1/19/2013 4:00 AM ET|
House lust, now a more somber affair
Five years after the housing bubble burst, we’re still searching for our dream homes. But gnawing uncertainty now colors the hunt.
For many first-time buyers, a no-frills starter home would be the answer to their dreams. Daphne Earley envies them. She and her husband have been house shopping for about a year, looking at ever-nicer districts, ever-more expensive homes, but they can't find what they want. And they don't want what they see.
"For some people, it's so easy. We have friends; she's a teacher, he's a cop. They just bought a modest home, probably in the upper $300,000s to $400,000 range. Why can't we be that?"
Obsessing, but not buying
Initially, Daphne and her husband imagined they'd buy a fixer-upper, until they toured a new home. Now, only new or remodeled properties look good. "We just fell in love with all the gleaming hardwood floors, nice granite kitchen countertops, nice tile bathrooms," she says.
She's got house lust, she says. She dreams of walk-in closets, a big master bedroom and bath, tall ceilings and ample square footage.
During the real-estate boom of 2001 to 2006, house lust -- a term used by author Daniel McGinn in his book, "House Lust: America's Obsession With Our Homes"-- was in the air. "Even as we realized the boom couldn't last, it was as if we couldn't help ourselves," McGinn wrote. House lust led buyers to spend money they didn't have on homes that were bigger and fancier than they needed.
What a difference five years of hard times makes. According to the online real-estate database Zillow, real estate gained about $1.3 trillion in value last year, the first uptick since 2006. Prices are rising. In some cities, it's difficult even to find homes for sale. The housing market is finally recovering.
But recovery is a relative term. Researchers at the residential real-estate site Trulia say the market is at 47% of normal now. That's a long way from solid and dependable. Foreclosures still clutter many neighborhoods.
In such a world, is there still a place for house lust?
McGinn seemed like the guy to ask. He came clean in his book about his own case of house lust and admitted to covetously looking up friends' home purchases in the county sales tax records to see what they paid. He got so caught up in his book research that, at the top of the bubble, he bought an investment property -- sight unseen -- in the real-estate boomtown of Pocatello, Idaho.
That purchase is not a subject he's eager to discuss today. It's for sale now, for slightly more than he paid. "It's not selling, probably because the town has so many foreclosures," he says.
The changing landscape
House lust has power because a home plays so many roles in our lives in addition to providing shelter. It's a status symbol, wealth repository, family nest and creative outlet, to name just a few.
"These are still hard impulses to rein in," McGinn says. "It's great to have a good (investment account) balance, but you can't throw a dinner party in your 401k. For a long while, housing felt like the great two-for-one special. You got this great investment and oh, by the way, you got to live in it, which isn't true today."
Irrational as the excesses of the boom were, McGinn says it also made crazy sense given the times. Rising home values offered ordinary people a chance to maybe make a killing, fund a retirement or just get ahead in a time when household incomes were slipping.
"We used to play the market, and then we started to play our houses," McGinn says.
Today, 20% of homebuyers are investors. But these are not the same mom-and-pop investors whose reckless speculation fueled the housing boom, says Lawrence Yun, the chief economist for the National Association of Realtors.
Today's bargain-hunting, cash-paying investors represent institutions such as Blackstone Group, a private equity firm that recently spent $2.5 billion on 16,000 single family homes, making it the biggest private real-estate owner in the country. With interest rates low, investors are looking to rental income for higher yields, Yun says.
House lust in 2013
Today, most homebuyers are chastened by the housing crash. "On the whole, people are being a little bit more careful about how much they spend on a house," McGinn says. "And if they aren't, their (mortgage) brokers are enforcing a little more discipline."
The Earleys may have house lust, but they aren't spending recklessly. In fact, they can't seem to spend at all. They've viewed and toured dozens and dozens of homes, but they can't seem to commit. The decision feels so final, she says.
They can afford a nice home, she says. She is 30 and owns an online fashion jewelry business. At 40, he has a technology consulting company.
But they want a really nice home, in a top-ranked school district with a Mayberrylike small town setting. Oh, and at a price they can afford. But, in northern New Jersey, across the Hudson River from New York City, where median home prices run $650,000 to $900,000, that's a tall order.
"This is really about just lusting after our perfect home," Daphne says. She stays up late nights browsing online listings, although she already knows them by heart. They started shopping last summer with a relatively modest budget. It grew as the search wore on. Touring a home priced at $585,000, "we had to walk out," she recalls. Her husband, apologizing to the agent, "said he couldn't be in a home that wasn't what he wanted."
They and their two toddlers spend every Sunday driving from open house to open house. They came close to buying recently but backed away. They could compromise -- a smaller home, a less-terrific school district, a longer commute -- but they won't. At least, not now. So they anguish over the question daily, sometimes all day. They discuss homes face to face, by phone, text, Skype and email, talking over the options, what their strategy should be, which open houses to attend next. "It's taking over our lives," she says.
For entertainment purposes only
House lust lives on, too, at cable network HGTV. But it doesn't look the same as it did circa 2003, says Kathleen Finch, the general manager of the channel devoted to real estate, remodeling and renovations.
"People still love their homes, but they love them for different reasons, and our programming reflects that," Fitch says.
Her audience now is more likely to want an escape than a game plan for flipping rundown bungalows as an investment. Even in the worst of the downturn, ratings grew for "voyeuristic outlets" like "Million Dollar Room," Finch says.
Recently, though, to her surprise, some of HGTV's fastest-growing shows center on homeowners finding and transforming fixer-uppers to live in.
Diane, who wanted only her first name used, is afflicted with today's sadder-but-wiser kind of house lust. She's a newly minted physician in the Seattle area. Her husband is a technology professional. Both are in their late 30s. While friends were buying homes and starting families, she was in medical school, postponing nesting. Now, with their first child due, it's hard for them to think about much else.
But they can't yet buy what Diane wants: a great home for now and forever. She wants a good neighborhood, a manageable commute, great schools, playgrounds and lots of playmates for their yet-to-be born children. And most importantly, she wants permanence. She's done enough moving.
"I know I am a house snob," she says. "We dream of Wolf ranges and a remodeled Craftsman with an open kitchen. We want a master bedroom with a master bath. I look at houses on RedFin and the ones I like I think, 'Oh, I would love to live there.' But they're like $700,000 or $800,000."
Their $300,000 to $350,000 budget would buy a small, maybe slightly funky foothold in one of the desirable neighborhoods in the city's heart. In theory, Diane loves the idea of a fixer-upper with great bones. In reality, neither she nor her husband is handy and both are dog-tired in the evenings after commuting to and from demanding jobs.
Lusting for something new
"Fixers" have diminished in popularity in her market, says Grand Rapids, Mich., real-estate agent Pat Vredevoogd Combs. Young buyers often demand new homes or ones that have been recently remodeled. A pair of recent clients, for instance, wanted to see nothing built before 2003.
"We are still having a little bit of trouble selling the houses that are older, built in the '80s and '90s, and don't have all the cathedral ceilings and the fancy master baths but are so well constructed," Combs says.
This emphasis on newer construction by first-time buyers can seem overblown. TV and magazines have upgraded all of our expectations, of course. But there are also solid reasons for wanting a turnkey home. For one, it's tough to find cash for remodeling.
"It's hard enough to get a loan in today's marketplace with all the regulations there are, and that has put a little bit of a crimp into people being able to buy and redo," says Combs.
For another, remodeling costs are unpredictable. "Don't buy a to-do. Buy new," a savvy homebuilders' industry group ad campaign urges buyers. Amateurs like Diane realize that they run the risk of spending more on improvements than it might cost to buy an upgraded home.
Diane worries, too, that home prices might fall again, or stagnate, locking them indefinitely into a starter home they don't like. She has friends who are stuck in homes they've outgrown but can't sell because the mortgage is underwater.
It feels like the clock is ticking on their decision, Diane says. They should probably just compromise and buy a small home before they're priced out of the market, she says. But with the economy still shaky and evidence everywhere of what can go wrong, uncertainty makes it hard to act. Instead, she window-shops online. She scours listings and pores over a "rent versus buy" system she's devised to compare monthly mortgage costs of her favorite listings with the prices of comparable rentals on Craigslist.
Economist Yun thinks that rising home prices eventually will push fence-sitters like Diane and Daphne into making a purchase. With low prices and "unimaginably low" interest rates, this may be a "once-in-a-lifetime opportunity" for buyers, he says.
But Diane is unwilling to hopscotch from home to home. She's used to delaying gratification to achieve her dreams. They'll try holding out for a couple more years, to save a 20% down payment on a $400,000-to-$500,000 home, she says. "It is tempting," she adds, "to try to save even a few more years for that almost-attainable dream home."
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