people not buying large houses but buying smaller houses with nicer features. In other words, the money that once went for more square footage would instead go for nicer features.

However, the story is about wealthy people still buying big houses but with custom finishes or new kinds of features. Does it matter much if instead of buying an 8,000 square foot home, someone purchases a 6,500 square foot home and stuffs it to the gills with add-on options? Does having a rain garden make the large and expensive house more palatable?

I suspect builders would like this quite a bit. No builder wants to be known for constructing McMansions, mass produced large houses. If they can offer plenty of custom features, they can still make a lot of profit and escape claims they are simply building cavernous homes. This echoes the techniques used by big builders like Toll Brothers; they don’t make McMansions, they make luxury homes.

New luxury NYC condo building gives affordable housing residents their own back entrance

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A new luxury condo building in New York City has space for affordable housing – but those residents have to use a separate, back entrance:

The poor will use a separate door under plans for a new Upper West Side luxury tower — where affordable housing will be segregated from ritzy waterfront condos despite being in the same building.

Manhattan developer Extell is seeking millions in air rights and tax breaks for building 55 low-income units at 40 Riverside Boulevard, but the company is sequestering the cash-poor tenants who make the lucrative incentives possible.

Five floors of affordable housing will face away from the Hudson River and have a separate entrance, elevator and maintenance company, while 219 market-rate condominiums will overlook the waterfront…

“It’s a blatant attempt to segregate people,” fumed Rosenthal, who is demanding that HPD deny Extell’s request for tax breaks. “It’s just not a good thing for the city of New York to be supporting.”“I hate the visual of market-rate tenants going in one door and affordable tenants going in another, but that’s a visceral reaction,” Diller said.

I’m not sure we should be all that surprised. Developers generally don’t want to construct affordable housing because it cuts into the profits they could make. This is particularly the case in dense areas like Manhattan where land is at a premium and using some of the space for affordable housing means leaving money on the table. So, if the city is going to offer tax breaks for including some affordable housing units (and this is a common strategy for encouraging affordable housing), why wouldn’t a developer want to separate the exits so the wealthy can think they live in a building solely with other wealthy people (and will pay more for this appearance)?

On the other hand, perhaps New York needs to add to what it means by “affordable housing.” It is one thing just to require units. It is another to place wealthier and less-wealthy residents closer together so they might actually interact. This is the sort of “black box” behind mixed-income neighborhoods that replaced public housing high-rises in many American cities. The idea is that more regular contact between wealthier and less wealthy residents will help those less wealthy residents in the long run.

Sales of $1 million plus homes back to 2007 levels

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A new analysis shows that the upper end of the real estate market, at least homes over $1 million, has recovered:

Home sales from Los Angeles to Charleston, South Carolina that are priced at more than $1 million are gaining at triple the pace of the broader market, according to real estate research firm DataQuick Inc. Wealthy purchasers, helped by gains in equities, are diving into real estate a year after a recovery began in the housing market when less-well-heeled buyers rushed to take advantage of record-low interest rates, said Susan Wachter, a professor of real estate and finance at the University of Pennsylvania’s Wharton School…

Sales of homes priced at more than $1 million jumped an average 37 percent in 2013’s first half from a year earlier to the highest level since 2007, according to DataQuick. Transactions priced at less than $1 million rose 11 percent in the same period to the highest since 2009, data from the National Association of Realtors show.

The $1-million-and-up end of the market usually trails cycles of the broader market because real estate purchases by wealthier buyers “tend to be discretionary spending” that can wait until economic conditions are right, Wachter said. Those homeowners usually can hang onto properties during tough times, and their houses are big enough for them to stay even if their families expand…

Homes priced at more than $1 million lost about 46 percent of their value during the housing crash, according to a Bloomberg survey of sales in the top four cities, based on valuation data from Zillow.com. Since then, their value has more than doubled. Home prices in the broader market fell to $154,600 in early 2012 and increased to $214,200 in June, according to the Realtor’s group.

At least one part of the market is doing well (the lower end is not doing as well): some expect homeownership rates in the US are expected to fall into next year.

I wonder if another reason these homes are selling at such a rate includes a perception that real estate is a good investment at this point, particularly compared to other investment opportunities that are more uncertain. This would assume that home prices would rise consistently but it would also help explain why so many investors are purchasing real estate.

Urban quiz: identify the city solely by its Starbucks locations

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See the Starbucks locations and identify the major city.

The quiz suggests you can see the rough outline of the city but this isn’t quite the case. It is probably more accurate to say that you can name the city from the higher-income neighborhoods where Starbucks are located (or not seeing the lower-income neighborhoods on the map). For example, look at the map of Chicago and the relative lack of locations on the west and south sides:

StarbucksinChicago

In other words, Starbucks acts as a proxy for other important factors in cities.

McMansions pass away quickly like reality stars, unlike stone buildings

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McMansions are often assumed to a passing phenomenon. See this quote from the TV show House of Cards:

“Money is the McMansion in Sarasota that starts fallin’ apart after 10 years,” Spacey’s character, Rep. Francis “Frank” Underwood (D-Antebellumville), tells us in an on-again off-again honeysuckle accent. “Power is the old stone building that stands for centuries.”

Or this description of a common path of reality stars: becoming famous and buying a McMansion.

Anyone remember what happened when that other TLC reality show about a big family got really, really popular? Jon and Kate Plus Eight quickly evolved: In later seasons, there was a new McMansion for the family, and a posh new look for Kate. By all accounts, Here Comes Honey Boo Boo could have followed the same trajectory. According to TMZ, the network has raised their salary from $5,000 and $7,000 an episode at the beginning of the series to “somewhere between $15,000 and $20,000 an episode.” But the extra cash hasn’t changed the family’s priorities.

For one thing, a bigger house was apparently in the offing, too. “We’re told TLC even offered to help the family find a somewhat larger, more secure home, but June refused,” said TMZ. “She said she wanted to stay in the house because she makes a big deal over Christmas — decorating the house for the community. June is heavily involved in her town.” Thus Season 2 takes place in and around their same little house with the beat-up furniture and the one bathroom.

Both quotes above discuss the notion that McMansions won’t last long. It pits modern spec houses against solid stone buildings. In reality, many homes in the US are not the stone variety. Plus, we don’t quite know how McMansions will stand up in the long run. Barring natural disasters, humans can be pretty resourceful with existing structures if they want to. The link to reality stars is quite clever; the implication is these are stars who will burn brightly, purchase their McMansions, and then burn out, never to be heard from again. McMansions have more staying power than these reality stars, if just by the number of such homes that have been built.

McMansions are new in the sense that the word didn’t really emerge in popular usage until the late 1990s. These houses simply haven’t been around that long so they are newer luxury items. On the other hand, McMansions seem to have become another part of the long-running battle between old and new money. McMansion can then be a derogatory term thrown at the nouveau riche who don’t have the proper social standing to compete with old money.

All together, there is a temporal dimension to the use of the term McMansion. Critics hope they are a passing fad. Others suggest they are making a comeback or larger homes are simply what Americans desire. Perhaps we need a new popular form of housing to replace the McMansion…

“Have You Noticed How Adam Sandler Characters Always Live in Giant Mansions?”

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This level of commentary is not usually associated with Adam Sandler movies but this is an interesting question: “Have you noticed how Adam Sandler characters always live in giant mansions?”

Ostentatious displays of wealth are a tricky thing onscreen: Movies are meant to be aspirational, but if the main characters live in over-the-top splendor, not many audience members will be able to relate. No one has passed this note to Adam Sandler though; his characters, more than those of any other modern movie star, tend to live in gigantic, multi-million-dollar megamansions. How does Sandler so often manage to luxuriate in his own wealth without alienating his less fortunate fan base? It probably helps that as his characters’ homes grow ever grander, Sandler’s clothes remain eternally grubby. (Hey, you don’t have much money left over for new duds when the mortgages are this high!) Join us now on a tour of Sandler’s biggest screen houses, accompanied by a look at his wardrobe in each corresponding film. Get ready for some sticker shock!

I have seen two of these seven movies but I have a few ideas about why these characters might live in such homes.

First, the big home represents the pinnacle of success but ends up contrasting with characters who find they need more than money to enjoy life. Big homes are shown as lonely places – there is a lot of room for fun activities but it might take you a while to find other people or have regular interactions with others in the house. Thus, we see the big homes early in the movies as supposed success but we are meant to leave with the idea that one can be house rich and love poor. This is a theme of a lot of movies, not just Adam Sandler films.

Second, big homes (and other garish displays of wealth) are associated with bad people. In other words, movie-goers are intended to see the unnecessarily large home and quickly make the association that the characters living in it are not nice people. The big home is then a shorthand image intended to reveal more about the character of those living there.

This requires more analysis for a definitive answer but these big homes are certainly plot devices. Given the relatively short amount of time in a movie (particularly compared to longer novels or multiple seasons of a television show), these large homes are likely the product of careful decisions.

Just how much should McMansions cost?

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Curbed San Francisco asks whether a McMansion in the city should sell for $2.16 million. The pictures are interesting and here are a few more details on the home:

The big abode was built in 2011 and features things like “5 luxurious baths” (one of which is photographed with an awkward looking dog in it) and too much recessed lighting. In fact, there’s too much of everything. Too much moulding, too much granite, too large rooms. The 5-bed, 5-bath home clocks in at 4,487 square feet and is asking $2,160,000, which is way more than half of the neighborhood average list price of $869,500.

The main argument here, both in the post and in the comments, appears to be that the home is priced too high compared to the neighborhood in which it is located. Prices for real estate, of course, are relative. But, this could lead to a larger question: how much do McMansions cost? It is assumed that McMansions are big so they will cost a lot. But, just as I have argued that at some point the square footage of a home makes it a mansion rather than a McMansion (perhaps around 7-8,000 square feet?), is there a price point where the mass produced McMansion becomes something only for the wealthy? In addition to being big, another trait of McMansion is that they are more mass produced in terms of architecture and design. Yet, how many Bay Area residents could afford a $2.16 million home? I’m not sure exactly where this price point for a McMansion versus a mansion is, particularly in expensive markets like San Francisco, but there is a line somewhere.

Mapping wealth by locating iPhone, Android, and Blackberry owners

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Check out the maps of cell phone owners in Washington, D.C., New York, Chicago, and a number of other major American cities:

Among other things, cell phone brands say something about socio-economics – it takes a lot of money to buy a new iPhone 5 (and even more money to keep up with the latest models that come out faster than plan upgrades do). Consider, then, this map of Washington, D.C., which uses geolocated tweets, and the cell phone metadata attached to them, to illustrate who in town is using iPhones (red dots) and who’s using Androids (green dots)…

That picture comes from a new series of navigable maps visualizing some three billion global, geotagged tweets sent since September of 2011, developed by Gnip, MapBox and dataviz guru Eric Fischer. They’ve converted all of that data from the Twitter firehose (this is just a small fraction of all tweets, most of which have no geolocation data) into a series of maps illustrating worldwide patterns in language and device use, as well as between people who appear to be tourists and locals in any given city.

The locals and tourists map scales up a beautiful earlier project from Fischer. You could kill a few hours playing with all of these tools, built on the same dataset. But we particularly liked looking at the geography of smart phone devices. As in Washington, above, iPhones are often more prominent in upper-income parts of cities (and central business districts), while Androids appear to be the dominant device in lower-income areas.

It sounds like there could be some methodological issues here. The data doesn’t cover all Twitter users and then Twitter users are already a small subset of the US population. Nonetheless, these are interesting maps. I saw recently that over 50% of Americans now have smartphones – it jumped from 35% to 56% in several years. But, not all cell phones cost the same or aim for the same markets. iPhones aren’t just expensive. They also have a certain aesthetic and set of features that appeals to a certain set of Americans. Samsung had a set of recent commercials that played off the cool factor of iPhones, raising the idea of the phone as (expired?) status symbol. If you asked smartphone owners why they chose the phone they did, how many would admit that the status of the phone significantly factored into their decision?

More broadly, it would be interesting to think about what other common consumer goods could be mapped in ways that show clear patterns.

Reminder: a 14,000 square foot home is not a McMansion

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I argue that Avery Johnson’s 14,396 square foot home is way beyond a McMansion – it is clearly in mansion territory. What pushes it into the mansion category?

1. The square footage seems beyond mass produced and is only really available to the wealthy. Johnson certainly is wealthy – he was fired as coach of the New Jersey Nets in December 2012 in the midst of a 3 year $12 million contract. Also, the home is listed for $9 million. While the home is located in The Woodlands which has a median household income around $85,000, this home is way past this median income.

2. The home is beyond large. It has seven bedrooms and eight bathrooms.

3. The luxury features go beyond a typical McMansion. Check out the pool that looks it belongs in a resort, the bathroom with a giant tub and three central columns, and the fully appointed game room.

In my mind, the best argument for why this home is a McMansion has less to do with the house itself and more to do with the community in which it is located. The Woodlands is a master-plan suburb outside of sprawling Houston and fits the image of the newer kind of wealthier suburb with bigger homes and office parks.

Some wealthy US zip codes don’t have enough mansions to sell

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This may be related to a supposed McMansion comeback: some wealthy US communities have a limited inventory of big homes available for purchase.

While housing inventory is falling throughout the country, it’s falling especially fast in some of the country’s richest ZIP codes. A study from Altos Research, the Mountain View, Ca., real-estate research firm, found that inventory in the nation’s 90 wealthiest ZIP codes fell 15 percent over the past year, slightly faster than the broader market.

But in the richest ZIP codes, inventory is down more than 50 percent. In a ZIP code in Carmel, Calif., inventory fell 76 percent over the past year. There were only four homes left on the market priced at $1 million or more as of the end of May, according to Altos.

In Palm Beach, Fla., the number of $1 million-plus homes has plunged by 70 percent, falling from 89 to 26. And in the Old Greenwich, Conn. ZIP code, there are only 10 homes left priced at $1 million or more, down 58 percent, according to Altos.

“I don’t recall seeing the market like this, and it’s come so quickly,” said Cristina Condon of Sotheby’s International Real Estate in Palm Beach. She said buyers have poured into the market in recent months, many from overseas. American buyers are also piling in—some from higher-tax states like California, lured by low taxes and still-low prices in Florida.

The phrase “mansion shortage” sounds funny. It may be true in a business supply and demand sense but shortage is a term often reserved for more essential commodities, not luxurious homes.

This is more evidence that there is a bifurcated housing market: the wealthy, whether Americans or residents of other countries, seem to be doing fine with their real estate.