From McMansion to McCottage

Real Estate Agent with Silicon Valley Real Estate

 The folks at the Wall Street Journal (subscription may be required) are talking about the trend towards downsizing.  Homebuilders like KB and Toll Brothers have nationwide portfolios and have obviously been dramatically affected by regional drops in home sales across many parts of the country.

During the boom period, these homebuilders were drawn to building high-margin McMansions, large template homes that provided a lot of square footage on the inside but were very similar to others in the neighborhood. 

Because many buyers in other regions are reluctant to make "big bets" on real estate (i.e. tie up a large chunk of their net worth in one investment vehicle --- even if they're living in it), these builders have started building McCottages again, smaller template homes that are more affordable.

Eichler would be proud.

Even so, there's another factor that's fueling this trend: the conforming rate.  With the evaporation of the secondary market for jumbo loans, mortgages over $417,000, the money used to fund them has become expensive and that cost is passed directly to the consumer. 

That difference could be a whole 1% on the loan or more, so Pulte, from the article says that "it expects its average selling price for the third quarter of this year to be $331,000, down from $335,000."  Has this decrease in size happened before?  You betcha: the early 80's, early 90's and today.  But between, the sizes increased all over again.

Comments (2)

Vicki Lloyd
The Lloyd Realty Group - San Diego, CA
(619)452-9798, Real Estate San Diego California

As a baby boomer, who bought my first house in 1979, I went along with the "bigger is better" thought process until my last baby went to college.  Then I started asking, "Why should I continue to maintain a 3000 sq ft house, when my husband and I only live in about 1200 square feet of it?"  We down-sized to 2000 sq ft, which is still more than we need, but we bought for the location, and feel that the extra square feet just came free. 

I predict that over the next 10 years, the boomers will exit their over-sized homes and be competing for the 1200 - 1800 sq ft single story homes!  There haven't been many built in recent years, due to the high land costs, so they will be hard to find, but should still hold their value better than most.

Sep 12, 2007 02:08 PM
Steve Leung
Silicon Valley Real Estate - Cupertino, CA

Hi Vicki, thanks for the first-hand story.  I think yours is a good prediction.  Who wants to spend the golden years of life climbing stairs and maintaining parts of a home you don't use? 

It's also kind of funny.  We don't have a lot of people who retire to Silicon Valley, but our land values have set a lot of people up for a pretty comfortable retirement elsewhere!

Sep 12, 2007 05:59 PM