Why are new homes built mostly McMansions when people want smaller?

[Minnesota!]

The "McMansions" are selling like hotcakes around here. Just went to the Parade of Homes a few weekends ago - which showcases all the new builds. Oof, I fell in love like 16 times, but most were already sold, or there were only a lot or two left in the development. Most started at 500K, too. And they are flying off the shelves. Granted, we are in a metro area with high paying jobs, and an abundance of them, but there is definitely a demand for these houses.

 

[goofyernmost]

I think a lot of people lose sight of the fact that when you rent you don't have to do the repairs for pay for them directly, you ARE paying for the repairs each month with a portion of your rent. Landlords would go bankrupt is they didn't charge more than it cost to keep up a property.

I've yet to pay more per month than someone with a mortgage and are responsible for their own repairs. Landlords make a profit by volume. In most cases the rates are set on what is likely to have a problem and how often would that happen. So if you are renting a single family dwelling, it would be a higher, but all appliances or other mechanical things are not likely to breakdown every year, so it is not an absolute expense and become a little more like a business gamble. Of course, things like property taxes are included in the rent, but if you are in an apartment building you are sharing that cost with all the other tenants. A landlord must charge enough to cover the mortgage that they have on the building plus taxes plus profit and upkeep/replacement costs. That final one is not a known situation so it usually is an educated guess in line with what the competition is charging. The landlord that is making a killing is the one with no mortgage, but does need to plan for upgrades and major building repairs.

To me it is kinda like healthcare for all. People don't seem to get the idea that you pay far less if everyone is contributing to the pot then if you have to cover the cost all by yourself. It is the blessing of numbers. Let's say tomorrow you had to pay, out of pocket, some medical procedure that came to $25000.00 (a very low number by todays charges), how long would it take you at a tax increase of $50 per month in health tax (a high number) instead of one person paying, out of pocket for every thing 350,000,000 people. By yourself you pay $25000 as a group you pay $.00007143. Rental repairs, taxes, etc. would be more than that but the basic principle is the same. You will pay a lot less. The downside is you won't be accumulating equity. You are sharing the expense. I've lived in my recent location for 4 years now in in those four years the only major thing that has had to be replaced is the blower motor in the AC/Heat unit. Even if I am paying a small amount more in my rent, I didn't have to figure where I was going to get the money to replace that motor.

 

[radishtoaster]

I've seen this same thing in my area, and we are desperate for smaller homes and small-family housing in our area with a HUGE influx of homeless and refugees. I have a few builder acquaintances who I asked about this not long ago and they weren't shy about admitting it is all about money. We just live in a time of extraordinary greed and selfishness, I think that explains about 99% of the issues we have in this generation. It's unbelievably sad, but there's more caste system in this country than we're willing to admit, and so many of the new money builders think they're the powerful and they get to decide who gets homes and who doesn't. I hear these conversations for work as well as at play with acquaintances or friends and they sicken me tbh.

 

[tvguy]

I've yet to pay more per month than someone with a mortgage and are responsible for their own repairs. Landlords make a profit by volume. In most cases the rates are set on what is likely to have a problem and how often would that happen. So if you are renting a single family dwelling, it would be a higher, but all appliances or other mechanical things are not likely to breakdown every year, so it is not an absolute expense and become a little more like a business gamble. Of course, things like property taxes are included in the rent, but if you are in an apartment building you are sharing that cost with all the other tenants. A landlord must charge enough to cover the mortgage that they have on the building plus taxes plus profit and upkeep/replacement costs. That final one is not a known situation so it usually is an educated guess in line with what the competition is charging. The landlord that is making a killing is the one with no mortgage, but does need to plan for upgrades and major building repairs.

To me it is kinda like healthcare for all. People don't seem to get the idea that you pay far less if everyone is contributing to the pot then if you have to cover the cost all by yourself. It is the blessing of numbers. Let's say tomorrow you had to pay, out of pocket, some medical procedure that came to $25000.00 (a very low number by todays charges), how long would it take you at a tax increase of $50 per month in health tax (a high number) instead of one person paying, out of pocket for every thing 350,000,000 people. By yourself you pay $25000 as a group you pay $.00007143. Rental repairs, taxes, etc. would be more than that but the basic principle is the same. You will pay a lot less. The downside is you won't be accumulating equity. You are sharing the expense. I've lived in my recent location for 4 years now in in those four years the only major thing that has had to be replaced is the blower motor in the AC/Heat unit. Even if I am paying a small amount more in my rent, I didn't have to figure where I was going to get the money to replace that motor.

Different rental and house markets vary of course. But I suspect most are not in your situation and pay less than if they owned it. Landlords are all different. The ones I know fall into two groups, they have one rental, often a home they used to live in that they kept when they moved or got a bigger house. Or own hundreds of units. Yes, the elderly guy with 300 apartments in the same city operates far differently. He and his dad built them all, they are identical. He rarely fixes ANYTHING. Doesn't make any economic sense to pay a refrigerator repair person a $125 service call when he just bought 100 off brand refrigerators for $100 each. Does the same with stoves and dishwashers. Something breaks, his repair guy brings a brand new refrigerator, stove or dishwasher and throws the old one out. His units use the same box ac units. He has spares in his warehouse and they just swap them out if they break. I think he does send the broken units out to be fixed and afterwards they become a spare in the warehouse.
And because his buildings have all been paid off for 30 years, he is MUCH more liberal about people being behind on rent. As long as a tenant paid something, he won't evict them. He has multiple tenants that are the only people that have lived in the unit they are living in, they go back 30 years.

 

[Mackenzie Click-Mickelson]

I think that explains about 99% of the issues we have in this generation.

What generation?

 

[barkley]

I've yet to pay more per month than someone with a mortgage and are responsible for their own repairs.

we became 1st time homebuyers back in the 90's entirely because where we lived the rents were insane and it WAS less expensive, even with projected potential home repairs to buy vs. rent. actualy, with the tax savings we ended up ahead each month (and this was in the days of double digit interest rates). i was curious so i just hopped on zillow (i know-not the most accurate of sources but it works for rough numbers) and looked at the place we owned back then-the 'zestimate' for what would be the monthly rent on that house is only a few hundred less than the 'zestimate' for a low down payment monthly mortgage payment (which includes p.m.i. b/c less than 20% down). in that case, once the tax savings were figured in-it could still be less per month to buy vs. rent (and the net savings set aside for repairs).

that said-one of the reasons i see for the lack of availability on resale 'starter homes' in some areas is b/c there is a significant group of first time recent owners in them who are much older than what many consider the historical norm (people in their late 20's/early 30's). dh is younger than i and i look at the number of his old friends who only became first time homeowners in the last decade or so (in their 40's/some in their 50's) and only by virtue of THEIR parents passing and making available a home for them to inherit in whole or in part. these owners have little to no inclination to ever sell and i anticipate that they will do as their parents and leave the 'family' home to their children to give them a shot at home ownership (it's facinating to me-it's like the decades past tradition of the family home passing generationaly has had a resurgence).

where we live it would have been less expensive to buy vs. rent a handful of years ago but the pandemic flooded the rural areas with buyers who drove prices through the roof. so many of the homes that traditionaly attracted first time buyers and we saw younger families rotate in and out of as their needs grew are so insanely expsensive i don't know what kind of buyer they currently attract.

 

[Brian Noble]

suggest we sell so another family has more room. heck no, it's my HOME. so as long as I capable of living here I will.

I don't think that's the reason anyone does it. It's certainly not the reason I am thinking of downsizing. I'm currently in transition and renting, but expect to buy in the next 2-4 years, depending on the market, rates, and what my (currently uncertain) financial picture looks like.

I definitely plan to move to a smaller space. I am favoring townhomes/condos as well. A smaller space means being more intentional about what I do and don't keep. It is easier to maintain. Yes, it will be cramped if/when the kids start families and visit, but just as you don't build a church for Easter Sunday, I don't need to size my home for the two weeks a year when everyone comes back.

The additional advantage of a condo/townhome: No more yard/sidewalk maintenance and potentially other upkeep. Yes, I am perfectly capable of mowing my own lawn, but I don't miss it now that I am not doing it.

 

[tvguy]

I don't think that's the reason anyone does it. It's certainly not the reason I am thinking of downsizing. I'm currently in transition and renting, but expect to buy in the next 2-4 years, depending on the market, rates, and what my (currently uncertain) financial picture looks like.

I definitely plan to move to a smaller space. I am favoring townhomes/condos as well. A smaller space means being more intentional about what I do and don't keep. It is easier to maintain. Yes, it will be cramped if/when the kids start families and visit, but just as you don't build a church for Easter Sunday, I don't need to size my home for the two weeks a year when everyone comes back.

The additional advantage of a condo/townhome: No more yard/sidewalk maintenance and potentially other upkeep. Yes, I am perfectly capable of mowing my own lawn, but I don't miss it now that I am not doing it.

My wife and I won't be downsizing for the same reason my mom stayed in her house for 53 years and didn't downsize, it make zero economic sense. Close to $40,000 just in real estate commissions to sell my current home. Moving costs. A smaller house would be worth more than I paid for my house, and at least in California, that can mean much higher property taxes. A condo or other dwelling with up keep included likely means hundreds of dollars a month in HOA fees. All adds up to more than staying put.

 

[Brian Noble]

I get that, but for me money is for spending. If it makes my life much easier and simpler, that’s worth some financial friction. Some of that friction (e.g. the sales commission) is going to happen no matter what. I may as well enjoy the benefits of it.

 

[Turn the Page]

We live in a resort area and are also desperate for affordable housing. One local township apparently passed an ordinance banning new builds less than 2000 sq ft. That's not helpful.

 

[tvguy]

We live in a resort area and are also desperate for affordable housing. One local township apparently passed an ordinance banning new builds less than 2000 sq ft. That's not helpful.

That is not unique to your area. Here, many projects start with so many "affordable" units in them, but by the time they are build the number of those units is reduced or in some cases eliminated. We have two rather large low income apartment complexes down the street. They have been there for decades. The majority of the residents are great, but a few cause problems. A lot of communities here are tied up in court trying to stop affordable housing. They don't say it is because they don't want low income residents in their area, there arguments generally center around the type of building which tend to be multi-story, densely populated buildings.

 

[ChrisFL]

I've seen this same thing in my area, and we are desperate for smaller homes and small-family housing in our area with a HUGE influx of homeless and refugees. I have a few builder acquaintances who I asked about this not long ago and they weren't shy about admitting it is all about money. We just live in a time of extraordinary greed and selfishness, I think that explains about 99% of the issues we have in this generation. It's unbelievably sad, but there's more caste system in this country than we're willing to admit, and so many of the new money builders think they're the powerful and they get to decide who gets homes and who doesn't. I hear these conversations for work as well as at play with acquaintances or friends and they sicken me tbh.

There's also a lot of NIMBYs who don't want affordable housing due to several reasons, but probably mostly their own home values going down if affordable housing is added nearby.