The McMansion is Dead

Long live the McTownhome

Things are getting tougher and tougher for homebuilders. In my blog two weeks ago, Is This True? - The calm before the cost increase, I wrote about accelerating commodity costs. Homes on the market hit an 11-year high, just as the average 30-year mortgage approaches 7.0%, up from 6.15% at the start of the year. Diesel is $8.00 in Seattle, and since I let my son take our F-250 to Washington, I get a call asking for money twice a week now, instead of once. The way I look at it, I get twice as many phone calls from him now.

Existing home prices are coming down in some markets of Florida, Texas, and other Sun Belt markets. There could be many more markets across the country where home prices could and probably should drop. That’s the only real lever left to pull. So far, according to the Case-Shiller Home Price Index, home values have held firm, but how much longer can they?

Home builders are used to getting creative in tough times, just as they did in good times when they invented the McMansion.

A McMansion is a derogatory term for a large, mass-produced suburban home criticized for being ostentatious, oversized, and lacking architectural integrity.

They know it’s about the payment, not the per-square-foot price. The era of the townhome has arrived. Townhomes offer real advantages in lowering the per-square-foot price and the payment.

• Less land per home - A detached house may require a 10,000-square-foot lot. A townhome might be less than half that size.
• Shared walls - fewer windows, less stucco or siding, etc
• More efficient construction - two townhomes are quicker to build than two single-family homes
• Lower cost - less landscaping, fewer fences, less ya

Builders also know that customer demands are changing. Boomers want lock-and-leave homes. Younger singles don’t want to mow a lawn every weekend. Millennials are getting married and having kids later in life, they don’t need the backyard.

Did townhomes take off because the market demanded them, or did they take off because that’s what is affordable?

Probably a little of both.