Monday, November 30, 2009

Will McMansions Follow the SUVs into Extinction?

With the cost of oil causing people to rethink buying a gas guzzling SUV, I'm curious if homebuying habits could deem McMansions a thing of the past. In boom times, building more square footage translates into a higher selling price. Now with credit a serious issue, it doesn't appear too many McMansions are being constructed. In addition, Babyboomers are just beginning to retire and downsizing will be in order.

The overspending craze of the 00's, just like the 80's could leave these oversized homes lingering on the market, until someone snaps them up at less then half their 2007 peak price. Incomes are being slashed everywhere as our new economy recovers from the depleted FIRE (Finance, Insurance & Real Estate) economy. The big question is: what will the new economy look like? Will their be enough high paying jobs to support our unsold housing inventory? In my opinion the future looks bleak for McMansions. Homes will return to a place to actually live in, as opposed to investments or retirement vehicles. This means more sustainable living in smaller spaces without excess square footage. Welcome to the new decade, the 10's.


speedingpullet said...

Will McMansions Follow the SUVs into Extinction?

Oh, Lordy, I hope so.

I look at al those gargantuan houses and wonder how many of them actually house the multi-generational families they were obviously designed for...

There being just the two of us (plus 2 cats), we're looking for a place smaller than 2000 sq ft. Heresy, I know! I'd rather have a big lot and a small house, not vice versa.
Sadly, the bubble seems to have forced otherwise sane people to raze perfectly good, if modestly sized, houses in order to build a behemoth to the lot line.
All with the hypothesis that people will pay more for a bigger house - kind of like Supersizing your real estate.

I wonder what's going to happen to all of those places.... are future owners simply going to tear down sections, so that thier family can live in a sustainable (not to mention cleanable) sized house?

Or will some of the MacMansions simply languish until they become the Local Haunted House?

Will people really bankrupt themselves trying to heat, cool and clean these white elephants long after they've become totally obsolete....?

Anonymous said...

I live in Manhattan Beach and watched as many of the older home were replaced with huge homes with little yard. Why do you live here if you have no outdoor space?

biggiejames said...

Unfortunately, land is at such a premium on the westside that if you build new and go through ALL the hassle start to think that you better throw in everything and the kitchen well in boom times. Not so much now.....

Anonymous said...

Cool! I just wait a little and I will get a home + big home office for a price of a home. Big tax writeoff!

Anonymous said...

When I lived on the east coast you saw a bunch of big houses built circa 1860-1910 for shipcaptains and merchants.

After the great depression and the white flight escape to the suburbs we saw in the 1950s & beyond, the only way to make these big places economically viable was to break them up into multiple tenement housing.

It is only now that there is again enough wealth located in the city centers that some of these places are being re-converted into single family housing once again.

Translating that lesson to this area, you have to wonder about the viability of our big mc-mansions, especially those in the far out suburbs in the IE.

Even worse, unlike those sturdy places built 100-150 years ago, the mcmansions of today will not withstand the extensive overhaul needed to convert them into duplexes or more.

Long term, they will come back, but when? After a 70 year period of neglect, (and in some cases outright abandonment), those sturdy east coast places are now experiencing a renaisance. Yet, does anyone seriously think a circa 2000 IE mcmansion will be able to withstand decades of neglect or worse?

Anonymous said...

I own a tiny decrepit teardown of a house in the 90402. It is 900 sq feet and just not suitable to live in - also not suitable to expand. I need a family sized home. I am considering having mine torn down and replaced.

Do not assume that every one that builds new is maxing out the square footage. In the 90402 the general rule is that you can build a maximum of 4200 square feet on your land. If you assume 500 square feet for a garage, that allows you to build 3700 sq feet for the house itself.

I would not want something that big - am thinking more along the lines of a 2900 sq foot two level house.

So I am carefully running the numbers - either build a 2900 sq foot house or just buy an existing 4 bedroom house and sell my teardown as a teardown

Decrepit teardown houses like mine used to sell for $300 thousand in 1983, then sold for $900 thousand in 1990 then sold for $600 thousand in 1995 and sold for $2.2 million in 2007 and today sell for around $1.4 million

So assume that I could sell my decrepit teardown for $1.4 today and then turn around and buy a decent four bedroom for $2.4 million in the 90402, I am out of pocket roughly 1.0 million

If I want to demolish my decrepit teardown and have something 2900 square feet built in its place, I think I would really have to strain to get it done for $1.0 million. Realistically, it is going to cost me MORE than $1.0 million out of pocket to get a modest 2900 square foot home put up.

So building is MORE money and MORE hassle than simply trading up, but the end result is probably a layout that is more to my liking.

I'd like to discuss the pros and cons of buying vs building with others on this site that have carefully done the math.

I also would like to humbly suggest that you end the separate 90402 blog - I think there is so much overlap in the readership of that blog and your main blog that you may as well have them all together

Also - I am very interested in debating the pros and cons of different buildings styles - should I build spanish style or cape cod style for example -

If no one else on this blog is interested in getting in to this level of detail I respect that, but I am looking for a forum to discuss all this stuff with more granularity

Anonymous said...

Hi, I built a home in 90405 in 2008. It was a heck of a time to build (cheap money, but swamped contractors and high materials cost). Now the situation is the opposite for building. There are no construction loans/HELOCs anymore, but the materials are down (slightly) and the labor is down (quite a bit).

I wouldn't do it again, even though I am pleased with the way it turned out. It was a lot of work, even with a full time GC.

If I did it again, I would buy a house that had the space, but needed major renovation to make it modern. I think it would at least remove half of the cost of building new if the structure/foundation was fine.

Spanish or cape cod??....I built a modern house so I am not the one to ask.....

Good Luck!

Anonymous said...

share some info please - how much all in, including every thing but the land -- did you pay

Anonymous said...

Many of us on this blog need to make a decision - build vs buy - so more discussions of this topic belong here

Note that it costs more to build North of Montana vs in Sunset Park. Generally people build to a higher quality of construction North of Montana

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Anonymous said...

I would still figure $400-420/sq. ft. all in to build in SM.

Exclusive of the land.

biggiejames said...

Building in Santa Monica is ridiculous...and I mean absurdly ridiculous....It was a bonafide nightmare with the City at times...

ALL those horror stories are true. I suffered through 2 years of it!!

Anonymous said...

I think Cape Cod looks silly in this area and if it were me I'd go for somethign more Spanish and in keeping with the style of the older buildings int he area.

That said, I hav enot built, but I have done major and minor remodels. There is a reason people pay a premium for a totally finished home, it is more work and stress than anyone imagines.

I am looking for an unremodeled, but high quailty xontruction mid-century modern. At least that is my dream home. I saw an incredible one in Ladera Hieghts, but it was more than I was willing to pay. I do think whoever bought it got a fantasic home. It had not been redone, but the quality of the original materials was so high that it was in fantastic chape and oculd be kept mostly original.

Anonymous said...

If all you want is a basic five bedroom house for your family, it is impossible to make new construction work. The math just doesn't make sense.
Think about it, buy a vacant lot for 1.5 million. absolute cheapest you can get a 3800 sq foot house built for is 1.0 million.
So you are all in for 2.5 million.

But the below house just sold for 2.3

Math just doesn't work if all you want is a basic place to live

*(of course if you want something personalized and distinctive, you have to build it for yourself and pay up - but if all you are looking for is basic habitat do not build) *

Address: 457 24th - 90402

Details: 5 bed/4.5 bath 3,769 sq ft house, 8,699 sq ft lot

Description: Best value in prime N of Montana location. Modern 5BD + 4.5BA. Incredible indoor/outdoor feel w/tons of skylights, beams & custom architectural designs thruout. Step-down living rm w/FP & built-ins, formal dining rm & charming, bright breakfast rm. Open chef's kitchen w/granite counters & center island. Family rm opens to private yard w/large patio. Bright master suite boasts dbl walk-in closets, dressing area and large bath w/spa tub, glass brick shower & bidet. Fanklin School District.

SOLD: 7/21/09 - $2,250,000

Anonymous said...

8:40 am said that North of Montana you are talking 400 a sq foot at minimum all in

that means 400 times 3800 = 1.5 million to build for yourself. 1.5 million for the construction. Add in 1.5 million for the land

So if you want to build for yourself you are not going to get in for under 3.0 million all-in

Meantime you can buy a finished 3800 sq foot home for 2.3 million

So to build, you have to wait 2 years from start to finish before you move in but if you buy for 2.3 million you can move in immediately

Anyone have problems with this logic?

biggiejames said...

Like I said, buying and remodeling is cheaper.

We looked for a larger home ( 4 bed/3 or 4 baths) in the 90405....and guess what? There is nothing nice that we found and we looked for 2 years.

So we built, as the market conditions supported it then.

Not now. Too much on the market as reduced prices.

May not be the most satisfying in the long run, but the cost to build new is staggering.

Anonymous said...

biggiejames - do you agree with $400 a sq foot all in

if you wanted three thousand sq feet that means you are talking 1.2 million plus i guess 800 thou for vacant land in 90405

So all in, someone could buy a piece of land in the 90405 and be ALL IN for 2.0 million to have a nice new three thousand square foot house

I assume you paid a little less for your land and paid a little more per square foot for your build, but all in is this right?

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Anonymous said...

Anon 2:39

Yes, that sounds about right, with today's prices for land construction, etc.

2M for a 3K home in 90405.

Trouble is you might be the top of the market in 90405....most expensive house is never the great thing to have!

Anonymous said...

Not sure I agree with the $400 per square foot price point. I know a guy who had a super high quality 5,000 sq. foot place built for $1.1mm -- in this market, the costs of the materials, the labor and the contractor is DOWN!!

Anonymous said...

A house for $220/sq. ft? I would like to see the quality of that???

People will always argue that they can get construction done cheaper. I have tried, believe me. You get what you pay for....

"Getting it done cheaper" doesn't work in Santa Monica...the delays with the City, the permit costs, all new infrastructure, etc. If the City has a hand in it, its gonna be more time and money.

Anonymous said...

Anybody actively looking for 650-800k SFR range in W.LA, CC, and Mar Vista. Everything I see on redfin is shit. Is that the reality on the ground as well?

Anonymous said...

Anon 8:27

All been snapped up by the first time home buyers and conforming loan junkies....+ NO inventory.

I see this RE market beach on the upswing in 2010

Anonymous said...

Fundamentally, what you get for $700k right now is junk.

Basically you have huge #s of people making around 100k eagerly buying anything (and I do mean anything) that is in the conforming loan limit.

So they borrow 7 times their income and live in a decrepit hovel

I think these people are dumb but they are out there in big numbers and they are buying aggressively

All I can say is, if you have a brain you need to rent for a few years and sit tight and wait for reality

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

Theres only so many people with incomes that can support purchasing these places. And LOL at borrowing 7x. Good luck with that. Thing is, nicer places with the same specs are being rented at $1800-3000 a month in this area while a $700K loan at 4.3% interest is $3400 a month(plus property tax, insurance, upkeep, etc).

Really makes no sense whatsoever to buy a $650-800K property on the Westside right now.

Anonymous said...

If you can get into the market with these low interest rates...I say do it now. ANd read the news....

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