Housing market spot check

[FIREd]

We actually are a beneficiary of BRAC down here... Keep all those families coming, it's good for our RE market...

[TargaDave]

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Originally Posted by FIREdreamer I think my wife and I have the best of both world: high paying jobs in low cost middle America! And that's why we are not in a hurry to move out of here!

Same here and we even have a great college town to reside in. BUT, it's 8 hours to our favorite stretch of ocean-bay-intercoastal. The middle America thing just doesn't work for us anymore. So damn the hurricanes, Nor-easters, flooding, insurance rates, lofty home-living prices, rising water levels, tsunamis, decaying causeway bridges, crowded tourist seasons, and whatever else is out there; we're goin. All a matter of personal preference.

[Grizz]

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I think the housing bubble will resolve itself in a different way than everyone is speculating. Sure, prices will come down, but I don't know if they will regress to that inflation curve for a long time if ever. The US housing market has been of a different nature than those in other countries, where renting is much more common, and where properties are often left to heirs instead of selling on the open market. I recall when I lived in Holland that houses were leased by families for 100 years, since few could afford to outright buy them (may be different now). I don't know if the US market will go this way, but as the population keeps increasing, construction decreases, and people have a harder time finding affordable housing, I think the rental market may be the next bubble.

I like your angle on this as I have actually spent some time considering this possibility and even talked with a friend who recently moved to my city from France. The things that seem to be preventing such a scenario from happening are twofold. First, compared to Europe, land is relatively plentiful and very inexpensive in most places here in North America.

Secondly, we have an abundance of trees which have and will continue to go down in price as the bubble deflates and construction slows. Construction has already gotten much cheaper overall, and because we build with wood, we get cheap houses that are like the second little pig's. The house that you grew up in will withstand a fair bit of abuse, but I doubt that it will be around in 200 years like many Euro homes, so really there is certainly a value to the construction, but since it's built of wood, there has to be a lower price tag placed on the structure as decay has to be figured in to its price,and since wood does have a finite lifespan, I don't think that construction can slow down forever unless we choose igloos.

I can definitely see a greater number of renters than there currently are, but IMHO that won't be due to land or construction costs but will be because mortgages will be very difficult to qualify for until the memory of those subprime mortgages that caused the collapse of the housing market is well behind us.

[audreyh1]

Fascinating discussion!

One thing that I have really wondered about.....

Home square footage seems to have really ballooned. You can notice a significant increase with each generation. Houses built 30 years ago are much smaller, and houses you see in the inner parts of cities are really quite tiny. And yet families have been getting smaller and smaller......

Houses these days just seem to be ENORMOUS!!!! It's like people think it's essential to their happiness to have a huge square footage - even in retirement communities.

Well, I have wondered whether this rapidly increasing square footage is a part of what has driven house prices over the past decade.

Audrey

[W2R]

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Originally Posted by audreyh1 Fascinating discussion! One thing that I have really wondered about..... Home square footage seems to have really ballooned. You can notice a significant increase with each generation. Houses built 30 years ago are much smaller, and houses you see in the inner parts of cities are really quite tiny. And yet families have been getting smaller and smaller...... Houses these days just seem to be ENORMOUS!!!! It's like people think it's essential to their happiness to have a huge square footage - even in retirement communities. Well, I have wondered whether this rapidly increasing square footage is a part of what has driven house prices over the past decade. Audrey

Yes, and have you noticed the increase in numbers and sizes of bathrooms? I have to admit that I am guiltier than most in this respect, since I love large bathrooms and utterly adore large showers with all the bells and whistles. But people managed reasonably well 50-100 years ago with one tiny, spartan bathroom in their homes and a line forming outside the door.

[Grizz]

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Originally Posted by audreyh1 Fascinating discussion! One thing that I have really wondered about..... Home square footage seems to have really ballooned. You can notice a significant increase with each generation. Houses built 30 years ago are much smaller, and houses you see in the inner parts of cities are really quite tiny. And yet families have been getting smaller and smaller...... Houses these days just seem to be ENORMOUS!!!! It's like people think it's essential to their happiness to have a huge square footage - even in retirement communities. Well, I have wondered whether this rapidly increasing square footage is a part of what has driven house prices over the past decade. Audrey

The reason that more square footage is desireable to many is because it is human nature to believe that bigger is better, both for the luxury of space, but mainly because having the biggest house on the block is a good ego boost. Exact same reason big 4X4 SUV's sell in big southern cities.

Houses have gotten bigger since the pioneers. This bigger is better mentality has been around for a long while, and by the time the 1960's came around, the technology certainly existed to build big (today sized) houses. The bigger houses haven't driven up prices at all, its only been the lenders with a cavalier attitude toward giving loans. Typically back then (at least where I live) you needed a bare minimum of 10% down, and you'd need a letter from your employer to prove a good long term job coupled with a debt vs income formula determining that you could handle the loan with relative ease. No such thing as a mortgage over 25 yrs. Also, interest rates weren't what they are now, and because of all of these factors, in order to have a fairly impressive house, a fireplace and maybe a sunken livingroom would do the trick.

[NotSoonEnough]

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Originally Posted by Want2retire Yes, and have you noticed the increase in numbers and sizes of bathrooms? I have to admit that I am guiltier than most in this respect, since I love large bathrooms and utterly adore large showers with all the bells and whistles.

My 80+ yo Mom just finished remodeling her new/old condo. The biggest change was to enlarge the master bath by expanding into an unused closet space and installing a big walk-in shower. I asked her why she was spending so much money on the shower considering how little time she spends in a shower each day... She laughed and said, "At my age I can have whatever shower I want to afford." I don't argue much any more...

[Edit]

And I should also say, after seeing what she did and how well it turned out, I am considering the same sort of adjustment at my place too...

[Puzzley]

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But people managed reasonably well 50-100 years ago with one tiny, spartan bathroom in their homes and a line forming outside the door.

Still that way at our house, since we live in the old family farmhouse. Not much of a line with just two of us, though...

[travelover]

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Originally Posted by audreyh1 ....... Home square footage seems to have really ballooned. You can notice a significant increase with each generation. Houses built 30 years ago are much smaller, and houses you see in the inner parts of cities are really quite tiny. And yet families have been getting smaller and smaller...... Houses these days just seem to be ENORMOUS!!!! It's like people think it's essential to their happiness to have a huge square footage - even in retirement communities.............

I can attest to that. My neighbors recently tore down a little 2600 sq ft house like mine and put up a 5000 sq ft McMansion. It is designed with the garage doors to the back so the front of the garage can appear to be part of the house. Gives it an enormous look, which I suspect was the intent.

[HFWR]

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Originally Posted by travelover I can attest to that. My neighbors recently tore down a little 2600 sq ft house like mine and put up a 5000 sq ft McMansion. It is designed with the garage doors to the back so the front of the garage can appear to be part of the house. Gives it an enormous look, which I suspect was the intent.

I think I'm gettin' a woody...

Tell 'em "good luck" with that $1000/mo electric bill...

[happy2bretired]

Since I was born to older parents and had older grandparents than most people of my generation I was exposed to a different perspective on home sizes. My grandparents remembered when there were very large Victorian homes, very grand homes only for the wealthy. Over time, those grand homes were vacated since the next generation could not afford to live in them because of heating costs, etc. The next generation built smaller homes (1950s, 1960s). My parents generation didn't want large, hard to clean or heat homes. The old Victorians were either torn down or divided into apartment houses, becoming the poor part of town.

Twenty years from now, after most of the boomers have retired, I see many McMansions being divided into multiple family dwellings. The rich will move on to new ground and we'll start the cycle over again.

[twaddle]

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Originally Posted by audreyh1 Well, I have wondered whether this rapidly increasing square footage is a part of what has driven house prices over the past decade.

I think that trend started before the current bubble. Median square footage went from 1500 in 1982 to almost 2000 in 1997. The current median is 2248 sq ft.

Anyway, the OFHEO (the source of the data in the graph I posted) uses a "repeat sales" methodolgy. Those are price increases for the same houses being resold, so it doesn't reflect any trends toward bigger homes.

[eridanus]

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Originally Posted by twaddle Anyway, the OFHEO (the source of the data in the graph I posted) uses a "repeat sales" methodolgy. Those are price increases for the same houses being resold, so it doesn't reflect any trends toward bigger homes.

Double incomes?

[kcowan]

Raised in an 850sq.ft bungalow with 2BR and 1 bath for the 4 of us.

When I had a family of 4, we were in 5000sq.ft - how was that for space inflation. Why? Because we could!

[biosurfer1]

I'm right in the proces of buying my first home and its almost too much to take in at once. Not only am I going through the typical learning curve of what means what, how much is what, all the new terms, etc, but I have the added fun of trying to figure out what is a good deal, why is it a good deal, where the market is going, and on, and on, and on.

It has been very hard for me to even make an offer on a house because of how things are going around. I feel bad for my real estate agent (truly, only a little) since I know he wants me to find a place and buy it (duh) but with absolutly no signs whatsoever that the market is still going anywhere but down, thats very hard to do since the same house will probably only keep going down, and if it does sell, there are 10 more around the corner that are cheaper.

I watch a lot of markets pretty close but even a monkey could see this coming. When you have a situtation where even a median house price is way more than a couple, who both make good money, cant even afford it, it has no place to go but down.

[JustCurious]

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Originally Posted by happy2bretired Twenty years from now, after most of the boomers have retired, I see many McMansions being divided into multiple family dwellings. The rich will move on to new ground and we'll start the cycle over again.

I don't think so because most new McMansions are built in planned developments, and the developments restrict the type and size of home that can be built by convenants and deed restrictions. They will not allow homes to be subdivided into multi family dwellings.

[haha]

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Originally Posted by JustCurious I don't think so because most new McMansions are built in planned developments, and the developments restrict the type and size of home that can be built by convenants and deed restrictions. They will not allow homes to be subdivided into multi family dwellings.

I believe that the rising cost of transportation fuel will before too awfully long make these things economically obsolete.

Ha

[Texas Proud]

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Originally Posted by Want2retire Yes, and have you noticed the increase in numbers and sizes of bathrooms? I have to admit that I am guiltier than most in this respect, since I love large bathrooms and utterly adore large showers with all the bells and whistles. But people managed reasonably well 50-100 years ago with one tiny, spartan bathroom in their homes and a line forming outside the door.

Well.. with 4 sisters and a brother... my parents filled up the tub once and washed us all.. two at a time.. I hated it when I was last in!!! But, we did have two bathrooms as my dad wanted his own....

[jazz4cash]

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Originally Posted by HFWR Tell 'em "good luck" with that $1000/mo electric bill...

As energy prices continue to escalate, I expect there will be less demand for the larger homes. Here in MD, we are going through a >60% hike in electricity rates. The PUC negotiated a flat rate for several years in exchange for deregulation and now its time to pay the piper.

[kcowan]

Our ideal home size is 1600sq.ft all on one level with a "great" room that has an open kitchen, dining area, and entertainment center, including Internet access. Opens to large deck/patio. Large MBR with ensuite with dual sinks and separate tub and large shower. Guest room with bathroom that doubles as a powder room off the great room; big enough to also serve as a hobby room.