patrick.net

(CME Housing Futures & Options watchers, please continue to follow things at http://www.capitalism2.org )

The fact that Toll is becoming a bellweather of the entire section ought to be very unnerving for the other players. They're supposed to be most resistant to potential downturns because of their wealthy clientele.

In fact, dispite their recent disappointments, I predict that Toll will survive this downturn better than most builder and may eventually emerge stronger than ever.

Not investment advice.

Over half a million "un-sold" homes? 5.8 month supply? A record? Maybe it's a GOOD thing "they aren't making anymore more of it"!

(Couldn't resist)

Matt,

LOL! This has got to be a joke. I don't think the fees generated would justify 30 days of "companionship."

What passes these days in the new homes as "luxory"? that would be a good question because the luxury homes I see these days look like conventional suburban homes with nice trim. Sort of like a Cadillac Cimeron from the early 80's that used a Chevy Celebrity as a base and loaded it up with plastic gold chrome. Maybe the Cadillac Catera would be a more familiar comparison. I assume the really wealthy would know the diffrence between crap and the real thing. I sold hardware for years and when I see fake plastic formed logs mounted to the ceiling of a luxury home- like the ones in Alameda, smething tells me that luxury home producers are actually on the same lines as a used car salesman. Total bullshit. I wouldn't take one of these homes if you gave it to me.

I see fake plastic formed logs mounted to the ceiling of a luxury home- like the ones in Alameda

Ughhh... Do you have the names of the builders doing this? I'd like to know so I can avoid doing business with them at all costs.

HARM,
I can't think of the name of the place, but I do recall them being a national builder. You've probably seen ads for these in the subways. There is an add with a overly happy high maintenence Asian-Hotty running with shopping bags. I forget the messaging. It was like " Island living was never this good!"
These homes are chunked together in a confined area right next to the Webster tube. They ALL have terra-cotta roofs, stainless appliances and granite countertops along with boring putty colored stucco. These things went up FAST!

You can look at Toll Brothers homes at http://www.tollbrothers.com/homesearch/servlet/HomeSearch

They are generally considered the premier upscale home builder. I don't think much of what they produce would fall in the McMansion category (but I'm sure that someone here will pore through their listings to find one example of a McPergo shack).

Folks I know who buy their homes swear by them. These guys actually use custom carpenters, interior designers, stone/tilers to customize their homes to the first buyer's specs. If there are cheaped out McMansions I would assume it's because the first-buyer was a specuvestor/flipper who tried to cut corners on the customization.

WW2,

Is that "real" plastic logs or the "genuine imitation" plastic logs? Like all of the TREX "wood" they are using on decks these days. I could see it on the coast (again w/ the 2nd/vac. home) but to have to look at everyday?

Dinor,
Trex for outdoor decking is fine. But these logs were affixed to the ceiling -inside. The reason I knew they were plastic is because the knot holes and shape was the same on every single one. The door hardware was laughable- all Kwikset brass plated stuff, and the doors were primarily made out of plastic, except for the front door. To the untrained, they look luxurious. But the truth of the matter is that they were made out of the cheapest materials like you would find in Las Vegas. Immitation luxo is what would best describe these and they could be had for a cool 1.2 million bucks.

Tannebaum,

I was going to mention the exact same thing ! Here is another link to a condensed news report - ONLY about housing.

http://news.yahoo.com/s/nm/20060524/bs_nm/economy_homes_dc_1

The relevant portion og the news
New home sales, prices climb in April
Sales of new U.S. homes defied predictions of a slowdown in April and rose 4.9 percent while prices climbed, although the supply of homes for sale hit a record, a government report showed on Wednesday.
The pace of new home sales rose to a seasonally adjusted 1.198 million unit annual rate from a downwardly revised 1.142 million unit pace in March, the Commerce Department said.

The emphasis is mine.

See how the headline and the first line paint a rosy picture of the "robust" housing market. But let's read more.

1. YOY, there is no gain in sales. It is actually DOWN 5.7 % from year ago.
2. For reporting MOM gains, they are using a downwardly revised number with a number that may get revised.

From other news sources.

Month Original Revised
Mar 1.213 1.142
Apr 1.198 ??

So you compare the numbers as originally reported, we are actually seeing a decline even MOM !! But they are conveniently comparing the lower revised with a suspect number. And that allows them to come up with that headline !

What a joke.

Just curious --in general, how would you guys rank the big national developers in terms of overall quality?:

Toll
Pulte
KB
Lennar
Centex
DR Horton

Are there any that you would *never* purchase a home from, regardless of price?

Randy,
I'm no stranger to seeing what rich people spend on houses and the trinkets within. I have sold more than 30k worth of door knobs to ONE PERSON for their home. These people seemed to have an endless source of enthusiasm for spending money non-stop on the latest-greatest-most exotic things for their homes. We sold old growth Brazillian hardwood for outdoor decking. It was over $6 a linear foot. 30-40k just for the wooden planks was considered average not including the actual decking frame, fasteners, and the $150 a gallon marine varnish you had to apply to it or it would crack. The front doors for some of these homes were in excess of $8,000. The never-ending stream of customers and architects that would come in and rattle off a list of insanely expensive things for homes in the hills that in themselves were millions alone was sort of a humbling experience. These people would spend more on a kitchen then most people make in 5 years, and more on hardware for their doors than I made in a year. It makes one realize just how many insanely RICH people there are here. Perhaps that's why housing to me seems a little of a losing tug of war since I have no chance in hell competing against someone that thinks nothing of blowing 1 million on their bathroom.

WWII,

The faster these fools blow through their fortune with such trinkets, the faster the field gets back to level.

Based on my fairly narrow experience, the builders are just disgustingly cheap on things you can't see. They'll use cardboard instead of woodboards just to save a couple hundred bucks. Even the multimillion dollar homes would have a huge amount of cracking alone the drywall and trims.

-alone
+along
:oops:

Astrid,
While there are fools that blow through money, the kinds of people I saw day to day coming in were genuinely rich, and rich enough to not be bothered by door knobs and stuff. I think there are more of these kinds of people than we realize. What I'm getting at is that there is a diffrence between those that want to be rich, and those that are rich, and the kinds of homes that these groups find appealing. A wealthy person would never want to live in a group of homes. The single biggest desire I saw in the true rich was exclusivity. The desire to be original, outlandish perhaps, eccentric, tasteful, and very, very showy and particular about the smallest things to the point of being obnoxious. On the other hand,I can see those that want to be rich aspiring to live in a cluster of look-a-likes with very " nice" looking interiors, but more like the disneyland version of a castle. So... what extent of homes built by luxo-home builders are actually built for the true rich, and the wannaberich? that would indicate that a signifigant chunk of the upper level market is way too underleveraged to actually afford them. if it were mostly true rich buying these, then they wouldn't care.

WWII,

I think your experience may have skewed your perception. There's only so many truly rich people out there and they're in a completely different market segment from the rest of us. As you said, no one in that segment wants to buy an imitation luxo-home. As for the wannabes, I think we'll soon discover that they're actually quite asset poor and worse off than someone with the financial discipline to live below their means.

Toll isn't that exclusive. They seem to build primarily to cater to people with some assets (often in the form of a much inflated former home). I do think of their construction as McMansions. They tend to have nicer lots and somewhat better detailing, but they're semi-custom rather than fully custom builders.

No way they could get as big as they are if they were only custom builders for the truly rich.

Toll builds for the top end of the "educated class". The neveux rich if you will. But not all these folks are irresponsible wannabees. Many are doctors, lawyers, business owners who enjoy living next to others like themselves, often surrounding a golf course and behind deco gates. My point is that not all of them are the McMansion McHomedebtor who pays $1.7M for a monster home in Emerald Hills (otherwise known as unincorporated Redwood City).

It's a bit dangerous to mix socioeconomic strata categorizations with lifestyle choices. There are uber wealthy who snort their wealth up their noses and run over house guests in restored sherman tanks, losing it all in the process. There are neveux rich who quietly hump along, plowing their law partner income into vehicles that will create generations of wealth legacy for their descendants. In fact, the neveux rich that I know who aren't zombies are quite the opposite: they often rose so far in life that they appreciate every bit of their success and don't take a penny for granted. They may buy a nice Toll Bros home on a golf course, but only if and when they can afford it after planning for their children's and their own future.

Astrid,

What exactly is a McMansion then? Almost all the stock of homes in the US are semi-custom. Of the 3 old houses I inhabited as a child growing up in the Midwest, all of them over 100 years old, they were still semi-custom. They were built by a local builder who constructed a number of homes over a relatively short period of time, all of which had similarities of design and aesthetics to some degree. In fact, people in town would know if they had a Mr. A home or a Mr. B home, etc. These were homes built in the late 1800s through 1930s. I guess my grandparents were McDebtors too.

Wow, the propoganda "housing sales unexpectedly up" hasn't attracted a troll comment yet. What gives?

Randy H,

I go with wikipedia's definition:

http://en.wikipedia.org/wiki/McMansion

True, not all of Toll buyers are wannabes, but quite a few of them are. I know some people who bought into that type of development and it seems half and half. In these neighborhoods, you'll find people who are worth tens of millions next to people who are barely getting by on their income.

Most new construction nowadays is somewhat customizable. I've seen some $1.5-2M neighborhoods where the houses still look similar to each other. These are 4000+ sqft houses. And there are still quality issues associated with the homes. The Toll houses might be bigger and have a better finish, but they're not even close to custom.

I think of fully custom homes as (1) buying your own land (2) hire an architect and crew. If you go with a national builder, then the home is not custom and the main difference is scale and location.

newsfreak,

You can do that, but I'm not comfortable living with that much untempered glass in an earthquake zone.

I'm with you newsfreak. When (I don't like to say if) I hit the fabled land of critical mass I'm moving to a place where neighbors need to charter a flight to visit me. But lots of truly rich people aren't this way. Atherton is an example. Belvedere Island is pretty compact too.

Astrid,

By the way, my father-in-law custom built his own house. He is a farmer who gets by with the mercy of government subsidies. Nothing wrong with his place, but I'd wager you'd take the most offensive McMansion to his 100% custom abode.

Randy,

Undoubtedly. I think "custom home" is mostly a technical term that's gotten hijacked to imply quality. Doing a high quality custom home usually means spending much more time and money than a similar quality track home, due to economy of scale and expertise. And anyone contemplating a custom construction better have high tolerance for unexpected delays and expenses.

Most "normal" rich people probably want to see and be seen by equals, so places like the Hamptons and Atherton will always exist. I'd personally like to see more high quality high density housing. Nothing wrong with a tract home, but I can do without the pretensions.

It’s a bit dangerous to mix socioeconomic strata categorizations with lifestyle choices. There are uber wealthy who snort their wealth up their noses and run over house guests in restored sherman tanks, losing it all in the process. There are neveux rich who quietly hump along, plowing their law partner income into vehicles that will create generations of wealth legacy for their descendants. In fact, the neveux rich that I know who aren’t zombies are quite the opposite: they often rose so far in life that they appreciate every bit of their success and don’t take a penny for granted.

Good points. There's nothing that automatically makes landed gentry --who applied zero effort/brainpower/sacrifice for their inherited wealth-- inherently "better" than the much maligned "nouveau riche". This term itself is pretty much a snobby put-down, no doubt invented by the "born on third base" elites to demonstrate their genetic superiority to the upstart newcomers. In reality, those who actually had to work hard to obtain wealth are statistically more likely to possess morally superior qualites (strong work ethic, thrift, respect/empathy for working class, etc.) vs. the self-absorbed playboy elite.

astrid,

did you read that wiki on McMansions. after doing so i'm a bit more sympathetic to them (although i still don't personally have a taste for them). nearly all of the criticisms of McMansions equally apply to Tract Homes. it seems that McMansions are pretty much just a new generation of Tract Homes incorporating more of the amenities that people demand. My first home in Redwood City was a charming 1950s Tract Home. Much more character than a McMansion. But, if forced to make that choice again, I'd choose a McMansion. Having 1.5 baths for 4 BRs, a kitchen barely large enough to flip a pancake, a detached garage as the only storage space and not enough aggregate closet space for my (quite frugal) wife let alone the other residents just wasn't worth all the aesthetic charm in the world.

In reality, those who actually had to work hard to obtain wealth are statistically more likely to possess morally superior qualites (strong work ethic, thrift, respect/empathy for working class, etc.) vs. the self-absorbed playboy elite.

Why this hatred against inherited wealth? Those who were "born on third base" must have done something good in their past lives. Too bad many of them do not take advantage of this gift and do something good. Their next lives may not be so great.

Having 1.5 baths for 4 BRs, a kitchen barely large enough to flip a pancake, a detached garage as the only storage space and not enough aggregate closet space for my (quite frugal) wife let alone the other residents just wasn’t worth all the aesthetic charm in the world.

OMG! I much rather have a McMansion with 4BR and 5.5 baths. Character is good but bathrooms are more important!

Randy,

My primary problem with McMansions is that they're too big and wasteful. The track home characteristics of McMansions don't bother me.

My second biggest problem with McMansions is that they're associated with an overall unsustainable American lifestyle of big houses, big cars, and big debt.

OMG! I much rather have a McMansion with 4BR and 5.5 baths. Character is good but bathrooms are more important!

They are at least more practical, especially when one has children and parents inhabiting their domicile.

Peter P,

Maybe it's good karma. Or maybe they're what the Chinese call "debt collecting ghosts" who come back to spend all the money their parents made, because of the parents' bad karma.

They are at least more practical, especially when one has children and parents inhabiting their domicile.

Absolutely. In case everyone in the house eats something bad and needs to use the toilet NOW.

Maybe it’s good karma. Or maybe they’re what the Chinese call “debt collecting ghosts” who come back to spend all the money their parents made, because of the parents’ bad karma.

Perhaps. There is no escape.

Randy,

True enough. However, most McMansions are not occupied by multiple generations. Based on what I see, most are occupied by parents with 1 to 3 children, and quite a few are occupied by empty nesters who want space for the two weeks out of the year when their kids might be in town.

Even if you want to design multi-generational homes, there are better ways to build them than via McMansions. If I was designing for such a family, I'd want a first floor guest suite for the elderly grandparents, a fairly private suite for the parents, and smallish rooms + a study room for the kids. For the exterior, a safe and convenient exercise/play area for the young and the elderly.

Most McMansion communities don't have these spaces. Instead, they boast of large swaths of underused kitchens, foyer, dining room, living room, great room, etc.

I don't profess DinOR's hatred of McMansions. I just mourn the opportunities that were lost to create something truly liveable and nice.

Just in case you haven't experienced bathroom bottlenecks in a crowded house:

* Elderly mothers tend to occupy bathrooms for very long periods of time at entirely randomized times of the day.

* Children tend to require the use of bathrooms spontaneously and with little margin for error.

* Working parents tend to require bathroom time at times not open to much schedule flexibility.

And, you can't apply a Poisson distribution to the queuing, because seldom does one wish to immediately occupy the bathroom after another has vacated it. In very short order it is possible to find a 1 hour queue building for the bathroom in a family of five.

Peter P,

The house where I spent the first 8 years of my life had one toilet for 2 kids and 7 adults. I've lived most of the next 10 years with 2 adults and one bathroom. We managed, somehow.

Besides, reputable sushi places rarely serve contaminated fish. The risks are pretty low.

"astrid’s just a kid"

Huh? The ratio of bathroom to bums got much better once I hit college.

Thank you! Thank you!

I have always believed that the McMansion is just the modern version of the tract home. A KB home community is nothing more than a latter-day Levittown.

My in-laws live in a 1950's tract home that is every bit as shoddily constructed as any modern McMansion. In fact, if you want to see what a McMansion will look like 50 years from now, just visit my in-laws' house.

My in-laws' kitchen is "galley" style; "barely big enough to flip a pancake" just about covers it. There is tacky 1970's pressboard paneling throughout the living room. The dining room's light fixture was made to resemble like the steering wheel of a ship. The avacado green appliances are gone, but that's just becuase they broke. There were orginally just 2 bedrooms; they added a 3rd some years ago, but it does not have a seperate enterance; the only way to get to bedroom #3 is through bedroom #2! If the occupants of those two bedrooms are on differnet sleep schedules, the occupant of bedroom #2 gets rudely awakened early in the morning or late at night when the occupant of bedroom #3 wakes up or goes to bed. My in-laws have no garage, and a lot of the neighbors have only a 1 car garage.

The modern McMansion is far superior to this horrible place. I'd take a 5br/4ba 3,000 square foot monstrosity over my in-laws' place any day of the week. There

My gripe with McMansions is that so much space is wasted, and for such pretentious reasons. The two-story entrance and living room are really tacky, especially when it's just a middle class family home, not a Newport, RI mansion. I do like the space -- I just wish so much of it wasn't frittered away on two-story foyers, Jacuzzi tubs in the "master suite," etc. But having enough room is a good thing in my book.

Actually, when you think of it, the Craftsman house that all of the artsy types are so in love with today is just an earlier version of the McMansion. It was the tract home of its day. I mean, you could order them from the Sears catalog! To my mind, that is the very definition of a generic middle class home.

And it's funny, a lot of your turn of the 20th century homes are...pretty big! We rented an old farmhouse for a while when I was growing up, and that thing must have been 2,800 square feet, more if you include the full basement. All of the old farmhouses in my Midwestern town were pretty darned large. Yeah, people had more kids back then, but maybe 4 or 5, most families did not have 15 children even in that era.

Ever been to New York City brownstone? Today a lot of them are two- or four-family flats, but they were originally single family townhomes. They're big, too! How about a 1940's "working man's" apartment in a place like NYC's Styvessant village? Those things are huge, no 800 square foot units there, more like 1,800 -- and that's in a housing project in the middle of New York City!

I think McMansions get a lot of unfair criticism. They're big, yeah, but there are plenty of 1920 Craftsmen in my town that are just as big. And back in the days before KB, when people built their own farmhouses by hand, a lot of them built nice, big, spacious homes. And even urban living, like in a NYC brownstown, was originally pretty spacious. You could even argue that the cramped little suburban tract house of the 1950's is something of an historical anamoly. The McMansion is part of a well-established historical tradition of American homes.

The Mcmansions you speak of exsist in huge numbers out where my parents live. When I was growing up, I figured we must've been well off because we had a 2 story home with 3 bedrooms while most of the neighbors had single story ranchers and trailers.Well, These days they are building MASSIVE 5 and 6 bedroom houses with 3 car garages, 2 story decks, and enormous living rooms. What I dislike about them the most is that they're usually built on ugly pieces of land, given small yards with no trees, and for some inexplicable reason simply look cheap and generic to me.