I know this sounds crazy but I think to some extent the house size is a function of smaller lots and economics.
Look at Carmel Valley (where we first lived)…
Each new year and new development creates bigger houses on smaller lots. The developers probably don’t spend significantly more money building bigger houses (I may be wrong about this), but they put bigger and bigger houses on smaller and smaller lots. It’s the value of the real estate which they are selling, the larger house is just there to sell the ‘home’. I think this might be why they maximize the size.
Example: We bought in CV and had a 13K lot (some hill) with a 3,500 house. The house was built in 1991 and we bought it in 2000 (when we moved from NYC). My sister bought a 4,800 house on a 6,000 lot!
The developers want to maximize the number of houses and by putting the biggest house on them they can maximize profits. When you have kids, you want to have the biggest house you can comfortably afford.
McMansions exist because we are changing the skew of money in this country. Real wages have gone down for regular people. The top few percent of the earners have had their earnings go up dramatically. So… The easing of credit has let people overextend into houses they can’t afford – but the McMansions are probably bye and large bought by people who are less affected (doesn’t mean not affected!) As a side note – look at CEO’s (as a group)… These guys made 200-300K in the 70’s now make Millions. Each executive level under them went up by a proportionally skewed amount. All while regular workers made inflation raises (but of course with outmoded definitions of inflation as gas, healthcare, mortgages, etc aren’t counted in the index!!!), and Minimum wage (at the bottom) got 0!!!
And to add some reality to the numbers from this post:
My costs (roughly) for having a 4,800 square foot house with pool was (monthly):
McMaintenance & McEnergy:
$2,500
McFinancing.
$6,875 int only on 1.5 Million
would be 8,200 in todays interest rates
McTaxes.
$2,000
McInvestment.
Broke even after 2 years bought just below the top, sold just after the top. Was it worth it? Yes but got lucky.
McResale.
Brutally hard to sell an amazing house. 2 acres of trees and lawns, huge pool w/spa and waterfall, tons of rosebushes, fruit trees, jogging path, ocean view (small), playhouse, privacy. Was so lucky to get out – will get much, much worse (as witnessed by how long my neighbor has been on the market). I can only imagine how bad it will get in the outlands where the commutes to towns are further.
I think that as long as you are happy in a place, and can afford it, and plan on staying for a long time – It so doesn’t matter what you pay for a house. That being said… No one wants to be a chump and buy at the top of a market. It’s better to wait a couple of years and save a couple, a few, a handful of hundred thousands. As I didn’t like the long driving, it was a no brainer to move. If I would have been happy with the driving, I would have been happy to stay there until I was a little old man!
