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I thought the article below, from today's Washington Post, might be of
interest to others on this list. Along with oversized houses, it's my
experience that the houses are, as well, being placed on larger lots,
which, for practical purposes, takes that land out of circulation for biofuel
crop production, local agricultural uses, "natural" services (filtering water,
sopping up CO2), among other things. The increased demand on our energy
sources and forests are, of course, significant as well. Other
than reasonable zoning limits, I don't think the government has a role in
telling people how to spend their money, on housing versus
whatever. But there's still enough idealist in me to wish people
would vote with their dollars for different values.
"Homes As Hummers
By Robert J. Samuelson We Americans seem to be in the process of becoming wildly overhoused. Since
1970 the size of the average home has increased 55 percent (to 2,330 square
feet), while the size of the average family has decreased 13 percent. Especially
among the upper crust, homes have more space and fewer people. We now have rooms
specialized by appliances (home computers, entertainment systems and exercise
equipment) and -- who knows? -- may soon reserve them for pets. The long-term
consequences of this housing extravaganza are unclear, but they may include the
overuse of energy and, ironically, a drain on homeowners' wealth. By and large, the new American home is a residential SUV. It's big,
gadget-loaded and slightly gaudy. In 2001 about one in eight homes exceeded
3,500 square feet, which was more than triple the average new home in 1950 (983
square feet). We have gone beyond shelter and comfort. A home is now a
lifestyle. Buyers want spiral staircases and vaulted ceilings. In one marketing
survey by the National Association of Home Builders, 36 percent of buyers under
age 35 rated having a "home theater" as important or very important. Of course, homeownership (now a record 69 percent) symbolizes success in
America. The impulse to announce more success by having more home seems to span
all classes. In his book "Luxury Fever," Cornell University economist Robert
Frank noted that Microsoft co-founder Paul Allen built a 74,000-square-foot
house. According to Frank, that roughly equaled the size of Cornell's entire
business school, with a staff of 100. Frank sees a "cascading effect" of
imitation all along the social spectrum. The super-wealthy influence the
wealthy, who influence the upper middle class -- and so on. People constantly
enlarge their notion of "what kind of a house does a person like me live
in." Another cause of this relentless upsizing is that the government unwisely
promotes it. In 2005, about 80 percent of the estimated $200 billion of federal
housing subsidies consists of tax breaks (mainly deductions for mortgage
interest payments and preferential treatment for profits on home sales), reports
an Urban Institute study. These tax breaks go heavily to upscale Americans, who
are thereby encouraged to buy bigger homes. Federal housing benefits average
$8,268 for those with incomes between $200,000 and $500,000, estimates the
study; by contrast, they're only $365 for those with incomes of $40,000 to
$50,000. It's nutty for government to subsidize bigger homes for the
well-to-do. But otherwise, why shouldn't Americans buy what they can afford? No good
reason. The trouble is that freedom doesn't confer infallibility. With
hindsight, some homeowners may regret sinking so much money into ever-grander
houses. One possible problem is future operating costs. Homes exceeding 3,500
square feet use about 40 percent more energy than those between 2,000 and 2,500
square feet, says the Energy Information Administration. Suppose electricity or
natural gas prices rise because (for example) new power plants or terminals for
liquefied natural gas aren't approved. A harder question is whether bigger homes might lose value. Say what? Gosh,
we're in the midst of the greatest real estate boom in U.S. history. Since 2000
home values have risen 55 percent, to nearly $18 trillion, says the Federal
Reserve. Americans have borrowed and spent lavishly against rising housing
prices. That has kept the U.S. and world economies advancing. Americans
increasingly believe that they can't lose by investing more in their homes: They
can enjoy themselves and make a pile. But booms have a habit of imploding. The latest evidence that cheap credit
and speculation have artificially inflated home prices comes from a study by the
investment bank Credit Suisse First Boston. It finds that home buying is
increasingly driven by purchases of investment properties and vacation homes. In
2004 these buyers accounted for 14.5 percent of all home sales, up from an
average of 7.5 percent from 1998 to 2002. Cheap credit also abounds. In 2004
almost a fifth of all new mortgages were interest-only loans (requiring no
principal repayments in early years), the study finds. Speculative booms usually
end when some speculators cash in or when credit tightens. Even if home prices don't collapse, their long-term performance may
disappoint. In a new edition of his book "Irrational Exuberance," Yale economist
Robert J. Shiller, who accurately diagnosed the stock "bubble" of the 1990s,
examined home prices since 1890. His startling conclusion: After adjusting for
inflation, home prices rose only 0.4 percent annually through 2004. After
periods when they've outpaced inflation -- say, right after World War II -- home
prices slow down. Their recent surge is, by Shiller's figures, unprecedented.
The implication is that prices may soon enter a period (after inflation) of
stagnation or decline. That would probably preserve big gains for longtime
homeowners, though perhaps not for the 22 million who purchased in the past
three years. As Shiller notes, home prices can't rise too much faster than average incomes
for too long without excluding many buyers from the market. Among home builders,
realtors and economists, the dominant view seems to be that the housing market
is basically sound. Younger families and immigrants underpin demand. Some local
"bubbles" may pop; elsewhere, price increases may subside. One way or another,
Americans might want to reassess whether their passion for ever-bigger homes is
good for them and the nation. Do we need to go from SUVs to Hummers? Maybe we
should revert to sedans. © 2005 The
Washington Post Company |
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