Inkwell: Authors and Artists
a plague of cilantro (cjp) Fri 21 Mar 08 11:17
> So you spend 1/4 of a million dollars on a house To give you an idea of the disconnect here, you can't even buy a crappy apartment here in Silicon Valley for $250K. And that's part of the reason I believe the housing crash is going to hit extremely hard in areas like ours. > the social contract of living in that town would do me in Exactly. Even if I *could* afford it, which I can't! > One thing we forget about the recent "subprime" collapse is how much of an artificial stimulant it was for the American economy. That is spot-on in my book. Daniel, I finished your book and have to say again how much I liked it. A couple of questions: Have you kept your rental property in Pocatello? What happened to it and the tenants and the property manager? And as for timeshares, have you looked into how hard they are to get rid of when the owners die? My father left me three, none of which I ever even visited, and they were absolute nightmares. The upkeep was easily $750 annually per timeshare week, and I couldn't sell them because I wasn't on title; that meant that I would have had to hire an out-of-state attorney do the paperwork for around $3000 ("and probably more," as I was quoted). Two of them I just quit claimed and nothing happened. The weirdest one was in South Carolina. According to the deed my dad signed, his heirs (moi) own the property in perpetuity, so the timeshare said I was responsible for all maintenance, fees, etc. Talk about the sins of one's fathers. But, and here's the catch, I couldn't sell it unless I changed the title to my name, which would cost about $3500. Now, the timeshare was worth maybe $2500 max, with nobody buying BTW, so it was a Catch-22. They just wanted me to keep on shelling out money forever on property I didn't own. For some reason this irked me. I sent the timeshare HOA letters explaining the situation, they sent me threatening letters, they charged me late fees, and they sicced collection agencies on me (who actually backed off when I explained how I wasn't in fact the owner, and they agreed with me). I finally got an attorney friend to send them a letter that said, in essence, it's not mine no matter what your deed says, now go away. Sheesh.
Daniel McGinn (danielmcginn) Fri 21 Mar 08 11:26
Philippe--Re the flash, glitz and rampant consumerism, I actually think there's at least a bit of difference between wanting a flashy car (or other gotta-have goods, like consumer electronics or clothing) and wanting a very nice home. I have no taste for the former (I drive a 10 year old Jeep with 140K miles on it) but quite a taste for the latter. I think much of the difference comes down to the "home as investment" meme we touched on earlier: everyone knows cars, clothing, and most consumer purchases depreciate, but real estate typically appreciates, which justifies a lot of spending and improvements on it. You get a new kitchen /and/ it's a good investment, at least in theory. It feels a bit more virtuous, at least in my mind. Agree? Disagree?
Daniel McGinn (danielmcginn) Fri 21 Mar 08 11:28
Lisa--The notion of our homes requiring a professional service crew resonated with me. My wife and I clean our house, mow our lawn, shovel our driveway, etc, but that's becoming surprisingly rare in our community, which is only mildly affluent. I'm surprised how many social conversations circle around to "the problems of managing our cleaning service" (a conversation to which I have little to contribute). So I do think as houses have increased in size, the phenomenon you're describing is going on in lots of places less affluent than Palm Beach.
Philippe Habib (phabib) Fri 21 Mar 08 13:13
Daniel, I agree that the investment side of home ownership rationalizes and legitimizes a lot of house spending, however it comes up short in explaining why the Toll Bros. style houses are popular while Sarah Susanka's approach is just a niche.
Linda Castellani (castle) Fri 21 Mar 08 14:04
Could you please say what Toll Brothers Style houses are and what Sarah Susanka's niche is?
Philippe Habib (phabib) Fri 21 Mar 08 15:35
Toll Bros. = big & flashy on the surface. For instance only the front of the house has nice siding or window trim, but the ceilings are tall and the rooms are big. Susanka = small space with high quality work and materials.
Linda Castellani (castle) Fri 21 Mar 08 15:52
Got it. Thanks.
Mark McDonough (mcdee) Fri 21 Mar 08 16:02
I have a friend who recently came into quite a bit of money. Not sure how much, but she and her hubby are in Costa Rica as we speak. More than single-digit millions. She immediately rushed out and bought one of those Toll Brothers style houses -- the kind which looks like it could be pulled down with a good length of chain and a Fordson tractor but has a living room that always brings to mind paper airplane contests. Every time I go over there, I ponder what could have been bought for the same money (or a lot less!). All the space is given over to flash. Her kids' bedrooms are actually smaller than in the townhouse she sold when the money train showed up.
Lisa Harris (lrph) Fri 21 Mar 08 18:04
Also about those Toll Brother houses, there might be beautiful window trim out front, but walk around back and the windows are completely naked.
Cogito? (robertflink) Fri 21 Mar 08 18:07
The discussion reminds me of Veblen's "Theory of the Leisure Class.
Alan Turner (arturner) Fri 21 Mar 08 19:55
> beautiful window trim out front, but walk around back and the windows are completely naked. Bingo. It's all about a street view impression. Brings new meaning to the word facade.
Mark McDonough (mcdee) Fri 21 Mar 08 20:13
I've noticed some of the more modest examples are very tall and wide but very shallow front to back -- basically a billboard advertising that you have arrived. They look absolutely comical from the side.
a plague of cilantro (cjp) Fri 21 Mar 08 21:29
A neighborhood of them reminds me of the fake Rock Ridge in "Blazing Saddles"...
Daniel McGinn (danielmcginn) Sat 22 Mar 08 06:30
Alan--Kensington sounds lovely and intriguing. It sounds as if you're very well versed in the "New Urbanism" school of architecture/urban planning. You may have already seen this, but in case not, there's a piece in this month's Atlantic Monthly that's getting a lot of buzz right now; it posits that today's suburbs will falter as people conclude that urban living is simply the better way to live. Here's a link: http://www.theatlantic.com/doc/200803/subprime
Daniel McGinn (danielmcginn) Sat 22 Mar 08 06:35
Scott--I think you're right about it not being very surprising that subprime borrowers with no equity would walk away. Continuing on this home-as-investment idea, some economists have said that when people put no-money-down on a home, it effectively functions much like a stock option. If the house goes up in value, they've got a chance at profit and a motivation to stay put. If the house declines in value, they lose no equity by walking away, and if the penalties for doing so (to their credit rating, or by the lender being able to chase them for the money) aren't high enough, a lot of people do this. The new homebuilding industry saw a similar phenomenon as the boom turned to bust: they were surprised that so many people who put a $5,000 deposit on a home would rather lose the deposit than buy it upon completion if the home had lost value. As you suggest, it really isn't that surprising; it makes economic sense. I was at the International Builders Show in Orlando last month, and the economists there were quite worried about how many people with little equity who are underwater might willingly default on their mortgages, even though they have the ability to pay. This is definitely one of the big variables in the housing market right now. I should offer a disclaimer here: while I write about home finance a bit for Newsweek, there's very little of this discussion in HOUSE LUST, which is mostly about the consumer side of the housing boom. So if all this economic talk makes someone out there think they won't like the book, rest assured the book doesn't go very deeply into the economics, and is a pretty easy read.
Daniel McGinn (danielmcginn) Sat 22 Mar 08 06:41
Cilantro--You asked how my investment property in Idaho is faring. It's doing okay. I've owned it for about 15 months. As I described in the book, I've had a fair share of headaches: my original property manager ran off with a couple of months rent last year, which hurt. The good news is I was able to find a good new property manager; so far, as best i can tell from half a continent away, he's not stealing from me. The other good news is that property values in Idaho have kept going up, and the realtor tells me the place has probably gained 10 percent in value since I've owned it. The tax deductions are also more significant than I'd realized. Owning an investment property feels a bit risky to me, and I'm not sure I'll be a landlord for the long-haul. But it definitely helped me understand what drives people to do this, and reviewers seemed to think that it enlivened a chapter of the book. So all in all, no regrets. Regarding timeshares, your inheritance issues with them are one of the reasons I've always been a little suspicious of the whole concept. The resale market for them seems to be pretty illiquid, which is a problem. As I say in the book, the seem to be less an investment and more a way to pre-pay vacations for years to come. But from the promoters' standpoint, they are a pretty ingenuous way to take advantage of the fact that most vacation properties sit empty for so many months of the year. Good luck sorting out your timeshare issues--and thanks again for your kind remarks about the book!
Daniel McGinn (danielmcginn) Sat 22 Mar 08 06:53
Philippe--I think the reason people flock to Toll Bros-type homes, and how that relates to investment, is that the square footage metric really has come to dominate people's consciousness about homes. I quote Susanka in the book saying that if people are told over and over that if they pay more than $250/square foot to build a new house they're getting a bad deal, it's only natural that they'll seek out builders who can provide the most space for the least money (the lowest cost per square foot). Ergo, Toll Brothers. And at a time when home values were rising, people figured it made sense to buy as much house as possible, hence all the 5,000+ sf houses that began popping up. I also think that architects have done an unfortunate job in marketing themselves over the years. I think the public perception is that to hire an architect and build a custom home, you have to be super-wealthy; in constrast, production builders really do have a user-friendly, streamlined process, with showrooms and model homes, etc. If people could pull into a development and look at a Toll Bros house versus a Susanka house, side by side, it would be interesting to see which one they decided to buy. But there's not a mechanism in place that allows consumers to make that side-by-side comparison, so consumers tend to purchase what's offered to them. Or do you think there are other factors at work here that I'm missing?
Daniel McGinn (danielmcginn) Sat 22 Mar 08 06:59
Hi Mark, and welcome. It's interesting how often discussion of my book ends up focusing on "big house syndrome." It's only one of the topics I touch on in HOUSE LUST, but it's clearly a flash point for a lot of people. Let me play devil's advocate for a moment. I have good friends who live in houses that would qualify as McMansions. While I don't covet their spaces, and if I were building a house I'd design it differently than theirs, I do think these houses work really well for entertaining. The kitchen is huge, the family room accomodates a crowd, you can send 20 kids into the finished basement and let them occupy themselves. If there's a big football game to watch, we tend to gather at their house (65 inch TV), not ours. So while I don't disagree with people who find these types of houses to have some wasted spaces and some aesthetic drawbacks, I do think there are aspects of how they work that are pleasing, at least to me. And while the thought of having paper airplane contests has never occurred to me, it's a great idea! What do you think--am I just a big McMansion apologist?
Mark McDonough (mcdee) Sat 22 Mar 08 07:33
I think McMansions are part of a democratization in taste in architecture that goes back to the period after WW II. The Depression was sort of a big void in terms of homebuilding for obvious reasons, but pretty much from dawn of American time through the 1920s, people built houses the way tradition or taste makers told them they should be built. Up until about 1800, tradition ruled and styles changed very slowly (if at all). After 1800 (starting a bit before that for urban rich folk), you get an increasingly organized reign of the taste makers, starting with the importation of the Adam/Federal style from England and eventually working its way down the food chain until by the end of the 1800s, nearly every domestic structure built in America was grabbed out of someone's pattern book. As a result, an amazingly high percentage of houses built during those years are pleasing to the eye. You can go to the most obscure podunk locations in America and find gorgeous letter-perfect Greek Revival or later Victorian vernacular and Craftsman/Bungalow houses, not because there was a builder or homeowner there with a highly developed aesthetic sense, but because everyone was literally and metaphorically on the same page. You didn't need to have taste, your builder didn't need to have taste -- the taste was in the books. All that broke down in the aftermath of WW II, and lots of books have discussed why -- the pressure of the post-war housing shortage, the exodus to the suburbs, the rise of truly massive-scale development companies such as the one that built Levittown, etc. During those years, Frank Lloyd Wright became a culture hero and celebrity, but only as the last of a breed -- no one built houses in his style, they built houses in the quick and easy styles favored by builders whose attention was already moving on to the next parcel of farmland they could subdivide. Toss up a box, and throw some vaguely colonial decoration on it. Done! Next! The only things that have changed since the house I was born in was built in the mid 1950s is that we've added a bit to the palette of discordant decorative details ("hey, can we put a couple of Palladian windows here?") and that everyone's learned that you can build things far more poorly and far larger than anyone would have dared to try in the 1950s. I do take your point about entertaining, but as someone who entertains often and well in a 1,200 square-foot townhouse (ok, so 20 kids would be a strain -- we'd have to lock them in a closet), I have to ask how rational it is to buy a house on that basis. What percentage of your time are you actually entertaining large numbers of guests? And could you buy a somewhat smaller, better-built house and still entertain quite well? Of course you could. I think most people swim with the current. Whether that's a good or a bad thing depends on who's making the current. If it's Andrew Jackson Downing or the numerous now nameless but skilled architects who designed home plans for 19th and early 20th century pattern books, it's a good thing. If it's Toll Brothers and ilk, that's a bad thing. I think taste makers were a critical part of the ecology of American architecture, because they encouraged people who were barely paying attention to buy homes that were much better designed and more pleasing than anything they would have sought out on their own. Left to their own devices (and manipulated by marketers) people have chosen things such as 30-foot "lawyer foyers" and massive industrial-scale kitchens in which they make microwave dinners. Is that an elitist perspective? You bet! Notice I'm not saying that these people are morons, just that they know nothing about architecture and don't pay attention to it. How many things in life can you possibly pay attention to or know about? People are busy. My friends who recently bought the hideous mini-mansion are extremely accomplished and intelligent people - they didn't come into their money via the lottery or inheritance. They just don't know jack about architecture, so when suddenly they were wealthy, they went and bought what the rest of the newly wealthy were buying. In 1895 that would have been a beautiful Queen Anne or maybe if they were a bit more daring something Shingle Style. In 2008, they bought a giant ugly piece of shit built to last about 20 years. So yeah, you're just a big McMansion apologist! ;-)
Scott MacFarlane (s-macfarlane) Sat 22 Mar 08 09:00
Mea culpa for bringing up the economics of home lust. As a Realtor, I live more directly than most with the consequences of what will or won't happen as a result of what the media describes as "a meltdown" or of "the balloon popping." Both fuel public perception and reaction to a certain extent, but both metaphors are problematic. The popping balloon implies a total collapse (home values have not gone down to zero). "Meltdown" has similar connotations. Most areas are suffering market corrections, not total collapse. The discussion here seems to focus on those upper middle class buyers with/or without aesthetic taste. The weak correlation between those with financial resources and a refined aesthetic give us the McMansion. Yet, there are many design criteria in newer homes that have improved over the years. Also, two competing pressures: getting-the-best-bang-for-the-buck/affordability VS. functionality/aesthetics enter into most buyers' decisions. And, again, most buyers tend to purchase toward the higher end of what they can afford. Compared to a generation ago, the lots are smaller. Governing bodies play a MUCH larger role in what the developer can and cannot do with regard to densities, location of developments (creating an artificial land scarcity), infrastructure requirements, parking, greenspaces, energy efficiency, common areas, water retentsion/runnoff, building code adherence, and making sure that every house on the block does NOT look the same. The newer houses are far superior in terms of energy efficiency, ventilation, HVAC, electrical safety, lighting, cabinetry, plumbing fixtures, roofing materials, and design flow. To make this design flow comparison, it is best to compare apples to apples (not custom-built homes of the affluent with the homes of the average Joe and Jane). Today, a 3 bed/2 bath 1500 square foot home prioritizes a single great room over a small living room and separate family room. Today, people prefer one larger master and master bath with smaller secondary and tertiary bedrooms. A generation ago, such a home would have three uniformly sized bedrooms clustered off of one hallway and tiny bathrooms (two if you were lucky). Kitchens are more "affordably" elegant today. If there is a fireplace today it is not woodburning, but gas fired. If we go back to the early 1950's and before, the average home was even smaller, even though the craftsmanship was usually superior because one carpenter did most of the work. Today, most houses are built with "portable" factory lines of subcontractors (roofing/framing/drywalling/electrical/plumbing/landscaping). This has kept the prices down for the consumer. Bottom line, even in new tract homes, there are many design improvements and a more aesthetic flow than in homes of yesteryear. Where the comparison gets distorted is when we compare an uppermiddle class pre-WWII home with a middle class home today. I once owned a 1250 sq ft home from 1929 which was built by a doctor on top of a half acre knoll with 300 degree views. This was uppermiddle class in its day, had some great aesthetic features, was incredibly solid in many ways with great built-ins, crystal knobs on the doors, cool doors, great porches, arches, etc. It was a one-of-a-kind gem. Yet, we also had to add a second 3/4 bathroom, live with two small bedrooms with tiny closets, replace the knob and tube wiring where we could, dispose of the asbestos around the furnace, add a/c, blow in insulation into the attic, etc., etc. Bottom line, it's too simplistic to suggest the those of yesteryear had more refined taste than today. Given the choice and the means, there are many people who choose quality over simple $/sq ft. There are also affluent people building cool one-of-a-kind houses today with great aesthetic sensibilities. Developers that last in the middle class market are always balancing the design features provided with cost considerations. If a home is poorly designed with few features for the money, then it doesn't sell. The home down the street will. In the future the developer will not keep building homes that don't sell. There are, of course, people who prioritize style features (such as the Toll homes) over sturdiness of construction of a more refined aesthetic. However, to emphasize this as the norm, is a gross oversimplification of the real estate market. Well, enough ranting, I'm off to sit my plat: "it has a great bang for the buck, compared to those $/sq ft boxes across the street." Compared to the resale home market in my town, at least these two new home subdivisions have products that are selling. And the sale of one 3bed/2bath home will earn me several times more this year than the book I published. Such is life in America.
Mark McDonough (mcdee) Sat 22 Mar 08 09:22
Well, I argued exactly the opposite, actually - that people in the past had tastes no more refined than those of today.
John Ross (johnross) Sat 22 Mar 08 10:43
Two questions: First, how does the economic argument about no-money-down house buyers account for the post-WWII period when VA loans made it possible to buy a house that way? As late as 1984, I bought my $60K house for less than $1,000 out of pocket with a VA guarantee. It seems like the real difference is the ratio of income-to-house price. Even allowing for higher interest rates than today, that's been the biggest change over the last 15+ years. And second, how does the recent revival of interest in old bungalows and craftsman houses fit into your observations?
Daniel McGinn (danielmcginn) Sun 23 Mar 08 14:51
Mark--I'd offer one additional thought about your observation that it doesn't make sense to buy a large house for entertaining, because most of us entertain so infrequently. You're right, but I do think many people do it anyway. In the book I refer to this using a term from automotive marketing called the "maximum use imperative," and it's a theory the auto industry came up with in describing why so many Americans came to want to driver 4wheel drive SUVs when they never go off road and only turn the 4wheel drive on once or twice a winter in deep snow. Basically marketers came to believe that a lot of people feel good about owning something with the capability to perform an "extreme" function (a car climbing a mud bank, a homeowner throwing a buffet dinner party for 75) even if we don't actually utilize the function all that frequently. In houses, I think guest rooms are another example of this: if you figure out how much extra you paid for a house with one more bedroom than you usually need, then figure out how many nights a year you actually have guests staying overnight in the room, then figure out what it would cost to put those (infrequent) guests up at the Holiday Inn, and it's probably clear that buying a house with a guest room makes no sense whatsoever. But a lot of people do it anyway. I do think when it comes to houses, people tend to consider not only their day-to-day needs, but their twice-a-year needs as well, particularly when low interest rates and a fast-rising housing market helped them justify spending a little more. Mark, you grasp of the history of architecture (which far exceeds mine) interest me. May I ask what you do for a living, and how you came to know so much about architecture?
Daniel McGinn (danielmcginn) Sun 23 Mar 08 14:52
Scott, I'm not sure if you've read HOUSE LUST yet, but there's a chapter exploring why a half-million Americans became real estate agents during the boom, and why so many people came to (wrongly) assume this was an easy-money profession. If you have read it, I wonder if you thought of this part of the book. If you haven't, I wonder if you're seeing a lot of newbie Realtors flee the market, and how you think public perception of your profession will change over time?
Daniel McGinn (danielmcginn) Sun 23 Mar 08 14:56
John--Again, I'm not really an expert in home finance, but here's my two cents re your no-money-down question: I think the big difference between the no-money-down VA loans and the no-money-down subprime loans that are now causing so many problems is the credit worthiness of the borrowers. The primary reason people took out subprime mortgages was because of a poor credit history, inability to document income or assets, etc. So I don't think it's all that surprising that their default rate is turning out to be higher than veterans who may have bought homes with similarly-low downpayments. There are probably other factors at work here (including, as you suggest, the prices of homes in relation to incomes), but this seems to me the primary difference.
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