Big Homes, Big Problems

How the size of our houses inflated the housing crisis.

By Robert J. Samuelson | Newsweek Web Exclusive
Jan 2, 2008

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  • Posted By: Knows RE @ 10/06/2008 4:14:18 PM

    ."House lust" .Americans let their egos buy their McMansions. This was happening in the early 1990s. Now they have to eat at McDonalds to keep their mortgage current. I wonder how soon we'll see rusted out Lambos up on blocks in the front yard.

  • Posted By: snjmom @ 09/20/2008 4:38:34 PM

    I wonder how long it will be before we start seeing the McMansions being subdivided? 5200 sf would get you 2-3 nice sized condos.

  • Posted By: trazer @ 09/20/2008 2:56:28 AM

    Learn from Obama.....Take money from Lehman Brothres, Fannie and Freddie, and known felons. Buy a house.....on fraudulent money. Then even go after half of the property of your neighbor to get a bigger house. When that does not work, Obama abandons his 2 children and lives in hotel rooms. He now expects the american taxpayer - 50 per cent who dislike him - pay for his living expenses. Talk about someone who is using us.

  • Posted By: BldrBob @ 01/02/2008 11:42:42 AM

    Sure, the "McMansion" is an easy target, and blaming successful people for our subprime crisis, greenhouse gases, housing bubble and the Miami Dolphins bad season is easy too. But try to look a little deeper. Where are the mortgage defaults occuring. In Atlanta, a recent survey showed them south of the city where smaller homes were built. Predatory tactics by production homebuilders pushed people into financial situations they could not afford. And who drives the production homebuilders? Wall Street. The real criminals are not the successful entrepreneurs who build business and they make the decision to purchase a large house. No, it's the MBA analysts working on Wall Street who push public companies to exploit their customers in neverending quest to increase profits.

    • Posted By: eminer42 @ 09/16/2008 12:53:35 PM

      Once again, It is the system and not the individual who is to blame. People have to be accountable for the choices and decisions they make in life. We are responsible for our financial decisions. Poor us we are so naive that we are at the mercy of those MBA trained people. We cannot even balance our own monthly budget, we are not responsible for anything we have ever done or will ever do. We cannot read or do math. I agree, there were many things done wrong, but no one was forced to sign a mortgage against their will. If you don't understand, don't sign.

    • Posted By: mjoneswater @ 01/02/2008 1:48:46 PM

      I agree, and it is not going to hurt just the people taken advantage of by predatory lenders to buy poorly constructed production homes...When they foreclose it hurts people like me who live in 10 to 20 yr. old homes that would like to build up equity but can`t because the market is flooded with them. I sell water treatment and I always wondered why I was having clients that lived in brand new homes of all price ranges not getting approved for water treatment and its because the lender of water treatment was looking at credit worthiness which the mortgage business was not....

  • Posted By: evilkitty @ 01/02/2008 1:10:21 PM

    A simple change in the tax laws would change some of the problems here -- no longer providing AS MUCH of a tax break on mortgage interest over houses of a certain size. After all, I think the intent in the tax break is to provide the average person/family with an average home, not a super sized luxury one. By setting it to square feet (and controling what is counted as square feet) it will reduce the tax incentive for those who have pure luxury homes buy ensure it for those who are buying smaller homes.

    The flip side of this... is finding more minimalist housing options. Seems like most of the new housing builds are large with many spendy options. I only know of one builder in my area that specializes in smaller, low cost 'cheap but not cheaply made' homes. But they only work with owners who already own a lot, they don't do track housing/mass building. Of course, the prices of lots in the metro area are still completely unreasonable, so even building a 'minimalist' home could put you well over the average local income.

    • Posted By: GtRl @ 01/03/2008 11:52:00 AM

      oh, I see, punish the people that have true prosperity and flip the burden of supporting those that are dependent on "government" tax funded programs to pay their way. Hmmm?, lets see, does that work? well, yes for a little while and then you will start saying that it's unfair that the people that are inherintly paying a higher tax premium are living in nicer houses and driving nicer cars and that you can't because you need a "government" subsidation to allow you the same lifestyle without the cost or risk of what it takes to live that way. Please, the fact that anyone in this country even entertains the idea of home ownership is because others have gone out with a entrepenuer spirit and made it possible. Stop crying about being dependent on others taking the true risks and then you benefiting on their sucess and blaming others on your failures.

      • Posted By: Johnsonium @ 01/03/2008 3:25:38 PM

        Another greedy sot claiming their success is their own, when in reality those at the top are more dependent on government and the commons for their opportunity to consume to excess. The public commons provides the infrastructure and framework that allows fat cats to get rich. There is no free ride. Those that benefit the most, should pay the most.

        • Posted By: eminer42 @ 09/16/2008 12:42:32 PM

          I couldn't disagree more. I and many of my friends and coworkers are educated successful people, who pay in the higher incomtax bracket. Why should we pay more so people who barely work and have children get whatever little tax contributions have made returned back to them at the end of the year? Are they using no services from the government and society? Aand as if that is not enough, some people get all their tax contribution and then some extra given back to them. It is nothing but wellfare. The same is true for medical cost, those who pay insurance have to pay for the cost of caring for the uninsured. Our entire system is based on wellfare. Instead of complaining about the people who are successful you should say thank you to them for paying more than their fair share so you can get your share back.

  • Posted By: rangersmith1997 @ 01/02/2008 1:45:05 PM

    Writers for big magazines always struggle to make headlines by pointing to our weaknesses, and blaming us for our woe. But this writer is wrong, my ego did not cause this awful mess. It's the lenders, stupid.

    Years ago, banks didn't write "jumbo" mortgages. Once they started doing this, everyone needed one or risked loosing their prospective home to those who did get one. I lost in bidding wars on three houses before I won one and got a dinky townhouse. Now everyone needs one just to afford even a small house, so this article blaming our egos couldn't be more wrong. Don't blame my ego for this ridiculous situation, blame the relaxed lending practices. Some bankers got big commissions for underwriting big loans and other bankers didn't want to miss out, so the supply curve shifted and price moved with it. Now, we get to lose equity we never had, but are legally responsible for. Don't blame my ego, I did what I had to do to provide shelter for my family.

    • Posted By: eminer42 @ 09/16/2008 12:24:54 PM

      You did what you had to do to provide shelter for your family? Once again, the individual is never at fault, It was the bankers' fault for forcing people to accept loans tha they knew they could not truelly afford right? We are all just victims as usual. I can do my own math and figure out that when a mortgage takes most of my monthly income, it is too high to be truelly affordable. I also understand that variable intersts will vary over time, they may increase and more than likely they will. I also know that jobs are not 100 percent permanent. I could lose my job, and I need to be prepared for less than ideal circumstances. I agree, Banks were lending to people who couldn't really afford the loans, but when you take out intersts only mortgages and are living above your means you are at fault, Quit trying to pass the blame to everyone else. If you made bad finacial decisions learn from them and shut up.

  • Posted By: eminer42 @ 09/16/2008 12:11:17 PM

    To answer the question do you deserve to lose your house if your current finantial situation changes. I would have to say yes. A key factor in affording one's house and life style is being able to pay the bills despite of what is happening in your life. Life happens; people divorce, marry, die, lose their job and get pay raises. If you are stupid enough to live month to month and have no money left for savings, who are you going to blame when you can't afford your bills any more? Americans love buying and spending and the majority of people losing their homes now, overstretched their budget to buy homes they couldn't truelly afford from the biggining. Now they are crying and wanting sympathy from t.he rest of us who are smart enough to live within our means. The best advice I received from my father was to save for a rainy day. I don't know what will happen in they future, but whatever it is, I have insurance and savings to help pay for my finantial obligations.

  • Posted By: YouCannotTrickMe @ 02/11/2008 2:53:38 PM

    I bought a rancher with 3 bed rooms, 1 bath a finish basement and addition I turned into my movie room. It has a 1 car garage, a large wood shed and nice landscaping on a1/4 acre of land for 189000. That???s more than enough for me, my son and my daughter who rather live with her mother so she is never there. I bought a house I could afford and I don't go crazy spending. I had to put a lot of work into it to get it the way I wanted it, new kitchen, new carpet, new wood flooring, and new ceramic tile. I plan to put in a basement bath and a deck in the future. Most of the work I did my self. I knew my limits, I bought a house with fix interest payment that I can afford and have enough skills to do my own home fixing. Buying a house is no joke, you have to buy with your brains not you hearth. Yeah I wanted the new construction with all the new stuff but reality was staring me right in the face. To many people living a fairy tale then reality bites them in the rear end.

    Like my mom use to tell me ???your eyes is bigger than your stomach???.

  • Posted By: s0055d @ 02/03/2008 11:05:41 AM

    The consumer mentality caused this. Everyone says "look what I got!" Then a few months later they cry about the bill. Years ago, people made do with less. Years ago people were happier. It's too bad that the people steering the economy keep trying to avert a correction. It will just make mattes worse.

  • Posted By: ERNESTK @ 01/31/2008 11:06:25 AM

    SOMETIMES IN OUR QUEST TO REACH HIGHER WE OVER EXTEND OURSELVES. MANY THINGS CAN CONTRIBUTE TO LOSING YOUR HOUSE... CHANGE IN WAGES, LOSS OF EMPLOYMENT, DIVORCE, DEATH AND THESE ARE JUST A FEW. DON'T BE SO QUICK TO ASSESS WHAT SOMEONE ELSE DESERVES. IF YOU LIVE IN A SMALL HOUSE IT MAY BE BECAUSE THAT'S ALL YOU COULD AFFORD , WHAT IF YOUR FINANCIAL SITUATION CHANGED AND YOU COULD NO LONGER AFFORD EVEN YOUR SMALL HOUSE? DO YOU DESERVE TO LOSE IT?

  • Posted By: ERNESTK @ 01/31/2008 11:06:05 AM

    SOMETIMES IN OUR QUEST TO REACH HIGHER WE OVER EXTEND OURSELVES. MANY THINGS CAN CONTRIBUTE TO LOSING YOUR HOUSE... CHANGE IN WAGES, LOSS OF EMPLOYMENT, DIVORCE, DEATH AND THESE ARE JUST A FEW. DON'T BE SO QUICK TO ASSESS WHAT SOMEONE ELSE DESERVES. IF YOU LIVE IN A SMALL HOUSE IT MAY BE BECAUSE THAT'S ALL YOU COULD AFFORD , WHAT IF YOUR FINANCIAL SITUATION CHANGED AND YOU COULD NO LONGER AFFORD EVEN YOUR SMALL HOUSE? DO YOU DESERVE TO LOSE IT?

  • Posted By: ERNESTK @ 01/31/2008 11:05:51 AM

    SOMETIMES IN OUR QUEST TO REACH HIGHER WE OVER EXTEND OURSELVES. MANY THINGS CAN CONTRIBUTE TO LOSING YOUR HOUSE... CHANGE IN WAGES, LOSS OF EMPLOYMENT, DIVORCE, DEATH AND THESE ARE JUST A FEW. DON'T BE SO QUICK TO ASSESS WHAT SOMEONE ELSE DESERVES. IF YOU LIVE IN A SMALL HOUSE IT MAY BE BECAUSE THAT'S ALL YOU COULD AFFORD , WHAT IF YOUR FINANCIAL SITUATION CHANGED AND YOU COULD NO LONGER AFFORD EVEN YOUR SMALL HOUSE? DO YOU DESERVE TO LOSE IT?

  • Posted By: trickytom @ 01/29/2008 3:39:10 PM

    I live in a small raised-ranch with a small mortagage. I didn't take out an exotic jumbo loan to buy an oversized home just to impress my neighbors, so I don't feel sorry for the people who did. Let them lose their houses...it can - and should - be a very humbling learning experience.

  • Posted By: blogsomebody @ 01/10/2008 11:52:35 AM

    Why can't we force the builder of new homes to take back a house that they know was sold at an overpriced value. 2 years ago, I bought a house from Prime Home Builder in Homestead Florida. They sold me a house for over $300,000, but the real price should have been no more than $200,000 and even that may be too much. Well they somehow persuaded my lender to give me over $260,000 loan to buy this house. So why can't we force these builders to take back these houses 2 years later, even oif they give me only $260,000. they can keep my deposit. But since average sale prices are about $250,000 K and nobody is buying they should be forced to buy it back from me. They were the Scammers!

    • Posted By: Ellen D @ 01/16/2008 2:15:30 PM

      The market price is determined by the market. That is you. If you were willing to pay $300,000 for the house, then that is what it is worth to you. I can't believe you think the builder should not have taken the $300,000 from you. Isn't that capitalism? Why can't you take some responsibility for your actions instead of expecting the builder or the government to bail you out?

    • Posted By: Ellen D @ 01/16/2008 2:10:30 PM

      Market value is determined by the market. That is you. If you were willing to pay $300,000 for the house, then that was its value to you. I can't believe you are blaming the builder for taking the $300,000 from you. Isn't that capitalism? You were in the driver seat in determining the price of the house. Take some responsibility for your actions instead of blaming everybody else and expecting the government to bail you out!

  • Posted By: matto00 @ 01/11/2008 11:47:33 AM

    Blogsomebody:

    Did the builder force you to sign the contract?

  • Posted By: matto00 @ 01/11/2008 11:45:56 AM

    Blogsomebody:

    Did the Builder force you to sign the contract ?

  • Posted By: besmith @ 01/04/2008 4:50:25 PM

    Considering the tax breaks given to big oil companies on one end and , the working poor who recieve way more eitc than they pay in to the system,the mortgage credit is one of the few things people who actually work hard every day to suceed in life can take advantage of. It encourages investment in every community in the country, and creates jobs. You should be able to deduct it without having to itimize.

  • Posted By: jb1001 @ 01/04/2008 4:18:37 PM

    We are always looking to blame someone else - especially the gov't. This is just a Market Correction - let it take its course. That is the American Way, and it all turns out well in the end, Supply and Demand. Stop buying homes, they will build less homes, the price goes down. Thank God we live in a country where the govt doesn't control it all and allows markets to correct themselves. If you don't like Walmart, don't shop there - its your choice, see what happens...

  • Posted By: K.Lake @ 01/04/2008 1:29:31 PM

    My husband and I own a 1000 square post WW!! home where we raised 5 children. We lived comfortably and paid our house off years early. Now we can increase our savings and live comfortably. In our neighborhood, there is just one house reclaimed by the bank, That house is one of the supersized versions.

  • Posted By: K.Lake @ 01/04/2008 1:24:08 PM

    When we married 15 years ago, my husband and I brought 5 teenagers into our 1000 square foot home. We considered enlarging, but only briefly. We may necessary repairs and paid the house off many years early. Now the children are grown and we are able to invest part of the former house payment Our neighbors in the post WW!! neighborhood are in the same situation. Despite the recession in Michigan, there is only one house for sale in our area and nary a foreclosure sign.

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