Big Homes, Big Problems

As a real estate agent in Colorado, I can relate completely to the "bigger is better" mentality. I see so many people trying to buy the biggest, most elaborate home they can afford. While that may be all fine and good, they also have the fanciest cars they can manage to lease and the wardrobe and the toys to go along with it. Too many of these folks make as small a down payment as they can and disregard any advice from me to consider something a bit smaller, less expensive, less "look at me". While the wealthy can choose whatever they want and cost is a small consideration, most of these folks aren't wealthy. They may have high incomes and have great prospects, but the fact remains that they have very little net worth and almost no ability to ride out an illness, job loss, divorce or any other curve ball life may throw at them. We see plenty of foreclosures in the million dollar price range just because people insist on living beyond their means.

The authors following comments are not entirely true. For vast majority of people the Alternative Minimum Tax kicks in and does away with most of those legitimate deductions.

" In 2008, the tax deduction for mortgage interest payments will cost the federal government $89 billion. The savings go heavily to the upper-middle class and the wealthy???the least needy people???and encourage ever-larger homes."

I had a large home with 3 floors so I put kitchens on each floor and rented out beautiful 1200 sq ft. flats with lake views for only 900 per month. Those flats never went empty for even a week, until the city stepped in and said I was renting in "single family zoning. " So the problem is not the houses, it is the stupid zoning thing which prohibits people from sharing a house unless they're married or something. Cities hate renters and want to keep them out. Its discriminatory, really. Cities have no right to tell us how to live in our own homes, or who to associate with. Nor do they have any right to use city ordinances to advance their idea of social mixing. Big houses are designed for more people, older people especially should gang up in these grand houses. Cities have no right to zone up the best real estate for their idea of what a family is. Modern families aggregate by choice now, not genes. Zoning, codes and ordinances must be limited to clear safety issues, and not grow into social steering programs that are obviously discriminatory. The single family zoning code must be replaced with a "single person per sq foot code". Then we can use the valuable real estate for all.

Why do people want to live in those McMansions anyway? My husband and I always laugh when we drive by those hideous houses. Aside from the fact that they're just charmless cubes (gotta love those tacky two story foyers), they all seem to be too large for their lots and have zero privacy. Why would anyone spend all that money on a house where you can't even bbq in the backyard without the whole neighborhood and passersby knowing?

Let???s look at the future. While the richie rich prosper, every one else???s salary is going down. Remember the global economy means American workers are in a wage competition with workers in Banga Desh. Who???s going to win? In addition, the next generation will be saddled with college debt. Since fewer employers are offering health insurance, particularly to younger employees, the next generation will have to cough up $12,000 to $ 21,000 for health insurance. (Source: American Prospect.) If Libertarians have their way, public schools will be privatized and parents will have to shelling out tuition the instant their child enters kindergarten, somewhere between $ 5,000 to $ 20,000 a year, depending on the quality of education a parent opts for,. If Huckabee replaces income tax with sales tax, the cost of a house will go up by 23%. Homeowners will not be able go get deductions for mortgages, which incidentally did help low income home owners as well as the rich. With this in mind, where will the next generation live?
Check out Barbara Ehrenreich???s book Nickel and Dimed to find out the options and remember that could be your future. Can all the folks investing in McMansions expect to resell their high class mausoleums? I don???t think so. The folks making six digit salaries simply can???t live everywhere at once. Expect housing values to go down - far lower than Robert Samuelson and company can imagine.

The bubble mentality also had a lot to do with the bloated homes being built. When you are getting 10% appreciation per year, would you rather get that on a $150K house or a $450K place? And sure the lenders are falling all over each other to hand you the money and the various govt bodies are giving out more tax breaks for this shed on which you are making more money and...why wouldn't you go for it? Except that you wake up one day and the champagne has gone flat 'cuz the party she be OVER, dude.

Now here's a house I wanted to build, but land in the area I wanted to live was unavailable. None of the builders in NJ are doing anything like this perfect 2100 square foot home:

http://www.houseplans.com/plan_details.asp?id=22061

I'm all for home ownership, and I believe it should be subsidized by tax exemptions. However, this is not about home ownership; it is about greed and hubris. Let the market adjust, and let people and corporations pay for their poor decisions.
--Self-righteous purchaser of a small home

Ego appears to be at least a factor. In my area, central/southern New Jersey, homes that we would have once called "mansions" are now commonplace. Former fields and forests are populated by developments full of these mamouth homes, with wings that jut forward of the house in order to accommodate multiple garage bays, walls of windows to show off 15 foot Christmas trees and $20,000 chandeliers. The rooms are massive as is the waste and energy spent to keep these homes functioning. I have visited the model homes for each of the new developments and it is clear that the homes are marketed for people who want high-end opulence. People are obviously free to spend their money how they like. But it appears that people's desire to have the biggest, shinest version of the exact same thing that everyone else has helped move the housing market along.

Having helped many people move into homes and now helping many people loose their homes I find that yes, many bought way above their means and need, a fmily of 4 with a 3,500 square foot home is crazy.

Older homes can be retrofitted with the latest energy saving features, but it does take some investment. The good news that it can pay for itself in lower heating bills.

The stock market returns beat the real estate returns on investment in the past 100 years and will do so in the next 100 years. And what kind of liquidity do have on a house in comparison to a portfolio of stocks/mutual funds?

These larger homes on larger lots create more sprawl which require more and bigger roads which means you have to live far out and have to drive everywhere. It is lose-lose situation as far as traffic congestion/infrastructure financing and environmentally speaking.