The Congress of Residential Architecture

I've been reading some of these finding Alpha posts since John put them up here. Interesting stuff, especially following the hype over the impending I-pad release. Being a Mac guy, I got the video of the conference where Jobs introduced it. As he sampled his I-tunes list on the stage and played a selection from American Beauty, it brought tears to my eyes.

Anyway, here's another look at the housing bubble. His symmetrical bubble graph portends another 100k drop in median house prices in California. Also interesting data on why we have less disposable income after housing increases.

http://seekingalpha.com/article/186666- ... urce=email

What is missing from his analysis of how housing prices rose from the 50s, is how the median or average house size also rose. If you look at it on a sqft basis, has the housing cost really risen so much, or have people simply chosen to extend themselves that much more by purchasing bigger houses. Not trying to blame this on the individuals, because clearly there was no much choice - builders offered bigger house, and for a given location/market you really had no choice but a bigger home. My point is that inventory existing houses that are tooo big may be 18months long. Inventory of smaller more sensibly sized houses is nearly zero. Looking at the time of house supply also ignores shifts in demand. Smaller houses no doubt will sell at a faster rate today, than existing large housing stock.

The article never attempts to address the 'why' only to identify the disparity.

I think there are a number of factors which caused this to happen. The number one cause being the expectation that houses where a risk free way of creating wealth.

The customer did not care if they could afford it -just pay interest and in two years when the balloon payment came due sell it or borrow against the increased value. Bankers felt the same way. Companies who's job it was to asses risk where in bed with the banks.

As Chris said, this article doesn't address the why of it, or the implied value statement. The simple answer is people bought what they did a) because they could, and b) I guess because they wanted to, or felt they had to because of peer pressure. Whether or not they got more value, more s.f. or whatever because of the additional expense is another issue.

There's a lot of competition for those scarce dollars. Health care, automotive, electronic gizmos, fashion, recreation. As the new generation sees what a bad investment their house is, not just now, but for years to come, they can't help but drift away to pursue other interests. My own feeling about this is that I think the prime thought about your home may revert more to being about where it is rather than what it is. The old real estate maxim...location,location,location. Unfortunately, none of this portends anything good for us here at CORA, who tend to focus on the "what it is" part of the housing proposition.

Ditto

I don't know Thomas - the move to smaller, energy efficient houses will create perceived investment value just as size used. Its just the people who bet on big houses will be caught holding the short end of the stick.

The move to smaller and energy efficient seems inevitable, but not as investment value, more as lifestyle value, to free up funds for other interests. Shelter as an efficient appliance, not someplace to love, or to define us. I do see that this does tend to put a little emphasis in to CORA's sphere, the "what it is", but I'm not sure that it is exactly the way that many of us would prefer; a little lite on the delight side, perhaps. Most of us pride ourselves on our ability to create places that people will love.

No - again I think you are wrong. As energy costs increase, which they seem they will, a larger house that is not well insulated will be an energy liability moving forward and will continue to loose value. Smaller, efficient homes will gain value, new houses will move to being built this way, and will continue to be a sound investment. This is a normal market shift. The expectation that people will flee home ownership as an investment medium is silly. For decades it was seen as sound, without the fantastic run-up of the recent bubble. There is no reason why it won't continue.

House size has been growing over the years for a variety of factors.
Of course the market is frozen right now and the Not So Biggers are coming out in droves:
http://www.marketwatch.com/video/asset/ ... teid=nwhwk

The largest factor IMHO that will drive down the average size of a home is not energy costs, not lifestyle value, but because everybody's credit will be so shot at the end of this year that no one will be able to afford a larger mortgage.

People crave space over detail. They do not live in any of today's house for a long period of time and have STUFF. Lots of stuff: Large screen tv's, guitar collections, car collections, video collections, computer rooms, play rooms for kids and their entertainment areas, exercise rooms, storage storage storage requirements, etc.
Because we treat homes like apartments, or temporary dwellings, they are pretty much built the same: throw away and short term use.

In an economy that is going down the tubes I see thirty percent of today's homeowners getting booted out of their own homes and being forced to rent, not buy.

The larger homes are going in foreclosure at a faster rate, well just about anyone connected to construction is getting hit in all price ranges.

We will still need the space though.

popular opinions about things like this change, especially when you've just lived through a crisis - don't stick your head in the sand. Stuff changes.

people move more now than ever before. fact.
people have lots of stuff. check out how many cars do not fit in garages anymore, especially starter to move up neighborhoods. fact.
computers, entertainment devices, etc. eat up space and are considered necessary. fact.

this is not popular opinion.

smaller is a temporary phenomenon.

This is not like a brand new idea. When you can find several glossy magazines at the supermarket about "simpler" lifestyle, "smarter" living, we are well beyond fad here no matter what any of us want to think. The next generation is much less interested in "more stuff", and the older generation that had more stuff is retiring and downsizing. Wake up. Smell the coffee.

Reasons it won't continue:
1) prices are now deflating, and will for another 4-5 years. Hasn't happened in recent memory.
2) we have buggered up the suburbs with bad planning; moving out for cheaper affordable land no longer a good option.
3) we have buggered up affordability with government regulation. This was not the case previously.

Net result, I see number of housing enthusiasts decreasing. Circulation of the shelter mags decreasing. HGTV becoming less popular. No facts to back this up, just a gut feeling. What breeds enthusiasm is the participants ability to make choices. Take the choices away, enthusiasm wanes.

At last part of the thrill of the Mcmansion was the customer's ability to be involved with lots of choices. Granite levels, wood species, deco tiles, exotic hardwoods, hardware finishes, sunrooms, screen porches, an almost infinite variety. Add in window treatments, fabrics, colors, it was the ultimate shopping spree, with no worries about the ultimate price. All you did was wrap it up in your mortgage, and count on appreciation to cover the sins of your indulgences.

I don't see that happening with our new, ultra-efficient- right sized products. We designers will have fun for a while dreaming them up, but the cost constraints and manufacturing efficiencies will keep the customer out of the option loop, just like the car business. Your home comes from the factory with pre-determined colors or option packages, and may be exquisitely designed, but you (the customer) will have much less input, and therefore less enthusiasm. Our subdivisions will look like giant parking lots of Camrys and Accords, all put together at hideous expense with perfect wall bracing and zero impact site drainage. Ho-hum. I don't see any enthusiasts lining up.

Me, I'd rather go live in any old dump I could afford, close to someplace cool, that I enjoyed (location,location,location), and focus my enthusiasms on other options. Art, theater, museums, parks, recreation, fine dining, lectures, galleries, music venues, whatever. Don't plan on being in my house much, and don't care that much about it anymore.

I don't think "shopping" as entertainment is going to continue to be a strong driver of the home buying experience. Myself, and I can speak for many others, deplore the activity of "shopping". Paradigms for things like shopping shift, often. Paradigms for things like investing in your home shift rarely and slowly.

1. Prices for old school homes are deflating. Prices for small, efficient, green if you will, homes are steady, if not rising because supply is not keeping up with growing demand.
2. The suburbs are buggered up. The best of the projects I'm describing are going in on redevelopment sites. Philadelphia has tremendous ground for expansion all in empty lots. Most metropolitan areas are the same.
3. Philadelphia is accelerating approvals for favorable projects to ease regulatory burden, many other metropolitan areas are doing the same. We have an office of sustainability in city government now and these projects enjoy preference.