McMansion Glut from WSJ.
The McMansion Glut
America's love affair with sprawling homes is showing signs of waning as the real-estate market softens and aging boomers seek smaller houses. Our reporter on nervous sellers and the growing supply of 'faux chateaux.'
By JUNE FLETCHER
June 16, 2006; Page W1
Mickey and Jane Finn put their five-bedroom, 6,200-square-foot home in Leesburg, Va., on the market in April, but already they've cut the price to $899,900 from $1.1 million. Now, they've decided to put it up for auction.
What's the hurry? Down the street in their leafy subdivision, two similar-sized houses are also on the market, and around the corner, five more have for-sale signs. The Finns, who paid $692,000 for the new house in 2002, recently retired and, with their two children grown, they're eager to move to a place half the size. "We don't need this big a house anymore -- if we ever did," says Mr. Finn, age 63.
The golden age of McMansions may be coming to an end. These oversized homes -- characterized by sprawling layouts on small lots, and built in cookie-cutter style by big developers -- fueled much of the housing boom. But thanks to rising energy and mortgage costs, shrinking families and a growing number of retirement-age baby boomers set on downsizing, there are signs of an emerging glut.
Interviews with dozens of real-estate agents, sellers, developers and housing economists turn up signs across the country. In an affluent Dallas ZIP Code, where half the houses have four bedrooms or more, home sales fell 31% in the first quarter compared with the previous quarter. But sales rose 23% in a nearby ZIP Code where 7% of houses have that many bedrooms. In Santa Fe, N.M., homes in the 2,000-square-foot range sell within weeks, while larger ones languish for months, says broker Pat French. In the Boston metro area, sales of homes with four or more bedrooms were flat in the first quarter from a year earlier; sales of homes with three bedrooms or fewer rose 14%. New Jersey appraiser Jeffrey Otteau says the inventory level statewide for large, $1 million-plus houses stands at 13 months, more than twice the state's overall average of six months.
A TALE OF TWO ZIPS
Sales of larger homes are flagging in many markets. See a comparison of home sales in nearby ZIP codes.
There is no formal definition of what constitutes a McMansion. (Some would say it's any home bigger and showier than your own.) One broadly accepted definition, used for this article, is a house larger than 5,000 square feet -- about double the national average -- with four or more bedrooms that is built cheek by jowl with similar houses. Most have been erected since the mid-1980s, when major developers such as Toll Brothers and K. Hovnanian Homes began to chase couples who wanted more space -- and luxury -- than they had when they were kids. These houses often boast grand, two-story entryways, three-car garages, double-height family rooms and master-bedroom "suites" equipped with sitting areas and whirlpool tubs. Developers market the homes under names such as the Grand Michelangelo, Hemingway and Hibiscus -- while detractors have dubbed them "garage mahals," "faux chateaux" or "tract castles."
Big Fuel Bills
The 2003 American Housing Survey, the latest available, found nearly 3.2 million homes in this country with 4,000 square feet of space or more -- the largest category the group tracks -- up 11% since the previous survey in 2001. Part of the big-house mania was fueled by speculation as home prices surged, says housing economist and consultant Thomas Lawler in Vienna, Va. "Folks bought megasized houses well beyond their needs to increase their investment in real estate," he says.
Now, some boomers in their late 50s are counting on selling their huge houses to help fund retirement. Yet a number of factors are weighing down demand. With the rise in home heating and cooling costs, McMansions are increasingly expensive to maintain. Nationwide, electricity rates have risen 12% over the past three years, while the price of natural gas for heating has risen 43% in the same period, according to the U.S. Energy Information Administration. That means it can cost $5,000 a year or more to heat and cool a 5,000-square-foot house in a city such as Farmington, Conn., according to Connecticut Light & Power Co.
The overall slump in the housing market also is crimping big-home sales. The volume of newly built homes sold fell 11.2% in the first four months of the year from a year ago, while sales of existing houses fell 5.7%, says the National Association of Home Builders and the National Association of Realtors. Yesterday, one of the biggest home builders, KB Home, cut its earnings outlook for the year, citing declining demand. Bruce Karatz, chairman and chief executive, said demand has fallen "largely due to a sharp reduction of speculative purchases and an oversupply in new and resale inventory."
Tom Green threw in a high-definition TV to sell his house in Loudoun County, Va.
Meantime, the jump in interest rates has put the cost of a big house out of more people's reach. With 30-year mortgages at 6.2% yesterday, a $700,000 loan costs about $4,300 a month, up from $3,900 when rates were 5.28% in June 2003, according to Bankrate.com. "The young people coming up don't have the means to absorb these big houses," says Mr. Otteau, the New Jersey appraiser.
Since February, Kris and Ray Victory have been trying to sell their five-bedroom house in Brookville, N.Y., built in 1987 with a sunken living room and a fireplace in the master-suite wing. The couple raised three children in the 8,000-square-foot home, but they say younger families seem turned off by its $1,000-a-month utility bills and $25,000 annual taxes. "Buyers tell us it's too big," says Mrs. Victory, a 45-year-old electrical engineer. The couple recently shaved $200,000 off the $2.35 million price.
This dynamic could become more acute in coming years. As the nation's 78 million baby boomers, born from 1946 through 1964, become empty-nesters and hit retirement age, many are already selling their trophy homes and trading down to smaller models. There are roughly the same number of people in the next pool of potential buyers, but they're marrying later and often have smaller families: U.S. Census statistics show that the average household size in 2005 was 2.57 people -- down from 3.14 in 1970.
Already, the McMansion oversupply is acute in places like Loudoun County, Va. In the fast-growing area northwest of Washington, D.C., thousands of hulking, red-brick colonials sprouted over the past 10 years on quarter-acre lots that had been carved from farmland and woods. In May, 4,719 houses were for sale, more than three times the year-earlier level. The number of sales dropped 39% to 484 in the month, and the number of days a home remained on the market lengthened to 70 from 14. "Sellers are dying out there," says local real-estate broker Michele Stash.
In one Loudoun subdivision, Tom Green, a 47-year-old airline pilot, put his five-bedroom house on the market six months ago for $1 million so he and his wife could downsize to a $592,000 townhouse nearby. But his home had to compete with 38 others for sale in the neighborhood with four or more bedrooms. His 5,600-square-foot, five-bedroom house, which he bought new for $515,000 in 2000, didn't get a nibble for months. Finally, a relocating California family agreed to buy it if the Greens would leave behind their high-definition TV and a lifesize Spiderman statue that had been a gift from Mr. Green's sister -- plus slash the price to $820,000. (They also had to throw in a cookie jar with "Biscuit" -- coincidentally, the name of the buyers' dog -- written on the side).
Mickey and Jane Finn have decided to auction their Leesburg, Va., house (left); the pool and waterfall at the Mumme house in Phoenix (right).
The Greens complied. The buyers, John Zuccaro and Cindy Fonseca, say they were emboldened to make their demands when they saw how much the market had cooled since April 2005, when they sold their three-bedroom house in Torrance, Calif., for its full asking price of $759,000 in only five days.
Though huge houses continue to be built across the country, many architects and builders appear to be responding to shrinking demand for McMansions. In the latest quarterly survey by the American Institute of Architects, 68% of the 500 residential architects polled said home sizes are stable or declining, compared with 58% a year ago.
Focus on Smaller Homes
For anti-McMansion activists, who hate to see big homes supplant smaller "teardowns" in established neighborhoods, a decline in demand may be good news. Homeowners in some areas have successfully lobbied for laws designed to rein in the light-and-view-blocking monsters: Last year, Arlington County, Va., limited home footprints to no more than 30% of a lot, while Wood-Ridge, N.J., recently said homes could take up no more than 55% of a lot.
Faced with dwindling demand and a fall in their stock prices, many national builders are starting to focus more on smaller houses, which often feature separate dining and family rooms but just two bedrooms. K. Hovnanian Homes, long known for McMansions, is building such houses under its "Four Seasons" label in nine states. Toll Brothers is creating communities like Cranbury Brook Villas in Plainsboro, N.J., which has two-bedroom homes ranging from 1,656 to 1,958 square feet that can be equipped with lofts, sunrooms and dining-room accent columns (the "Bayberry" model starts at $389,975).
Yet some families have found it hard to downsize. In Phoenix, David and Mary Mumme, both 49, are selling their 4,938-square-foot house, partly because their oldest son is heading to college and partly because maintaining the house and yard -- with pool and waterfall -- takes about eight hours a week. They're asking $1.8 million, about three times what they paid for it six years ago, because they saw nearby houses sell quickly for about $2 million last year. But even though the house has 12-foot ceilings, marble countertops and skylights in the closets, no one has made an offer during the month it's been on the market.
John and Barbara Fiore, both 54, had to slice $50,000 off their $900,000 price to move their 5,500-square-foot house in Warwick, N.Y. Ms. Fiore, who has five grown children, says she worried that no one would want her six-bedroom home while it sat on the market all last year, because today's families are smaller. (The eventual buyer was a married doctor with three young children.) The delay in selling "was scary," says Mrs. Fiore. The Fiores, who built the house 14 years ago, now live in a three-bedroom house nearby that's less than half the size. Meanwhile, Mrs. Fiore's parents recently sold their Warwick house in a month -- but it's only 2,500 square feet.
And even some young couples who have tried the big-house life are getting out of it, trading space for higher-quality construction. Last October, Andrew and Sheri Leppert of Alpharetta, Ga., both 32, exchanged their four-bedroom, 2½-bath home for a smaller one that has only three bedrooms and two baths -- yet, at $450,000, cost 50% more. Ms. Leppert, a homemaker who now has a young child, says she was attracted by the new house's details -- including beaded-glass windows, wide-plank flooring and 9-foot-tall doors made of solid wood -- which elevated it in her mind above the "Georgia sprawl" house she was leaving. She and her husband never used the fourth bedroom of their old house, she says, and she doesn't miss cleaning the extra space. "Taking care of it became a burden," she says.
Write to June Fletcher at june.fletcher@wsj.com
A Tale of Two ZIPs
In many markets, sales of bigger homes are flagging while smaller ones are doing better. Here's a comparison of nearby ZIP Codes for the first quarter of 2006:
CITY ZIP CODE % OF 4+ BDRM HOMES NO. OF SALES MEDIAN HOME PRICE COMMENTS
Dallas 75205 49% -31% $365,000* There are many new homes in both ZIPs, but in 75206 they're selling better because they're typically half as big, and cheaper. For sale in 75205: a 6,390-square-foot home for $3.5 million with wine room and library; in 75206, a 3,300-square-foot Tudor, $599,000.
75206 7% +23% $125,000*
Miami 33133 19% -8.1% $538,500 Miami's market has cooled, agents say. In 33133, which includes trendy Coconut Grove and Coral Gables, a 6,900-square-foot, three-year-old house has dropped $1.25 million, to $3.5 million.
33132 0% +32.7% $340,000
Seattle 98119 21% -9.8% $499,500 Anti-McMansion sentiment runs high in Seattle. In 98121, most homes are tiny and relatively new. Newer homes in the older neighborhoods of 98119 are pricey: a six-year-old, 5,200-square-foot house with Puget Sound views asks $3.3 million.
98121 10% +5.4% $395,000
Tucson 85718 39% -9.7% $401,500 Tucson's had a big growth spurt since 1990. In a gated community in 85718, a 6,100-square foot home, built in 2003, has fallen $200,000 in asking price, to $3.3 million. In 85704, $600,000 buys a new, 2,400-square-foot pueblo-style custom house.
85704 28% +3.9% $279,500
*Census 2000
Sources: DataQuick.com, City-Data.com and local multiple listing services
America's love affair with sprawling homes is showing signs of waning as the real-estate market softens and aging boomers seek smaller houses. Our reporter on nervous sellers and the growing supply of 'faux chateaux.'
By JUNE FLETCHER
June 16, 2006; Page W1
Mickey and Jane Finn put their five-bedroom, 6,200-square-foot home in Leesburg, Va., on the market in April, but already they've cut the price to $899,900 from $1.1 million. Now, they've decided to put it up for auction.
What's the hurry? Down the street in their leafy subdivision, two similar-sized houses are also on the market, and around the corner, five more have for-sale signs. The Finns, who paid $692,000 for the new house in 2002, recently retired and, with their two children grown, they're eager to move to a place half the size. "We don't need this big a house anymore -- if we ever did," says Mr. Finn, age 63.
The golden age of McMansions may be coming to an end. These oversized homes -- characterized by sprawling layouts on small lots, and built in cookie-cutter style by big developers -- fueled much of the housing boom. But thanks to rising energy and mortgage costs, shrinking families and a growing number of retirement-age baby boomers set on downsizing, there are signs of an emerging glut.
Interviews with dozens of real-estate agents, sellers, developers and housing economists turn up signs across the country. In an affluent Dallas ZIP Code, where half the houses have four bedrooms or more, home sales fell 31% in the first quarter compared with the previous quarter. But sales rose 23% in a nearby ZIP Code where 7% of houses have that many bedrooms. In Santa Fe, N.M., homes in the 2,000-square-foot range sell within weeks, while larger ones languish for months, says broker Pat French. In the Boston metro area, sales of homes with four or more bedrooms were flat in the first quarter from a year earlier; sales of homes with three bedrooms or fewer rose 14%. New Jersey appraiser Jeffrey Otteau says the inventory level statewide for large, $1 million-plus houses stands at 13 months, more than twice the state's overall average of six months.
A TALE OF TWO ZIPS
Sales of larger homes are flagging in many markets. See a comparison of home sales in nearby ZIP codes.
There is no formal definition of what constitutes a McMansion. (Some would say it's any home bigger and showier than your own.) One broadly accepted definition, used for this article, is a house larger than 5,000 square feet -- about double the national average -- with four or more bedrooms that is built cheek by jowl with similar houses. Most have been erected since the mid-1980s, when major developers such as Toll Brothers and K. Hovnanian Homes began to chase couples who wanted more space -- and luxury -- than they had when they were kids. These houses often boast grand, two-story entryways, three-car garages, double-height family rooms and master-bedroom "suites" equipped with sitting areas and whirlpool tubs. Developers market the homes under names such as the Grand Michelangelo, Hemingway and Hibiscus -- while detractors have dubbed them "garage mahals," "faux chateaux" or "tract castles."
Big Fuel Bills
The 2003 American Housing Survey, the latest available, found nearly 3.2 million homes in this country with 4,000 square feet of space or more -- the largest category the group tracks -- up 11% since the previous survey in 2001. Part of the big-house mania was fueled by speculation as home prices surged, says housing economist and consultant Thomas Lawler in Vienna, Va. "Folks bought megasized houses well beyond their needs to increase their investment in real estate," he says.
Now, some boomers in their late 50s are counting on selling their huge houses to help fund retirement. Yet a number of factors are weighing down demand. With the rise in home heating and cooling costs, McMansions are increasingly expensive to maintain. Nationwide, electricity rates have risen 12% over the past three years, while the price of natural gas for heating has risen 43% in the same period, according to the U.S. Energy Information Administration. That means it can cost $5,000 a year or more to heat and cool a 5,000-square-foot house in a city such as Farmington, Conn., according to Connecticut Light & Power Co.
The overall slump in the housing market also is crimping big-home sales. The volume of newly built homes sold fell 11.2% in the first four months of the year from a year ago, while sales of existing houses fell 5.7%, says the National Association of Home Builders and the National Association of Realtors. Yesterday, one of the biggest home builders, KB Home, cut its earnings outlook for the year, citing declining demand. Bruce Karatz, chairman and chief executive, said demand has fallen "largely due to a sharp reduction of speculative purchases and an oversupply in new and resale inventory."
Tom Green threw in a high-definition TV to sell his house in Loudoun County, Va.
Meantime, the jump in interest rates has put the cost of a big house out of more people's reach. With 30-year mortgages at 6.2% yesterday, a $700,000 loan costs about $4,300 a month, up from $3,900 when rates were 5.28% in June 2003, according to Bankrate.com. "The young people coming up don't have the means to absorb these big houses," says Mr. Otteau, the New Jersey appraiser.
Since February, Kris and Ray Victory have been trying to sell their five-bedroom house in Brookville, N.Y., built in 1987 with a sunken living room and a fireplace in the master-suite wing. The couple raised three children in the 8,000-square-foot home, but they say younger families seem turned off by its $1,000-a-month utility bills and $25,000 annual taxes. "Buyers tell us it's too big," says Mrs. Victory, a 45-year-old electrical engineer. The couple recently shaved $200,000 off the $2.35 million price.
This dynamic could become more acute in coming years. As the nation's 78 million baby boomers, born from 1946 through 1964, become empty-nesters and hit retirement age, many are already selling their trophy homes and trading down to smaller models. There are roughly the same number of people in the next pool of potential buyers, but they're marrying later and often have smaller families: U.S. Census statistics show that the average household size in 2005 was 2.57 people -- down from 3.14 in 1970.
Already, the McMansion oversupply is acute in places like Loudoun County, Va. In the fast-growing area northwest of Washington, D.C., thousands of hulking, red-brick colonials sprouted over the past 10 years on quarter-acre lots that had been carved from farmland and woods. In May, 4,719 houses were for sale, more than three times the year-earlier level. The number of sales dropped 39% to 484 in the month, and the number of days a home remained on the market lengthened to 70 from 14. "Sellers are dying out there," says local real-estate broker Michele Stash.
In one Loudoun subdivision, Tom Green, a 47-year-old airline pilot, put his five-bedroom house on the market six months ago for $1 million so he and his wife could downsize to a $592,000 townhouse nearby. But his home had to compete with 38 others for sale in the neighborhood with four or more bedrooms. His 5,600-square-foot, five-bedroom house, which he bought new for $515,000 in 2000, didn't get a nibble for months. Finally, a relocating California family agreed to buy it if the Greens would leave behind their high-definition TV and a lifesize Spiderman statue that had been a gift from Mr. Green's sister -- plus slash the price to $820,000. (They also had to throw in a cookie jar with "Biscuit" -- coincidentally, the name of the buyers' dog -- written on the side).
Mickey and Jane Finn have decided to auction their Leesburg, Va., house (left); the pool and waterfall at the Mumme house in Phoenix (right).
The Greens complied. The buyers, John Zuccaro and Cindy Fonseca, say they were emboldened to make their demands when they saw how much the market had cooled since April 2005, when they sold their three-bedroom house in Torrance, Calif., for its full asking price of $759,000 in only five days.
Though huge houses continue to be built across the country, many architects and builders appear to be responding to shrinking demand for McMansions. In the latest quarterly survey by the American Institute of Architects, 68% of the 500 residential architects polled said home sizes are stable or declining, compared with 58% a year ago.
Focus on Smaller Homes
For anti-McMansion activists, who hate to see big homes supplant smaller "teardowns" in established neighborhoods, a decline in demand may be good news. Homeowners in some areas have successfully lobbied for laws designed to rein in the light-and-view-blocking monsters: Last year, Arlington County, Va., limited home footprints to no more than 30% of a lot, while Wood-Ridge, N.J., recently said homes could take up no more than 55% of a lot.
Faced with dwindling demand and a fall in their stock prices, many national builders are starting to focus more on smaller houses, which often feature separate dining and family rooms but just two bedrooms. K. Hovnanian Homes, long known for McMansions, is building such houses under its "Four Seasons" label in nine states. Toll Brothers is creating communities like Cranbury Brook Villas in Plainsboro, N.J., which has two-bedroom homes ranging from 1,656 to 1,958 square feet that can be equipped with lofts, sunrooms and dining-room accent columns (the "Bayberry" model starts at $389,975).
Yet some families have found it hard to downsize. In Phoenix, David and Mary Mumme, both 49, are selling their 4,938-square-foot house, partly because their oldest son is heading to college and partly because maintaining the house and yard -- with pool and waterfall -- takes about eight hours a week. They're asking $1.8 million, about three times what they paid for it six years ago, because they saw nearby houses sell quickly for about $2 million last year. But even though the house has 12-foot ceilings, marble countertops and skylights in the closets, no one has made an offer during the month it's been on the market.
John and Barbara Fiore, both 54, had to slice $50,000 off their $900,000 price to move their 5,500-square-foot house in Warwick, N.Y. Ms. Fiore, who has five grown children, says she worried that no one would want her six-bedroom home while it sat on the market all last year, because today's families are smaller. (The eventual buyer was a married doctor with three young children.) The delay in selling "was scary," says Mrs. Fiore. The Fiores, who built the house 14 years ago, now live in a three-bedroom house nearby that's less than half the size. Meanwhile, Mrs. Fiore's parents recently sold their Warwick house in a month -- but it's only 2,500 square feet.
And even some young couples who have tried the big-house life are getting out of it, trading space for higher-quality construction. Last October, Andrew and Sheri Leppert of Alpharetta, Ga., both 32, exchanged their four-bedroom, 2½-bath home for a smaller one that has only three bedrooms and two baths -- yet, at $450,000, cost 50% more. Ms. Leppert, a homemaker who now has a young child, says she was attracted by the new house's details -- including beaded-glass windows, wide-plank flooring and 9-foot-tall doors made of solid wood -- which elevated it in her mind above the "Georgia sprawl" house she was leaving. She and her husband never used the fourth bedroom of their old house, she says, and she doesn't miss cleaning the extra space. "Taking care of it became a burden," she says.
Write to June Fletcher at june.fletcher@wsj.com
A Tale of Two ZIPs
In many markets, sales of bigger homes are flagging while smaller ones are doing better. Here's a comparison of nearby ZIP Codes for the first quarter of 2006:
CITY ZIP CODE % OF 4+ BDRM HOMES NO. OF SALES MEDIAN HOME PRICE COMMENTS
Dallas 75205 49% -31% $365,000* There are many new homes in both ZIPs, but in 75206 they're selling better because they're typically half as big, and cheaper. For sale in 75205: a 6,390-square-foot home for $3.5 million with wine room and library; in 75206, a 3,300-square-foot Tudor, $599,000.
75206 7% +23% $125,000*
Miami 33133 19% -8.1% $538,500 Miami's market has cooled, agents say. In 33133, which includes trendy Coconut Grove and Coral Gables, a 6,900-square-foot, three-year-old house has dropped $1.25 million, to $3.5 million.
33132 0% +32.7% $340,000
Seattle 98119 21% -9.8% $499,500 Anti-McMansion sentiment runs high in Seattle. In 98121, most homes are tiny and relatively new. Newer homes in the older neighborhoods of 98119 are pricey: a six-year-old, 5,200-square-foot house with Puget Sound views asks $3.3 million.
98121 10% +5.4% $395,000
Tucson 85718 39% -9.7% $401,500 Tucson's had a big growth spurt since 1990. In a gated community in 85718, a 6,100-square foot home, built in 2003, has fallen $200,000 in asking price, to $3.3 million. In 85704, $600,000 buys a new, 2,400-square-foot pueblo-style custom house.
85704 28% +3.9% $279,500
*Census 2000
Sources: DataQuick.com, City-Data.com and local multiple listing services
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