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This is why I bought my house just as close to the city as I possibly could. I give myself a little credit for foresight. Even back in '99 when I got my house I was saying that someday the price of fuel was going to skyrocket. And all the "McMansions" that were being built dozens of miles away were going to be white elephants. When the families they were built for disperse, and mom and dad don't want four or five thousand square feet anymore. They'll be too far from anything, and too big. In fact, I could almost see a time where they will be snapped up by local governments at foreclosure sales and remodeled into small apartment houses or mini-jails.
 
That majority of the country lives paycheck to paycheck. Most people right now are 2 missed checks away from losing everything they own. Nobody saves, nobody plans.

If more people lived within their means instead of putting everything on a damn credit card we wouldn't be HAVING an economic crisis right now.
But if more people lived within their means, then where would our economy be right now? Better yet, who would have fueled the emergence and growth of the Chinese, Korean, Indian, and mid-east economies??
 
I bet high energy prices make an even bigger dent in the budgets of people who do not live in McMansions. Someone who lives in an older suburban house - the 3-bedroom ranches that many baby boomers grew up in - may have a long commute, too, but is probably already operating on a smaller budget.
 
That majority of the country lives paycheck to paycheck. Most people right now are 2 missed checks away from losing everything they own. Nobody saves, nobody plans.

If more people lived within their means instead of putting everything on a damn credit card we wouldn't be HAVING an economic crisis right now.
Excellent post! Most people are saddled with debt - in the form of a house they can't afford, an expensive fleet of automobiles and credit card debt. I have a sister in law that has criticized me for living too far below my means. I have no credit card debt, two cars that I own free and clear and am moving into a home that I had built with a 40% down payment. Funny thing is that in the long run by living below my means I will live much better than her (and the rest of the country) when retirement hits.

I am a commercial credit officer and am constantly shocked at the debt burden most of America has. Just because a bank will qualify you for 3.5times your income for a house doesn't mean you should do that! People would finance the air they breath if they could be convinced there was better air out there to buy...we live in a foolish gullible society built around consumer spending.

Saddly GM rode the wave of the consumer spending nightmare as they built bigger, thirstier and more expensive SUVs while continueing to build crappy sedans. Now it has come back to haunt them. My dad just purchased a Saturn Aura - which is a nice sedan that gets really good mileage - but it has one of the hardest cheapest interiors that I have ever seen!!! My 2004 Mazda6 S has better interior materials than the Aura... The plastic may be "low sheen" but it is still hard and brittle feeling.

GM - when are you going to figure out what is necessary to be successful? The Volt had better come to market sooner rather than later or GM is dead in the water. High gas mileage cars are going to take the market by storm and GM (and the other domestics) will be screwed.
 
Funny thing about the McMansions...I am building a new 3,221 square foot one story home after living in a 1,732 square foot home for nearly 10 years. The new home has double paned low-e windows, radiant barrier, super high efficiency three zoned A/C system, heavily insullated to obtain the energy star certification and will most likely use similar or less energy than my small 25 year old home. Also - I am moving to a more convenient location closer to the cities central main highway. Granted the location caused the dirt to cost much more...but I will consume far less energy than I did in my small cheaper house. Go figure.
 
Discussion starter · #28 ·
This is why I bought my house just as close to the city as I possibly could. I give myself a little credit for foresight. Even back in '99 when I got my house I was saying that someday the price of fuel was going to skyrocket. And all the "McMansions" that were being built dozens of miles away were going to be white elephants. When the families they were built for disperse, and mom and dad don't want four or five thousand square feet anymore. They'll be too far from anything, and too big. In fact, I could almost see a time where they will be snapped up by local governments at foreclosure sales and remodeled into small apartment houses or mini-jails.
That's the argument that has been made in this book:

http://www.amazon.com/Suburban-Nation-Sprawl-Decline-American/dp/0865476063
 
Funny thing about the McMansions...I am building a new 3,221 square foot one story home after living in a 1,732 square foot home for nearly 10 years. The new home has double paned low-e windows, radiant barrier, super high efficiency three zoned A/C system, heavily insullated to obtain the energy star certification and will most likely use similar or less energy than my small 25 year old home. Also - I am moving to a more convenient location closer to the cities central main highway. Granted the location caused the dirt to cost much more...but I will consume far less energy than I did in my small cheaper house. Go figure.
While it may be a large home, the use of energy saving features and good quality materials "disqualifies" a house as being a McMansion. McMansion kind of a perjorative term describing oversized houses with ill-concieved exterior design features built with cheap materials. These houses are then sold at a great profit to the builder. When some smart planning goes into a house, such as what you have done, a good quality house results.
 
While it may be a large home, the use of energy saving features and good quality materials "disqualifies" a house as being a McMansion. McMansion kind of a perjorative term describing oversized houses with ill-concieved exterior design features built with cheap materials. These houses are then sold at a great profit to the builder. When some smart planning goes into a house, such as what you have done, a good quality house results.
Can't forget the tight packing and small lots in the development, unless that's what you meant by oversized.
 
Discussion starter · #32 ·
While it may be a large home, the use of energy saving features and good quality materials "disqualifies" a house as being a McMansion. McMansion kind of a perjorative term describing oversized houses with ill-concieved exterior design features built with cheap materials. These houses are then sold at a great profit to the builder. When some smart planning goes into a house, such as what you have done, a good quality house results.
Also, if you used the same enery saving materials in a house of similar size as your old house, you would be using half as much energy as your new 3200 sq ft house.
 
Also, if you used the same enery saving materials in a house of similar size as your old house, you would be using half as much energy as your new 3200 sq ft house.
But you wouldn't get your money out of it when you sold it. People won't pay for high-dollar features in small houses. Small house usually equates to small budget.
 
That majority of the country lives paycheck to paycheck. Most people right now are 2 missed checks away from losing everything they own. Nobody saves, nobody plans.

If more people lived within their means instead of putting everything on a damn credit card we wouldn't be HAVING an economic crisis right now.
This is a cosummer driven economy now, the economy depends upon people buying things and going into debt. If people are not spending you get a resession. This country has not been living within it's means for at least three decades.
 
Funny thing about the McMansions...I am building a new 3,221 square foot one story home after living in a 1,732 square foot home for nearly 10 years. The new home has double paned low-e windows, radiant barrier, super high efficiency three zoned A/C system, heavily insullated to obtain the energy star certification and will most likely use similar or less energy than my small 25 year old home. Also - I am moving to a more convenient location closer to the cities central main highway. Granted the location caused the dirt to cost much more...but I will consume far less energy than I did in my small cheaper house. Go figure.
Its so funny you say that. When we lived in Brooklyn we lived in a 1300 Sq Ft home built in 1925, with oil heating, window A/C's, and no insulation. In 2006 we had a 2400 Sq Ft home built here, it costed $120k less than what we got for the home in Brooklyn. This house has central A/C plus a heat pump, insulation, and quality windows. Plus we have an electric stove and dishwasher we use every day. Now we spend $1000 less a year for our Heating/Cooling/Electric bill. Amazing isn't it?
 
But if more people lived within their means, then where would our economy be right now? Better yet, who would have fueled the emergence and growth of the Chinese, Korean, Indian, and mid-east economies??
When the last boom slowed, a few years later the asian economies felt the pain. I think you'll see the pain spread east as the need for $29 DVD players evaporates. I always remember the Japanese conglomerate buying Pebble Beach for billions in the late 80's and selling it for millions in the mid-90's during their banking crisis. And as the asian economies slowed back then, oil fell into the low teens per barrel. It can happen again if the world economy slows thanks to the US slowdown. Heck, the president of Russia even got pissed off at the US for causing the global credit mess the other day. Reminds me of Hardy telling Laurel "another fine mess you've gotten me into" :)

And it isn't just the east that feels the pain. 40% of the homes sold in the Orlando area from 2004 to 2007 were bought by EuroZone residents who took advantage of a strong currency/weak dollar and the romantic thought of owning a place in Florida that was much larger than the flat near London or Frankfurt they now call home and with much better weather more months of the year. Almost all of these homes are well under water in value and with mortgage companies red-lining Florida, they won't be sold anytime soon. Quite a bit of foreign investment capital will share in the Florida real estate bust.
 
Discussion starter · #37 ·
But you wouldn't get your money out of it when you sold it. People won't pay for high-dollar features in small houses. Small house usually equates to small budget.
Over the past decade or so, I agree. However, if economic conditions get bad enough, there may not be demand from enough people to sustain the price of your house like you believe. Big houses are only worth as much as people are willing or able to pay. With the current problems in the credit markets, a lot of people that could get loans two years ago are now unable to. Sort of like SUVs. Doesn't matter how much it cost new, because no one wants to buy them, the value plummets, even more than what has historically been the case. Hence the title of this article. I'm not saying that this will or even might be the case with your new house, it's just that old line assumptions like the one you just made about high dollar features in small houses are being tested right now and are failing in many cases.
 
People buy McMansions because of quality of life and their relaitve cheap price. Prices for these houses are cheaper because of they are not situated within prime land and because these houses are from an existing plan.

Money management is important but so is family and quality of life. The sudden increase of fuel has cought everyone off guard including the best financial managers.
 
The issue is that these developments are so far away from job-centers, that as the price of gas goes up, the value of the houses goes down, since living closer to job centers would save you more money.

Example:

Bob's McMansion is 50 miles from his job, and Bill's McMansion is 10 miles from his job.

Annual Miles Driven

Bob = 50 miles x 2 times per day x 5 days per week x 52 weeks in a year = 26,000 miles per year

Bill = 10 miles x 2 times per day x 5 days per week x 52 weeks in a year = 5,200 miles per year

Annual Fuel Consumed

Bob = 26,000 / 20 mpg = 1,300 gallons

Bill = 5,200 / 20 mpg = 260 gallons

Annual Fuel Cost at 2.50 per gallon

Bob = 1,300 x 2.50 = 3,250 bucks

Bill = 260 x 2.50 = 650 bucks

Annual Fuel Cost at 4.00 per gallon

Bob = 1,300 x 4.00 = 5,200

Bill = 260 x 4.00 = 1,040

Now, let's multiply that by 20 years of home ownership, and calculate the difference in price-hike impacts between Long-Distance Bob and Short-Hop Bill:

Bob = 65,000 total cost at 2.50, and 104,000 total at 4.00... difference of $40,000

Bill = 13,000 total cost at 2.50, and 20,800 at 4.00... difference of 7,800.

Hence, houses further away from job centers are impacted more by higher fuel costs.
Can I add to this? Let's suppose both of them bought a Tahoe LTZ to commute to and from Virginia Beach. After one year, according to Kelly Blue Book, the difference in private party value, assuming similarly equipped vehicles (leather, multi CD mp3 stereo, dvd player checked) will be over 3 grand.

The real estate bubble bursting may be a boon to my parents, however. They're retired, the house long since paid for, and a reduction in home values will at least mean less they'll have to pay in taxes. This might help alleviate the problems caused as the stock market problems devalue their money market funds...
 
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