Nerve Endings Firing Away

Balloon Juice blames HGTV for the housing crisis:

How many episodes of House Hunters or Property Virgins or whatever the show du jour was at the time did they have with twenty-somethings, just out of college, touring houses and turning them down because they only had two bathrooms or there was only one sink in the guest bathroom or because there was not enough light in the dining room or because the cabinets were not nice enough in the 400 square foot kitchen or, well, you get the point.

Although the post is made in a lighter vein, I can’t say I completely disagree. If anything can be blamed for this housing crisis, it is this relentless push not only for homeownership but also for large-sized homes that belied any rationality in terms of use. HGTV merely fed into the fad of more is less. Housing size has ballooned in the past decade and 2000+ square-foot homes on even larger-sized lots were now considered passe. Even when you had only a kid or two. People justify larger homes for kids needing space but anyway they carry half their belongings for their two-year-old in the family mini-van when they travel. In any good, more is always better but then so is declining marginal benefit. There exists a platuea beyond which additional square footage is simply not required for optimal living and merely counts as luxury. Of course,billionaires like Ambani cannot be chastised on their 55-story home but if overconsumption becomes the norm, you invoke tragedy of the commons which leaves everyone worse off.

In a climate of oversized homes, builders naturally obliged to satisfy this demand of McMansions especially when adding a bedroom or two didn’t add much to their construction cost but allowed them to hike up their price just high enough not to deter buyers. Do we need a fifth bedroom, but it’s only $10,000 more…hmmm, let me have it and then we can think what we put in there. Even when Mr. and Mrs. John Doe did not need that extra bedroom, all of their friends (peer-pressure) had a five-bedroom house so why not them especially when it isn’t going to cost all that more. Also, you must remember the housing boom was fueled by easy access to loans without proportionate collateral so piling on debt wasn’t an issue especially when your home prices are expected to rise exponentially just as they had in the past few years. Why wouldn’t any ‘rational’ homebuyer get that oversized house especially when you had access to loans to buy it for slightly more? Want trumped need and most weren’t so tough when the going got tough.

No wonder the suburbs are suffering far more disproportionately than central cities. People especially those fresh out of college may finally discover that they indeed can live comfortably in 1200 sq.ft homes. Or probably less, ask your average Mumbaikar.

Update: It took a housing crisis but the markets are adjusting. Average home size for a single-family detached home is declining from 2,626 to 2,343 square feet. The average home size was 1,710 in 1982 but the average family size has in fact decreased over the years thus providing no rational reason for increased home size.