Back in 2011, many observers were predicting the end of the McMansion era. But five years into the recovery that barely feels like one, homebuilders have happily returned to the old ways of building bigger homes in ever farther-flung areas. The recession was supposed to usher in a return to the dense, urban and walkable. Instead, the opposite has happened.
There are any number of explanations for this trend. Young first-time buyers, who are less inclined to buy big suburban houses, are largely sitting out of the market. Credit requirements are still much tighter than they were before the housing collapse, so much of the activity in the housing market is from wealthier families looking to trade up -- and they're looking for bigger and better.
Another, possibly overlooked contributor? Politics. A 2012 paper by Stanford political scientist Adam Bonica found that builders and construction firms were among the most politically conservative businesses in America, judged by their owners and employees' contributions to political parties. And a Pew Research Center study last year found that conservatives overwhelmingly prefer communities where "the houses are larger and farther apart, but schools, stores and restaurants are several miles away."
So on some level, homebuilders may be inclined to build communities that reflect their own values. This isn't a problem if potential buyers share those values too -- but what if they don't?
One potential sign of trouble might be the homeownership rate, which at the end of 2014 reached its lowest level since about 1989 -- 25 years. That's not necessarily a bad thing. Data show that the economy added millions of new households in 2014 as more people living in shared arrangements -- including some of those young adults staying with mom and dad -- struck out on their own. Most of them decided to rent. That could portend an uptick in the homeownership rate in the coming year as more renters decide to buy.
As Nick Timiraos put it in the Wall Street Journal yesterday, "Home sizes are rising even as sales have slowed because builders have competed for affluent buyers who aren’t likely to run into trouble qualifying for a mortgage and saving for a down payment."
But if young families enter the market and all they see are $400,000 single-family homes in the 'burbs, sellers may have a tough time convincing them to buy.
Correction: The median new home in 2014 was 1,000 square feet larger than the median new home in 1982, not 1992 as a previous version of this post stated.