Mansions may face resale obstacles
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Meaning the inventory of McMansions is likely to
grow. And grow. And grow. Could we one day see a landscape with
large white elephants lingering on the market?
"I find it difficult to see how we won't,"
Lawler says.
Gopal Ahluwalia, vice president of research for the National
Association of Home Builders, isn't as quick to perform last
rites on the McMansion.
"There is a definite decline in those homes,
but are they on their way out? No. This happens often as the housing market goes
up and down. They are not on their way out; they have slowed down with the whole
housing market," he says.
The SUV of suburban homes
In recent years, McMansions also became an attractive alternative
to investing in the stock market.
"We know that, beginning right around
the latter part of 2003 and 2004, there was a fairly dramatic increase in the
number of people who bought real estate as an investment," says Lawler. "There
are two ways that an individual can increase their investment in real estate:
buy a rental property or just buy a bigger home. Most people want to invest in
real estate but not everyone wants to be a landlord." During
the past 30 years, a curious phenomenon occurred: The size of American homes increased
at the same time that family size decreased. Ahluwalia says the average home size
has grown from 1,500 square feet in 1970 to a projected 2,450 in 2006. U.S.
Census figures show the average household size declined from 3.14 people in
1970 to 2.58 people in 2002. Ahluwalia says the average home
size and what Americans consider their optimal home size seem to have reached
a sweet spot at roughly 2,400 square feet, less than half the size of the smallest
McMansion. "I don't think the home size will continue
to increase anymore," he says. The
trouble with hugeness
There are numerous reasons why McMansions are
in decline:
McMaintenance. The cost
of maintaining a McMansion continues to rise. Energy, insurance
and home maintenance costs are all affected by home size. Energy
costs have been on a tear nationally; over the past three years,
natural gas is up 43 percent and electricity rose 12 percent, according
to the U.S. Energy Information Administration. If you own an average-size
home but fancy a McMansion, imagine these bills suddenly doubling.
Or tripling.
McFinancing. McMansions
looked better when interest rates were lower. With rates on a 30-year
fixed mortgage at 6.29 percent as of early May 2007, a $1 million
McMansion would cost you $6,183 per month; the same manse at 5.28
percent in June 2003 would have cost you $5,541 a month.
"Interest
rates are still relatively low, but as rates rise, as they inevitably will, the
cost of financing the 5,000 square feet you think you want will look very unattractive
compared to the cost of financing the 2,000 square feet or less that you actually
need," says Gauer. | 
