What is with this obsession with bigger and bigger homes? And why am I part of the mad lemming rush to bigger mortgages and huge property taxes?
The Washinton Post has an article about the emergence of Taj Mahals for the common millionaire. With the influx of interest only mortgages and the rise of real estate values, the $800K-4M house is now within reach for a surprising number of people. Houses with square footage of 6000 to more than 23,000!
In her book “The Overworked American”, Juliet Schor wrote that the average home in 1950 was 750 square feet, and had grown to 2000 sqft by 1989. She also documented the greatly increased labor of keeping a larger house clean, and the greater expenses involved in heating, cooling and maintaining the larger structure. I can attest to this personally, as I am living in what would have been a mansion in 1929 when it was built, a massive 1300 sqft home in Tucson. Of course this pales in comparison to the house I am remodeling now, a 1959 ranch style house that is 3322 sqft. Comparing the size of my new house to the averages listed in Ms. Schor’s book, it would seem that I am moving into what would have been a Taj Mahal of its day. Perhaps in another 30 years I can move into one of these 23,000 sqft monsters.
One thing that was not really touched on in the Washington Post article is the impact of the hot housing market and the capital gains exemption for a personal residence. This capital gains exemption was a primary motivator for my decision to move into a house larger than I needed. I had a lot of concern that the extra utility expense, and the greater maintenance would keep me house-rich and cash poor. I was willing to put up with that for two years in order to sell the remodeled house for a nice capital gain. Or I could stay. I went through a period in my life that was house-rich once already and I don’t think I would like to do that long-term again. This is the harsh reality of the great American dream - if you work hard enough to make enough money to afford the fancy house, then you don’t have the time to enjoy it.
With the Bush administration talking about massive tax reform that would impact the mortgage interest deduction, this could foul my plans. A change in the mortgage interest deduction would decimate the value of houses on the high end, since high income earners could no longer write off the cost of their huge mortgages. I hope this doesn’t happen.
But maybe I should hedge my bets and start looking for a 1950s house that is only 750 sqft.
