Tuesday, April 14, 2009

And Here's To You Mrs. Robinson--end of the big suburban home

I have one word...just one word, Ben...plastics. This line by the pool of a large suburban home summed up the prosperity of an era or the mass consumption that Dustin Hoffman would rail against. The Graduate could be shot today by a pool in a large suburban home, but there would probably be For Sale sign in the front. The booming economy that produced those homes in the sixties seventies and eighties and nineties is gone and so is the dream of the big suburban home. Mrs. Robinson drinks from a large bar that spills out to a patio that spills out to a pool. Ben runs from one monster house to another.

Cut to 2009. The very people who now own those homes...one word, just one word Ben...cant find that one word anymore. What is the new thing? What is the plastics of our new era. It is not cars and it won' t be large suburban homes. Maybe ...solar panels...or hydrogen...or...fuel cell technology. Whatever it is the next generation will not be looking at large homes. For many reasons, but the biggest one will be that the banks will never make those loans again.

I'm sorry Mrs. Robinson but your debt to income ratio is out of whack. Mr. Robinson you don't have six months reserves and a job of two years with a W2 that shows you make two hundred and fifty thousand a year. I'm sorry Mrs. Robinson, but you don't have the twenty percent to put down. Mrs. Robinson, you were late on a credit card and your credit score dropped to 650...we only lend on 700. No, I'm sorry, we don't do stated income anymore or interest only loans.

The only reason big homes were able to be built in the first place was that the banks would give people loans on stated incomes and qualify them under teaser rates or adjustable rate mortgages that started out in the three percent range. Or the famous NO DOC loan that required nothing but a social security number and a FICO score. Then you could put Mrs. Robinson in her home. But not anymore.

Out where I live there are many large empty homes. I don't know what they will do with them. They will never sell. Why? Because middle class people will never qualify for them and whats more people don't' want them. The utilities alone on Mrs. Robinson house today runs a cool six hundred a month. And that's with Voice over IP. These are not energy efficient homes. They were not built that way. These monsters cost an arm and a leg to heat and cool and throw in that electric bill (do you know what it costs to keep Mrs. Robinson's pool warm?) and you are headed straight for the poor house.

Taxes. Nobody wants those taxes anymore. Out where I live (suburb of Chicago) taxes start around ten grand and on the big homes we are talking twenty four thousand dollars. That's a cool two grand a month without the mortgage. Don't forget maintenance and filling large homes with furniture Mrs. Robinson's home was magnificently appointed. The scuttlebutt among realtor's for a long time has been that a lot of the McMansions are empty. People would move in and didn't' have the money for the furniture. Many a cable guy has told me this story as well.

When the banks return to health they are going be loathe to make those jumbo loans. Only the truly rich will qualify and they probably won't want them either. All those spec homes you see out there are now owned by banks who got them from builders who couldn't make the note--that will be a painful reminder that they won't forget. So if your dream is to throw your money away on a house, then you better be hauling it in.

But the biggest reason is simply that the era of the big home is over. Conspicuous consumption has given everyone a nasty headache and culturally we have moved on. Greed is out and what was that thing called the American Dream? Maybe a big house won't make us happy. Green homes. Green cars. Waste not. Want not. We are truly moving into a different world.

So here's to you Mrs. Robinson...and Ben I have just one word...one word...downsize!

Books by William Hazelgrove