The Wall Street Journal reports that so-called "McMansions" -- large houses mass produced by developers -- are going out of favor. This seems pretty logical, given the housing market's troubles. But there's reason to believe that this new trend might be more than just a phase. It's also another nail in the coffin for the U.S. real estate market, as smaller houses mean less profit.
The WSJ explains:
A survey released this month by the National Association of Home Builders shows that the average home built during the first quarter of 2009 was 2,335 square feet, down from 2,629 square feet during the second quarter of 2008. And 59% of builders surveyed in May by the trade association said that they are planning on building smaller homes in the coming year. Only 1% reported that they would be building bigger homes.
Then the article takes a strange turn, which doesn't seem right to me:
But don't write the obituary for McMansions just yet. Although mass-produced behemoths more than 3,000-square-feet in size have only been common (and commonly criticized), since the late '90s, home sizes have never been influenced by need alone. The builder association's report also points out that houses ballooned most--about 1,000 square feet--during the period between 1970 and 2008, when household size dropped from 3.11 to 2.57. Homes are getting smaller now because people feel poorer, but all that will change once the recession ends and consumer confidence is restored.
If the U.S. were just experiencing a short-term shock in the housing market, then I'd tend to agree. But some systematic changes are at hand as well. As baby boomers retire and their nests empty, they will take flight to smaller townhouses and condos. That should provide significant excess inventory for any new home buyers looking to purchase larger homes for raising a family. Oddly, the article even mentions this, but then ignores it:
Census shows that there are 77 million people in the "empty-nester" phase of life, from ages 45 to 64, and 61 million in the first-time buyer category, from 20 to 34.
That's bound to have the greatest effect, but it isn't the only thing to consider. Since being green is so en vogue these days, I would suspect that larger, energy sucking houses will also be out of style indefinitely. Unless the McMansions of the future are also designed with enough solar panels and wind turbines to power themselves, 20- to 30-somethings will not be interested. They also probably wouldn't be too eager to run up huge gas and electric bills, as energy costs increase.
I would suspect that houses will go the way of the automobile, where bigger is not better. Builders, like carmakers, will be forced to focus on producing smaller options in the days to come. Both supply and demand seem to indicate this direction for the foreseeable future of the housing market.
I am not sure this is right. I live in a small development of somewhat larger houses. Out of the fourteen houses here only one has children at home. Only one other is of child bearing age, and half are older single women. There are a lot of guest bedrooms, art studios and home offices in our neighborhood.
Indeed, two of the older single women here moved out of condos and into these homes. One would think the condo would be more comfortable for a single person but apparently not. I honestly think that the idea of a big house is more important to many people than the need for space itself.
I also skeptical. I think for more people than not, bigger is (seems) better, and receives far more importance in buying decisions than it "should."
Just watch HGTV one day, trends certainly seem to be going towards bigger/higher end, although go figure, I'd like to see some data that isn't from a trade group before I say anything unequivocally.
You're undoubtedly right about empty-nesters being one of the factors affecting the size of houses in the future. Besides energy and maintenance costs, I think that older buyers will avoid houses of more than one story. In some parts of the country, it's actually hard to find a single-family house or townhouse without stairs. Ironically, a few years ago, a builder in a Washington, D.C. suburb put a one-story house amid all the two story homes he already had sold, and the neighbors protested that the new house would ruin their property values.
Like GM and the "big" truck phenomenon, McMansions are cheap to build and have a lot of unnecessary space.
Most builders inflated contruction costs to slide MORE profit out of these behemoths.
They fell out of favor, in part, becuase their impractical.
Brewer Caldwell is seeing major price discounts on these larger homes in the Phoenix market. They will sell at the foreclosure auctions for prices from the 90`s.
I don't know Dan. Everything about the Boomer generation has revolved around consumption and an lack of concern about the needs of successive generations. No economic trend shows people giving up their McMansions on the 7th hole to trade into condo developments or assisted living.
First of all, where are the condo developments to house all these aging Boomers going to be built? Second, one can argue now that the McMansions exist, abandoning or tearing them down would be an even worse waste of energy than living in them until their costs are amortized. Third, with health care one of the only growing segments of the GDP, we're more likely to see an army of Home Health Aides take to the streets in beat-up gas guzzling cars, making rounds to McMansions, than any sudden piety or green streak in this particular generation.
People who are used to a certain lifestyle are not going to modify it in response to as esoteric a concept (to them) as "green," and 20-30 somethings do not HAVE to be interested in McMansions to perpetuate them, as their are plenty of Boomers that likely have a half a century or more of life left in them, and are going to need somewhere to live. Preferably something with a three car garage, a great room, an outdoor kitchen and maybe a playroom for the grandkids.