RIP, 'McMansion': Homebuyers turn toward more modest homes
The "McMansion" is dead.
That jumbo-sized, aspirational edifice, often with vaulted foyers, vast bathrooms and granite countertops, has become a relic of the housing bust in the Hudson Valley, builders and real estate experts say.
"It all boils down to the caution that buyers have adopted since the downturn," said J. Philip Faranda, whose J. Philip Real Estate business is based in Briarcliff Manor. "Ten years ago, you'd get childless couples buying McMansions because it was a good investment. We had 70 years of an appreciation curve to draw on ... It used to be an easy kind of sale."
All that changed, however, when loose mortgage lending standards and leveraged financial markets triggered a meltdown in the real estate and financial markets -- the Great Recession of 2007-2008.
"The buying public became incredibly cautious, less optimistic, less believing that they would get an asset that would appreciate," Faranda said.
Scott Wohl, executive officer of the Builders Association of the Hudson Valley, said that although the American Dream of a center hall colonial with 4 1/2 bedrooms has not exactly perished, it has been significantly scaled back in the Hudson Valley.
"There's been a roughly 25 percent reduction in the overall dwelling size," he said.
Peter Berman, chief executive of Goshen-based construction company The Ruby Group, said that during the boom years houses commonly ran from 3,000 to 3,500 square feet. The new norm: 2,000-2,400 square feet, with 2 1/2 bathrooms instead of 3 1/2.
Other amenities often lost in the downsizing include vaulted ceilings, media rooms and extra dens.
"We're going toward more pragmatic, utilitarian designs," Faranda said.
Though the footprint may be more modest, Berman said, it has the same number of bedrooms.
"It's the same house," he said. "It's just smaller than it used to be."
The new normal in homebuilding is reflected in construction numbers.
CONSUMERS WARY OF EXCESS
In the January-September period last year, 655 single-family housing permits were filed in the Hudson Valley, 11 more than the same period in 2011, according to Census Bureau figures cited in a Marist College report.
Construction costs associated with those permits last year, however, declined 25 percent to $177 million from $236.3 the previous year, an indication that single-family construction projects have been scaled back.
If the appetite for McMansions has slackened in new construction, it also has declined in the aftermarket even as the overall housing recovery has picked up steam -- with prices rising at an annual rate of 7.3 percent in the fourth quarter of last year, according to the S&P Case-Shiller.
Ken Davies, general manager of John J. Lease Realtors in Orange County, said many of the original McMansion buyers have mortgages that are underwater.
"That market is still a very thin market," he said. "We're not getting a lot of activity in those houses. A lot of those houses were built in the last seven or eight years."
In many cases, he said, the owners are resorting to "short sales" in which they accept a sale price that falls short of the amount owed on the property. The transaction sometimes is an alternative to foreclosure, but debt holders such as mortgage banks have to agree to release any liens on the property.
For instance, Davies said he is listing one house that formerly sold for $1 million. The short-sale price? Under $500,000.
"There's just no appetite for the public for that part of the market," he said. "That market has almost collapsed. If your $650,000 house is going to bring $470,000, you're not selling unless you have no choice."
WELCOME TO 'EX-CHESTER'
A key factor keeping a lid on the McMansion aftermarket is taxes.
"Taxes on these properties are very high and have been an issue," Davies said. "I don't think a lot of people in Orange County are willing to pay taxes in excess of $25,000 a year. Taxes are a very big issue and will continue to be an issue."
Aside from Orange, many of the McMansions were built by expatriates of Westchester County seeking more space in Dutchess and Putnam counties, Faranda said.
"We called it 'Ex-Chester,' " he said of the areas populated by those who moved north, thinking they could escape Westchester's hefty property taxes.
Could the McMansion make a comeback?
Berman said that buyers now tend to be focused more on quality issues like fit and finish than on size, but an improving economy could rekindle buyers' desires for the mega-houses.
"People want the biggest they can get," he said, observing that fast-food customers still supersize their French fries.
But Faranda said he wouldn't expect a comeback anytime soon.
"They only came into prominence after 15 or 20 years of prosperity," he said, arguing that the economy could need another lengthy winning streak before McMansions return to prominence.
"Not for a while," he said.