As we all predicted - houses getting smaller!

[btuser]

Wages have been stagnant for 30 years, we've just now run out of credit/savings. I think there's going to be a trend toward deflation in the housing market (well, except for my neighborhood, we're special!) as energy costs really amp up. I remember driving with my mom past our "old" house when I was six. Even at six years old I knew it was a much nicer house in a better area and was much bigger. I asked why we moved and she bluntly said: "we couldn't afford to heat it." That was the oil mess in the 70's. Granted, it was over before most people had a decent wood pile to fall back on but its coming again and this time its going to stay, regardless of how efficient we can make our 4000sqft homes.

Its not just the cost of heating/cooling a larger home, but the cost of building a larger home is going to skyrocket. The cost of wood, cement, roofing, siding, diesel for the equipment, glue for the OSB, everything is price right now on cheap oil. The size of a come will be determined by the cost of energy. If the price of heating oil goes to $10/gallon I doubt there will be many successful scroungers on this site. I'll end up closing up part of the house and opening it in the Summer. Can't wait to see what that will do to drywall!

 

[Delta-T]

these are all the reason that I sit slack jawed when watching the Extreme Makeover. How, if these people could not afford to paint their house when it was 1200sq/ft, are they gonna pay to heat/cool/electrify/maintain their now 4500sq/ft monstrosity ? Again, it seems we have a severe deficiency in sense of the common variety, or maybe its just me.

 

[Seasoned Oak]

WebM Wrote
"This may be OK if your kids are in the local schools…you are getting a deal on those $6K property taxes in that case. But carrying costs can really hurt!
When my dad told me today that his house had sold, I didn’t ask how much. He asked me why I didn’t ask. I told him it didn’t matter - the big deal is that he is going to save 30K plus per year in taxes, country club, HOA, trash pickup, maintenance, etc…..."

Made a lot of sense for your parents to downsize but for me, not so much.
Where your house is located is another variable, Im in a middle class neighborhood and My 3000 SF house Property taxes are $425 a year and The PA gambling revenue credit pays about a third of that. My Trash PU is $30 a month,heating & hot water $65 a month. No country clubs or HOAs to deal with. Probably cost me more to downsize than im spending now as i have no mortgage now. The only way ill move is if i get a deal on a farmette.
I think most people losing houses today is due to not being able to keep up their mortgages more than high cost energy demand. They just cant afford the house payments and or they are so upside down its not worth it to keep paying. It truly is a tremendous waste of resources that some brand new houses may never be occupied and may have to be razed.

 

[btuser]

My parents downsized too early. They complained about the taxes and heat, but turned a blind eye to what they were giving up. I couldn't get them to admit that the cost of selling+moving was about 10 years worth of heat, and that rent was going to be 3x their property taxes. They felt good about the check however, at least untill the market collapsed.

 

[benjamin]

big McM
With stagnant wages and everything else, I just think that particular part of the American Dream is going to be out of reach of many (most) people.

I just hate agreeing with you Craig, but you're right on this thread. The American dream is as unsustainable as a lottery winner's budget or an Extreme Makeover project. We can argue elsewhere about why, but the boom is over. Houses will be smaller.

I believe that smaller houses may suit some people, but many people will be better served by homes that are extravagantly sized by world and historical standards. Energy use is far from the largest waste in NEW housing, even in sloppily built mcmansions. Better and cheaper materials make size relatively less important than labor costs in the construction and maintenance of buildings. (Some) People do pay a large premium to live in old houses or cute houses whether they admit it or not.

Here's a funny example
http://host.madison.com/lifestyles/home_and_garden/article_f730ecee-b132-11df-aaf3-001cc4c03286.html
http://www.madisonenvironmental.com/

This house may well function as promised, time will tell. Many of the features make good sense, cellulose super insulation, simple heating system for a tiny load etc. Time will also tell whether this house is sufficient or if it gets added onto at dramatically increased cost and complexity compared to new construction.

I'll make the prediction that this house/kit/publicity stunt is a dead end and a complete waste of grant money. The only innovation I have heard of in this project is a new measure of heating capacity: the "one hair dryer per floor". It's gonna take quite a few hair dryers to power the ol Prius 100 miles one way from Viroqua to the office on the Capitol square.

edit: here's another article with a much better description of what is possible with mostly standard materials and technology. This extreme doesn't make sense if you're burning wood, but it shows what is possible. Notice that there is no mention of size, the requirements are per square foot, making it easier for bigger buildings to meet.

(broken link removed)

 

[Seasoned Oak]

My parents downsized too early. They complained about the taxes and heat, but turned a blind eye to what they were giving up. I couldn't get them to admit that the cost of selling+moving was about 10 years worth of heat, and that rent was going to be 3x their property taxes. They felt good about the check however, at least untill the market collapsed.

If they are trying to live off the interest from the "check" they must be having a tough time at .25-1% Int rates. I never sit on cash to make money. Im still collecting 8-15% on every investment in ever made and some roll over and double overnight. Very simple to do. I buy the best piece of Real estate i can find and sell it and hold the mortgage.
Cheap houses are 15%, more expensive ones 8-10%. Whats the risk? Of course your buyers can default and you get the house back and sell it all over again,you actually make more when that happens. Iv got buyers from all walks of life School teachers,medical professionals,blue collar,retired,many of whom have an annual salary many times what mine is. even if your 80 years old its not that difficult to collect a mortgage,not like being a landlord.

 

[kinshipknight]

So what happens to the McMansions of suburbia? Levelled for more smaller homes people can afford and that are more efficient?

 

[Seasoned Oak]

So what happens to the McMansions of suburbia? Levelled for more smaller homes people can afford and that are more efficient?

The whole industry was built on a presumption of easy credit and good high paying jobs both of which will be in very short supply for some time.
Would have made more sense to leave it as farmland. Pa is actively purchasing land use rights to farm land for quite some time now leaving to land in the care of farmers to farm but prohibiting its sale to developers. I guess were all paying for those empty houses with unemployment benefits ,added national debt, and all the costs associated with the collapse of the housing sector.

 

[benjamin]

So what happens to the McMansions of suburbia?

Duplexes, triplexes, fourplexes, branch compounds for the Davidians and satelite communes for Heaven's Gate.

 

[webbie]

It's a big country, and there are probably people to fill the McMansions in many areas - however, in others there are not!

Nothing happens instantly, but what is already happening is that the prices of these particular homes are coming down much more than, for instance, a townhouse or smaller house in the same area. My parents just sold theirs for about 1/2 price compared to 3-4 years ago.

Some will be neglected and then, when the owners - buyers - or banks find out how much mold remediation, a new roof and other things will cost, they will walk away, auction or abandon them. There was an article about this already happening in some burbs (I think Charlotte, NC was one example).....

Oh, here is that article:
http://www.theatlantic.com/magazine/archive/2008/03/the-next-slum/6653/

Notice that the article mentions a premium now being paid for urban living, when it was the opposite before!

Don't hold this over my head later, but my intention is to retire in a place where I can walk and bike to 90% of the stuff that I need on a day to day basis.....there are quite a few such places around here, if I stay, or elsewhere if I do not.

Good article, though....worth a read for those interested in macro trends.

 

[jharkin]

these are all the reason that I sit slack jawed when watching the Extreme Makeover. How, if these people could not afford to paint their house when it was 1200sq/ft, are they gonna pay to heat/cool/electrify/maintain their now 4500sq/ft monstrosity ? Again, it seems we have a severe deficiency in sense of the common variety, or maybe its just me.

There was a big discussion about this over at oldhouseweb recently. Its started off with fustration at the fact that they tore down a builtiful old log cabin that just needed some TLC to build a McMonstrosity... But then a few posters pointed to stories documenting how many EHM "winners" later end up loosing their houses anyway. Feds tax the value as a windfall capital gain and then on top of it the new house hits them with property taxes bigger than the old mortgage they were struggling to pay.

Just a scam to advertise home despot I guess...

 

[benjamin]

Nice article Craig.

In most of the country we have another example of what happens when a form of housing becomes less fashionable and attracts a much less attractive grade of occupant, the mobile home park. I can only imagine what the mood was that spawned the apparent popularity of mobile homes in the 60's and 70's. It certainly wasn't cost, at least not any realistic life cycle cost. Remember Buckminster Fulller's designs and advocacy of lightweight houses? Was it the faith in technology? efficiency? I can just imagine similar half witted authors' praise for the new trend in housing, "maintenance free exterior, only the finest materials put together on an assembly line, aluminum windows that will never rot, modern heating and air conditioning for ultimate comfort, no need for an outmoded basement".

As the article states, the pendulum did swing pretty far away from urban towards suburban in postwar america. The article failed to mention the obvious causes, cheaper more comfortable automobile transportation, affordable new housing, and OVERPRICED OBSOLETE RUN DOWN OLD HOUSING. My grandfather bought a Victorian for $11,000 in 1955 in a foreclosure auction when Victorians were equivalent to the 70's houses of today. That seems like a bigger bubble than what we have seen in the midwest a few years ago.

Certainly the pendulum has been swinging back toward urban, as the author noted and is promoting and exploiting to the best of his ability. And likely it will not swing as far toward the urban (if that is something that can be measured) because of the physical limitations on urban expansion and the result that urban development has a steeper price supply curve. Imagine our pendulum swinging on a 100' rope, it swung toward the suburban and now is swinging back toward the urban, downtown, smaller house, apartment, loft, etc. I predict that the increased cost of urban renewal (rebuilding utilities vs slapping them down in a cornfield, cumbersome city building departments, logistics of remodeling vs new construction) will act like a stop on the rope causing the pendulum to finish it's swing in a shortened arc with a jerky ride back to whatever the next fashion becomes.

One of the signs I see as evidence of the irrationality of the pendulums swing, is the recent infatuation with trains. This author goes even further promoting the superior construction of row houses to modern construction ?!?! The guy's been reading too much Jane Austin and not enough Dickens.

 

[webbie]

I can assure you that row houses in Philly - where my wife grew up and where I was born, are far superior to most recent construction! Most were built in the post-war period 1950-1960.

I think a lot of these tendencies are regional - that is, the country is a big place! In this state - both parts of it (east and west), we have vast millions of sq ft of old factory buildings which can easily be converted. Many of these buildings are close to town centers due to the fact that the original workers had to walk, ride a bike, or ride a trolley.

This is a resource our state has recognized and is engaged in developing. We have a statewide program where a town gets CASH from the state.....first for rezoning an area which is walkable, and secondly when the actual building permits are given. This program will probably be taken advantage of by most towns.

The little town next to us, Easthampton, probably has enough mill space for 100's of residential units (maybe more) - and this is a town of 13,000.

As you probably know, cities are much greener in terms of energy used per person...than the rural areas. I think, for that reason, NY State, CT, MA and RI are the most energy efficient states in the USA (per capita)......

Urban living....to a certain point, is OK. I would not want the din of traffic, but I don't mind a higher density of housing and shops - as long as there are plenty of open spaces. Our place in RI is somewhat like that - the Island is quite heavily developed, but because we have water, beaches, thousands of acres of protected land (farms, nature reserves, etc.), it has a very high quality of life. That's probably a perfect scenario for high density........just jump on a kayak or boat and you are alone in the wild.

NYC...that would be way too much for me! I'm from philly, and we are used to always being close to Parks, etc. - I think Fairmout Park is one of the largest urban parks in the country (or was, at one time!).

 

[benjamin]

row houses in Philly... are far superior to most recent construction!
...post-war period 1950-1960.


As you probably know, cities are much greener in terms of energy used per person...than the rural areas.

I believe there were some great buildings built at different time, and I didn't mean to pick on row houses, but I was comparing the new construction that was available in the 50's to the existing housing stock that was in pitiful shape. I assumed the author was referring to prewar housing.

The nostalgic notion that they don't build them like they used to is partly true, materials change, but "plywood glue drying out", buildings falling down without drywall, and the weakness of shingled roofs? This guy is out of touch with the reality that new houses will require far less maintenance and far less energy than houses built at any time in the past.

Certainly factories can be converted to residential use and will be wherever there is a premium paid for that sort of charm, but I don't believe it is usually cost competitive with new construction and cost equals resources one way or another.

The notion of cities being much greener because there is less energy used (directly) per person ignores the importation of food, raw materials and tax dollars, and the export of services.

 

[jharkin]

I am going to have to respectfully disagree with the notion that older houses are obsolete.

I'd put the build quality of a Victorian or colonial period house up against a modern house any day of the week. When my wood clapboard siding gets worn I can repaint it. over and over again. That wood has and can last centuries. When vinyl starts to degrade from sun exposure in < 30 years you have to replace it... usually all of it as the colors and styles change so often you wont find matching replacements.

And what about all that foam everywhere. Ever seen 30 year old styrofoam? It crumbles to dust.

Dont even get me started on crappy aluminum windows....



The modern "low maintenance" house is a scam. What they are selling are materials that CANNOT be maintained, so instead they have to be replaced... Far sooner than most folks realize.

 

[webbie]

Here is one of our local conversions, although this has apartments - not condos.
http://eastworks.com/
It also has shopping, the motor vehicle office, lots of artists, karate, etc,

A lot of these places are set up for "live work" for artists and work at home people.....

This place:
(broken link removed)
is one town over and has electrical generation from the canals which go under the building! The CT river falls 60 feet at Holyoke, which is why the city was originally built (power) and there are millions of square feet.....MANY millions. You can buy the buildings for a song.

Holyoke hasn't taken off yet like Northampton and Easthampton, but it is probably only a matter of time.......

 

[begreen]

Restoring an old house is about as green as you can get. It's recycling resources that have already been spent.

 

[Mainely Saws]

What the heck , I'll throw my 2 cents worth in on this subject . I think how a large home is used can determine if it's " green " or even cost effective . Years ago folks lived in large homes but had relatives living with them & they also had rooms that were closed off in the winter so they wouldn't have to heat them . I have a fairly large home ( over 3500 sq.ft. ) BUT it is a duplex & the income pays for the taxes , water & sewer bill , insurance & sometimes there's a little left over that gets saved for when it's time to replace a roof or change out a furnace . The rental income also helped me to borrow money to build a 2000 sq. ft . two story garage that has housed my business for over 25 years . So , I have a large house but the actual living space for myself & wife ( kids are grown now ) is about 1000 sq. ft . Repairs & improvements can be tax deductible & there are numerous other advantages to owning this large house . If I were to sell the rental income can be factored in to loan which would make it more affordable to a prospective buyer . I know owning & living in a duplex has it's own pitfalls & is not everyones cup of tea but for me it has worked out well ..............

 

[timfromohio]

We were lucky and flip/flopped house/yard size before real estate tanked. In 2005 we moved from a large, McMansion-style house on 0.20 acres to a smaller, split-level built in 1970 on almost two acres. During the same time, we had two kids. So, we doubled our household and moved to a smaller, cheaper house. How un-American!

Personally, I think some of the older neighborhoods like the one we live in are idea. Smaller homes that can be made more energy efficient along with much larger yards that enable substantial food production.

 

[webbie]

We were pretty much un-American until we moved up here and bought a new house - but, frankly, the only reason we bought new was that the housing boom was at peak and the prices they were asking for used houses was out of sight - really out of sight!

It turns out, though, that a newer house built to code in MA. uses about 1/2 the energy for heating as my 50 year old house in NJ did. Big difference.....

Even before the last housing boom, many folks took as a sort of "religion" that you should live in the best house you can afford. We never bought into that, and instead fixed up our little house with additions, etc....until it was a really nice "medium" house by the time we left it (26 years). During the time we lived there, we wanted a second house "at the beach" in NJ, so we bought a very old duplex about a block from the beach. I did a lot of work making it livable and even then it was certainly not up to any modern standards...bu, heck, it was a beach house and our kids loved if for the 6 years or so that we had it. We were able to rent the rear unit quite often - either yearly or seasonal, and therefore the cost of keeping the house was almost negligible.

It's interesting the my parents were VERY much up and coming back in 1959 when they moved from a row house to a tudor single in the burbs....but, still, my brother and I lived in the same room our entire upbringing! Today, the kids usually have their own room(s), as well as maybe an extra playroom or two. We did have the incredible luxury of our own (3 kids) bath, as our parents suite had theirs! All the row houses only had one bath upstairs - although many installed "flush up" toilets in the basements and converted those to play areas, etc.

 

[timfromohio]

Our current home is just under 1800 square feet - the only way I could imagine a larger home would be to accomodate other family members. There are big advantages, as many others point out, to this type of arrangement so long as all parties get along. Would need fewer vehicles, lower heating/cooling costs, food would be cheaper (pooling resources to engage in bulk purchases), shared chores and activities, security, etc. I expect there will be another thread in the not too distant future as a follow-up to the "houses getting smaller thread" - it will be "households getting larger", and it may not be all bad.

It will also be interesting to see if people begin to value more practical aspects of homes. The McMansion trend brought multiple story great rooms and entry ways and walls of windows while features like full basements took a back seat, at least in that you had to pay extra for that feature whereas the wall-o-windows and two story great room came standard.

 

[btuser]

Drive across the country on the back roads and you'll find towns that are deserted, buildings that have died, entire factories/economic ecosystems that have died. The suburbs won't be any different. The tractor drove more people off the land than the dust bowl.

 

[jebatty]

I discussed this topic and The Atlantic article with a financial consultant who owns a CPA firm. The following is a paraphrase of his response:

"I can get to the same answer [small house] using financial analysis. I have had several financial focused discussions on the wisdom of maintaining debt on a personal residence. The main argument for it is to limit financial risk due to changes in the real estate market. A balanced approach with respect to where wealth is held will result in a conclusion similar to the one in the article. Specifically, reduce housing and energy expense in exchange for other financial goals. To do this, one needs a home that is affordable (i.e. as small as reasonable, energy efficient, and close to work/life needs to limit transportation costs).

Predicting the future is nearly impossible. Responsibly allocating resources today is possible and will have similar results."

 

[benjamin]

Restoring an old house is about as green as you can get. It's recycling resources that have already been spent.

Or throwing good money after bad. This is the work I do, and I spend too much time talking people out of cute houses that they've fallen in love with. The only thing worse than wasting this time is when they ignore my advice, sink money into the dump, sink way more money into it and then lose it in foreclosure less than halfway through the project. Nothing green about that.

 

[benjamin]

... the only reason we bought new was that the housing boom was at peak and the prices they were asking for used houses was out of sight - really out of sight!

It turns out, though, that a newer house built to code in MA. uses about 1/2 the energy for heating as my 50 year old house in NJ did. Big difference.....

My point exactly, I commend Craig for his wise allocation of resources.