At the height of the housing boom, a number of real estate agents used the following pitch:
You are going to want to purchase as much home as you can afford. Clearly, with the appreciation that we are now enjoying, the larger your home, the greater the financial return on your investment.
Many followed that advice, making the oversized McMansion immensely popular. But what will be the fate of the McMansion market now?
Population forecasts conducted by the Dukakis Center for Urban and Regional Policy at Northeastern University make it clear that New England is aging rapidly and this is likely to affect the demand for large homes, perhaps substantially. The front end of the baby-boom generation is now pushing past age 60. Over the next 10 years, the increase in household formation throughout New England will be largely confined to those over 55. Such households traditionally look for smaller homes, regardless of their wealth and income. The demand from this section of the demographic spectrum will be for smaller homes, condominiums, and age-restricted housing. Not for McMansions.
At the same time, the number of households in the 35-to-55 age group will actually decline over this period. These younger families, usually with children at home but old enough to be able to afford a large home, normally constitute the largest market for McMansions. But this demographic group will be shrinking and, given the implosion of the economy, less likely to want or be able to afford a McMansion.
In cities across the nation there are neighborhoods with large, ornate homes built at the turn of the last century. These were the McMansions of their time. For the most part these lovely old homes ended up subdivided into smaller apartments. Economics and changing times made the behemoths lose their appeal. I wonder how many of today’s McMansions will end up sharing a similar fate?
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Where I live, the bigger homes are good for families that enjoy living together and taking care of one another. Since several incomes are needed to afford the home, taxes, and upkeep, it works out well for the larger expanding family who likes to stick together.
Good Morning Twist,
While writing my book in 2006, I included the following.
“It is no secret that there are 78,000,000 (as in million) baby boomers. Do you think as these people get older they will want larger two- and three-story homes? Do you believe that they will want to continue to incur the expense of hefty taxes, utilities, maintenance, lawn care, and the pool boy? Will they want to hike stairs in their older years? The answer to all of these questions is a resounding, “You gotta be kidding!”
“So what will happen to the market for all these large homes? The generation coming after the boomers is smaller in numbers and tends to have fewer children. Take a wild guess at what the market will be for those mini-mansions that the boomers will eventually want to sell so that they can scale down. That market will be rougher than three days in jail. Not much of an investment, was it?” [end quote].
The best laid scams…I mean plans…of mice and men huh?
Twist,
I was at a demography seminar 4 years ago, the so-called expert (her name escapes me at the moment) said that boomers would move into larger homes because boomers like things big. I was sceptical then and I still am. When you get taxed for your carbon foot print as is being advocated by the dems you will see less of an inclination for big anything.
Metro-
The taxes are one factor, but I wonder if upkeep and expenses are big factors as well.
It’s easy to go through the fancy models and picture yourself sipping cold drinks by the pool, or playing games in the enormous bonus room with the kids.
After you move in though, you may find that you are too busy with upkeep to relax by the pool, and that after paying the huge mortgage and utility bills, there’s no money left to buy games for the bonus room. Then when you discover that instead of hundreds of thousands of dollars in appreciation, you are seriously underwater….
It has to make a more modest home a lot more appealing.
“Economics and changing times made the behemoths lose their appeal”
That’s pretty broad isn’t it. You could say that about anything. Economics and changing times made the horse and buggy lose their appeal. It doesn’t draw the point you want it to.
One of the primary reasons that “neighborhoods with large ornate homes” didn’t do so well is because of a varierty of reasons. First was the advent of the automobile. No need to be in the dirty city when a cheap car ride could get you out into the country. Cities were dirty, filled with emigrants, and declining schools. Racial flight was another reason.
also – why stay in old houses when a new house was more comfortable.
In many cities, such as NY, Portland, SF, there are many old neighborhoods that were nice and have stayed nice – because they were solid throughout.
Sprawl – not size of the home – is the problem.
That said – McMansions are a silly idea. But i’ll bet that most of the homeowners and even renters here are in homes that are bigger than they need to be, and bigger than the homes they grew up in. McMansions are a class based idea – that those with moderate means shouldn’t get all uppity.
As for me – I am in a moderate home – and loving the decline. This means I can sell my house for a $10k loss and move into a house that would have cost me $200k more 4 years ago. Less cost to me and more house, and more room for my vegetable garden!