More room

by Russ Roberts on September 12, 2007

in Standard of Living

I spoke too soon. Here’s the stat of the week (from the WSJ): new houses are about 40% bigger than they were in 1980. That’s the median, not the average, so Bill Gates’s house doesn’t distort it. Lots of people, not just the top 1%, are getting richer in America.

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{ 25 comments }

Sameer Parekh September 12, 2007 at 2:24 pm

This is good news, but I wonder how has the median lot size changed? I lament that I am seeing ever larger houses on ever smaller lots. I don't doubt that it's a situation where my preferences are at odds with the general public's, but I wish it were easier to find a house with a higher lot size to square footage ratio. I had to restrict my home search here in Phoenix to homes built before 1970, because recently-built homes are all on tiny lots.

jomama September 12, 2007 at 3:36 pm

Now I'd like to see a graph of re-pos
superimposed on that one.

olivier blanchard September 12, 2007 at 3:54 pm

Maybe the culprits are the availability and size of loans, rather than income?

muirgeo September 12, 2007 at 4:21 pm

Wow! Is this supposed to be an argument for Liberal economics? Bigger houses seem well correlated with greater consumer debt. Consumer debt in turn seems to be well correlated with increasing wealth accumulation by the paper pushers and the money changers on the very top who rely not on free-market economies but instead rely heavily on the exact lending and monetary policies set up by our top down economic planners.

I don't remember any of this when I read The Road to Serfdom. And then there is the $50 billion recently pumped into the economy to save the Hedge Fund Managers and their houses. Is that really what Liberal economies do? I mean it sounds like a planned economy to me.

John Dewey September 12, 2007 at 4:29 pm

"I had to restrict my home search here in Phoenix to homes built before 1970, because recently-built homes are all on tiny lots."

Sameer, don't Arizona developers build in a lot more public spaces these days? greenbelts, trails, and neighborhood parks?

I know Arizona is a huge state, but isn't much of the land either owned by Native American tribes or else protected from development? That would likely drive up the cost of land. As I understand it, housing prices have already appreciated sharply in the Phoenix area. Perhaps developers have determined they cannot sell homes at high enough prices to justify large lots.

Lots are generally larger here in Texas, where little land has been preserved. That's probably not smart for us, though, as we do not xeriscape as you folks in Arizona have learned to do.

REW September 12, 2007 at 5:12 pm

OK, how can this be spun to further the housing bubble myth…
Inflation is everywhere, even square footage is rising! or
See, those sneeky mortgage lenders tricked people into buying houses that were bigger than advertised. or
Bush lied and housing got bigger!

This just in, when asked to comment on the story, presidential candidate Hilary Clinton called for an immediate Senate investigation into Big Housing! Quote the Senator, "More regulation is clearly needed to protect the American public from this growing housing problem."

K September 12, 2007 at 6:46 pm

I think the size increase is due mostly to a reduction in civic activity. The home appeals more and the community less.

Home theaters beat movies (for me anyway). Computers and electronic games displace outside play and sports. Bulk purchases of food save money but they require larger pantries and freezers and refrigerators.

So we have microwaves, freezers, trash compactors, separate bins for recycling, larger trash bins because packaging is more elaborate and our water comes in plastic bottles, larger kitchen ranges and refrigerators, etc. Wine cellars and storage.

TV's are far more pleasant to watch. But they are also much bigger.

Then, because of all this increased activity at home, people want more rooms so the sounds of the varied activities won't mix. The washer and dryer are always droning because children now expect to change clothing two or three times a day from that walk-in closet in their unshared room.

More bathrooms are expected because there is more demand for privacy 'personal space' among siblings.

You don't need all that room when you are focused on life away from the home.

About the mortgage and real estate bust. I live in a very nice area just north of Phoenix. About five percent of homes have for sale signs out. Listed prices are down 10-20 percent from two years ago. And nothing is selling. I expect much worse in California soon.

John Dewey September 12, 2007 at 7:09 pm

" I live in a very nice area just north of Phoenix. … Listed prices are down 10-20 percent from two years ago."

Prices are down that much in North Scottsdale and Carefree? I should retire now, shouldn't I?

K September 12, 2007 at 9:24 pm

John: I suspect the top end, over $2M, is stable. At least in AZ people who are shopping in that range probably aren't greatly concerned with mortgages and ARMs. I think they buy on quality, location, and personal wants and may have over one home.

My neighborhood is less; around $600K to $1.3M now. Here that sort of money gets about 4000 square feet, a pool, often a golf course or water lot.

My spiel about use of home space, etc. reflects changes I have observed in friends and neighbors and their general life outlook. I'm long retired and uninvolved personally.

However I recently advised my son in CA to avoid buying for a while.

But more to the point. Very expensive homes don't normally have signs out. So I wouldn't notice how many were listed or at what price as I take my walks at 1 am.

The Dirty Mac September 12, 2007 at 10:11 pm

Cars, in comparison with rickshaws and horse drawn wagons, seem well correlated with greater consumer debt.

Kevin September 13, 2007 at 12:40 am

Heh, just today I was making a joking comment elsewhere that Americans living in "poverty" 20 years from now will have 3000 sq ft homes and nannies.

I think maybe I even underestimated that.

K — you like your "walks" at 1 am? That another way of saying you're a cat burglar?

K September 13, 2007 at 2:06 am

K — you like your "walks" at 1 am? That another way of saying you're a cat burglar?

It is another way of saying Phoenix is sometimes still 100 F. at 1 am.

It will be about 88 F. for my walk tonight. Never cared much for the treadmill as a substitute.

My observations about the topic of huge houses are not economic. Bigger houses get built partly because buyers felt they are entitled to them.

It ia a sense of meriting more. Why? Like the hair commercial 'because I'm worth it.'

Rapid price increases of resales can be a different matter. A $500K house in California is not necessarily a swell place to dwell.

Such prices come from a conviction that inflation and thus wages will increase substantially for decades. So even if the market cools for a short time you will not lose.

I think that logic is right provided you don't get caught in a personal trap such as a rising ARM, loss of work, etc.

www.lake-shore.co.uk September 13, 2007 at 5:11 am

Very good

John Dewey September 13, 2007 at 6:32 am

kevin: "K — you like your "walks" at 1 am? That another way of saying you're a cat burglar?"

Kevin, I frequently rent a home when I vacation in Phoenix or Tucson in the summer. It's not unusual to see a person walking through the nicer suburban neighborhoods at midnight or later. Desert landscape looks pretty cool at night. Nocturnal wildlife is visible on moonlit evenings. Many of the high-end neighborhoods have common areas with walkways or trails, so its possible to walk through a neighborhood and not be too close to houses.

kurt September 13, 2007 at 6:55 am

I bet dual-earners incomes have increased as well through this period. Families can afford larger homes, because both parents are likely to be working (full-time) now.

Mr. Econotarian September 13, 2007 at 8:38 am

Houses are bigger because of zoning restrictions.

A builder wants to maximize the value of a building and lot. Thus, the house becomes larger, given that land, its use and lot sizes are limited by government.

If lots could be smaller, we may have smaller houses. Or if multi-family dwellings could be built on a lot rather than one single-family one, but can't because of zoning rules.

However when houses get too big because of this, people on lower income turn them into illegal multi-family dwellings, as is happening in Northern Virginia.

John Smith September 13, 2007 at 10:52 am

With regards to the building/Construction sector.

Did you know the Federal Government is pumping Billions into Construction (schools, facilities, ..etc…) under the premise of keeping it afloat?

Individual and business will find the Cost to add an addition or build new is way over priced.

Because of the bursting to the housing market, loan defaults and Gov monies going into Construction…..

…..it is more cost effect(better deals ‘bang for the buck’) buying a house/building that is on the market.

(This assumes one has good credit)

The Dirty Mac September 13, 2007 at 12:41 pm

Washing machines, in comparison rocks and sticks, seem well correlated with greater consumer debt.

Perry Eidelbus September 13, 2007 at 1:00 pm

muirgeo, you're ignoring the basic principle that consumer debt is quite well correlated with consumer *income*. People can afford to buy — outright or via credit — nicer houses, nicer furniture, nicer cars, etc., because they're earning more. Lenders are not stupid (at least not systematically so). Apart from the moral hazard of government bailouts, lenders won't give loans to those they believe cannot afford them. And what is the single most important factor in determining qualifications? That's right: income.

Now, you puzzle me by writing, "Is that really what Liberal economies do? I mean it sounds like a planned economy to me." I've seen your comments around this blog, but this one particularly puzzles me because nobody's arguing that the U.S. is a "liberal" economy (I presume you use that in the classic sense of the word). If anything, this is a very interventionist economy, and Dr. Boudreaux would be among the first to say that it could be improved by the Fed ceasing such "liquidity injection" (followed by the elimination of central banking altogether).

vidyohs September 13, 2007 at 6:04 pm

Kevin,
I lived in Ajo, Arizona for some three years as a young boy, and not knowing where K likes to walk I can say that if he/she is out away from the brighter parts of the city then the view of the night sky is something you have to see to experience.

In 1996 when I married my second wife we made Ajo one stop on our traveling honeymoon. I took her out into the desert west of Ajo our first night there. It was a full moon, and we sat on the hood of our Caddy, drank red wine, ate cheese and just for fun read the newspaper by the moonlight with no squinting or discomfort. And, unlike K, I can report that by 0930PM in March the desert is not 100F it is cool enough to compell a jacket.

What does this have to do with house sizes, nothing. But, housing is cheap in Ajo, the community is conservative (no hippies or druggies hanging out in public places as happens in Bisbee), and the desert is instantly accessible.

Kevin September 13, 2007 at 8:42 pm

OK you've convinced me — actually midnight walks in the desert sound supercool. As it is I settle for 9 pm walks in the neighborhood park, and it always amazes me that I'm invariably the only human being out there doing that.

True_liberal September 13, 2007 at 9:13 pm

1) I wonder how much of the growth in sq. footage is due to zoning "improvements" – ??

2) A good friend recently sold a midwest executive's home ($500K or thereabouts) in just 24 hours – using only a yard sign.

muirgeo September 14, 2007 at 10:36 am

Perry,

What should be the bigger story for a person claiming to be a Liberal economist?

A: Increasing Housing size.

B: The moral hazard of government bailouts.

All I see here on this blog seems to be a push of points such as in "A" while ignoring points as in "B" which IMO totally negates any "A" issues.

So again what was the professors point?

Also you said, "People can afford to buy — outright or via credit — nicer houses, nicer furniture, nicer cars, etc., because they're earning more. Lenders are not stupid ……. And what is the single most important factor in determining qualifications? That's right: income."

You sure about those statements?

Chris September 14, 2007 at 12:51 pm

Sameer –

You can find a new home on a larger lot if you don't mind being among the first into a new development. Developers tend to use larger lots to attract initial buyers and to make the area more appealing to later buyers, who see the large lots, but end up receiving smaller lots.

Perry Eidelbus September 25, 2007 at 12:08 am

muirgeo, "What should be the bigger story for a person claiming to be a Liberal economist?" is a non sequitur. What was *your* point? Boudreau and Roberts talk about both A and B on this blog, noting the amazing wealth in the United States, despite the excesses and abuses of government.

Also, what was your point in pointing out that site? You said absolutely nothing there, or are you intimating that lenders are systematically stupid? The bad mortgages that have been made were, apart from the rare situation of a bad lender decision, courtesy of the moral hazards engendered by government and central banking.

Tell you what. Go to your bank and apply for an unsecured loan, say, $1000. What do you think they'll want to see first? Here's a free answer: proof of income. And what happens when you have a greater income? Here's another free answer: you could borrow more if you wanted.

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