Inkwell: Authors and Artists

    
Our next guest author is Daniel McGinn.  Daniel's recently released book,
"House Lust: America's Obsession With our Homes" is a book that looks at the
frenzy of the real estate market in the last decade.  It explores how we
went from thinking of homes as purely shelter to something much more.

Daniel McGinn is a national correspondent at Newsweek, where he's
worked since 1993. He's previously served as a reporter in New York,
bureau chief in Detroit, and since 1999 he's been based in Boston. He
writes about management, the economy and a variety of other topics. His
freelance writing has appeared in WIRED, Inc., the Boston Globe
Magazine, and other publications. He lives in the suburbs west of
Boston with his wife and three children in a 35-year-old renovated Cape
Cod-style home. HOUSE LUST is his first book.

Philippe Habib leads our conversation.  Philippe is the host of the <home.>
and <cars.> conferences on The WELL.  He lives in the San Francisco Bay area
and has built his own house once and is currently in the process of building
a vacation cabin.  Philippe likes to make things that are typically
purchased.  In addition to houses, that list includes bread, beer, and
sausage.  For a living, Philippe writes software.
  

    
Hi Daniel,

Living in the Bay Area I have always been in an environment where
housing prices keep getting higher so reading your book forced me to
remember that the whole country is not as house value driven as I am
used to.

Do you think that the Silicon Valley, and I suspect parts of the East
Coast, have lived long term with the house as investment instead of
shelter mentality that you write about?  If so, do you see something in
those markets that can say what this might mean for the rest of the
country?
  

    
Hi Philippe. That’s a great question to start things off.

I definitely think that the phenomenon I call “House Lust” is more
prevalent in places like the Bay Area (and most of California, for that
matter), Boston (where I live), New York, DC, etc, where home prices
are quite high and have generally appreciated for most of our
generation’s adulthoods. As I write in the introduction to my book, if
you live in places like Cleveland or Detroit, the book may not resonate
quite so well, since home prices have languished there for years.

At the same time, I think there are several factors that make people
in all parts of the country more aware of home values than they were a
generation ago. Go back a couple of decades, and housing equity was far
less liquid than it became during the boom. People didn’t do cash-out
refinancing or take out home equity loans the way our generation does.
The fact that paper wealth became something it was pretty easy to
convert into consumable wealth made people everywhere more conscious of
it. Savings patterns changed, too: during the 2000s Americans have
been notoriously poor savers, in part because many of us were betting
on rising home values to save for us. I even think the Internet has
played a part in this, since it brought a lot of transparency to home
values, thanks to Zillow and its kin.

In the book I try to describe some of the peculiar behaviors that
emerged as America’s faith in ever-rising home prices became so
palpable during the early 2000s. Going back generations, Americans have
/hoped/ their homes would be decent investments, gaining value slowly
over the decades in which we owned them. But living through the boom,
when prices seemed to rise nearly overnight, definitely skewed the
attitudes of a lot of us, and in the book I tried to capture some of
the ways this manifested itself. Just as in the 1990s a lot of us
became irrationally exuberant for tech stocks, in the early 2000s a lot
of us became irrationally exuberant for homes. HOUSE LUST seeks to
explain why.

Finally, I’d also point out that a lot of people tend to be pretty
optimistic, glass-half-full types when it comes to values in their own
neighborhoods. One of my favorite stats in the book is that as recently
as last summer, one survey showed that 55 percent of Americans
believed their homes were still gaining value—nearly two years after
nationwide home prices had peaked. My book isn’t really about
economics, but there’s a fair bit of economic research that suggests
that people tend to overestimate how much home values are really
gaining—particularly when you factor in interest expenses, maintenance
expenses, etc. One of the best sources of data on home prices is the
Case-Shiller index, now run by S&P, and I just checked its data. It
suggests that home values in San Francisco dropped for a good stretch
during the early 1990s, for about a year in ’01-’02, and peaked in May
2006. Despite that, I'm sure your house is still worth a lot more than
you paid for it, which leads you to be optimistic about values there.
But lot of the fallout we’re experiencing right now stems from the fact
that people came to have a little too much faith in this notion that
home prices would always go higher, even if the data suggests it ain’t
necessarily so.

Now, enough economics. Why don’t you stoke my House Lust by telling me
about the vacation home you’re building—and why it’s a good
investment?
  

    
I wish I could say it was a good investment.  We're building because
one of my kids uses a wheelchair to get around and enjoys the adapted
ski program at the resort near where we're building.  Taking him there
we learned there was no accessible place to stay and since we built
once before we thought we'd build a fully accessible cabin.  We built
as small as practical and as plain as we could to keep expenses down
and I jut got back from a weekend of working on wiring and installing
the wheelchair lift I found used on Ebay.  It will be a very nice
cabin, but any financial upside will be from sweat equity.

Which sort of brings me to a facet of house ownership that you talked
about, but maybe not as much as some of the other topics.  Do you think
that this perceived house wealth has resulted in people doing less
themselves than in the past?  Growing up, my dad and all of my friend's
dads did all of the fixit work.  Now there are pros who handle every
facet of upkeep.  Am I imagining this or has the hiring of people to do
work around the house become more mainstream?
  

    
Wow, Philippe, if you're doing your own wiring, I'm definitely
impressed. I think you're definitely onto something about our
generation being less handy than our parents'; I touch on this a bit in
the book. Fact is, many of us sit in front of computers typing much of
the day, so it's not a big surprise many of us are fairly  useless at
home repairs or improvements. Also, a lot of the stuff we put into our
homes has become a lot more complicated in the last generation. (That's
true in the automotive world, too: even people who know their way
around an engine often struggle to fix modern cars without diagnostic
computers and the like.) I'm surprised how many of my friends can't
figure out how to hook up a surround-sound stereo or new television
there are so many wires. I can do that, but I can't do the wiring
you're doing.

It sounds like you have great motivations for building your vacation
home, and a cold-eyed realism about the extent to which it will be an
investment. But let me counter your generational observation with
another one: when I was growing up, I didn't know anyone who had a
vacation home. Now many of my more affluent friends already own or are
in the market for one. In HOUSE LUST I talk about some of the things
that have driven increases in vacation homeownership (things like
discount airlines and work-anywhere technologies are key drivers). But
since you're actually building a vacation home, have you given much
thought to why this seems a much more common experience nowadays than
in the past? Is there something more here than the general rise in
affluence?
  

    

(Note: Offsite readers with comments or questions may have them added to
this conversation by emailing <inkwell@well.com> -- please be sure to put
"House Lust" in the subject line. Thanks!)
  

    
Hi Daniel, and thanks for coming to The Well for this discussion. I'm
about 10 pages away from finishing your book and have truly enjoyed it.
Your book really captures the different ways that house lust has
sunken its teeth in the American psyche, and I found myself feeling
rather sheepish when I ran across what seemed to be my very own
doppelgangers, like the folks who dream of fancy mudrooms and spa-like
bathrooms. I, for one, blame it all on Martha Stewart.

We live in Silicon Valley, and our area's full-bore house lust is just
barely beginning to cool off. While there's still way too many little
ranchers on the market for over $1M, and way too many silly people who
buy them, I've noticed that inventories are way up even in the
higher-end neighborhoods in the west valley, like Saratoga, as well as
in classier downtown areas like Willow Glen.

My question to you is, are you writing (or planning to write) about
the other side of the house lust phenomenon, i.e., the people who got
subprime loans, the people who designed and marketed subprime loans,
the people who have zero equity in their homes because they cashed out
on credit lines or have seen their house's value plummet?
  

    
I think your book really covers a lot of what has helped to make the
vacation homes possible.  The escalation in prices and the easier
access to that equity.  

Our parent's generation couldn't tap into that equity and to build
that vacation home, they would have had to get a land loan from a bank,
then have enough equity in the land to use it as collateral on a
construction loan.  Now solidly middle class people can just write
themselves a check instead of qualifying for what used to be tough
loans to get.  A lot of banks, even now won't do construction loans to
owner builders because the risk of the place never getting finished it
too high.  With that easy access to equity all of that dissapears.

The flip side of that, much like the people who got caught in the
subprime mess, are those properties for sale with a foundation in place
that are offered for less than the raw land would sell for.
  

    
Dan, I too am really enjoying your book.  My House Lust began years
before this most recent big real estate boom.  I've been a floor-plan
lover for years (I should have been an architect, but the math eludes
me).  I have made my husband turn the car around so I could grab the
information in the tube.  My children are only too aware of what we
call the "baby torture tours" when we would drive around prospective
neighborhoods looking for houses (when we were in the market and not). 


We live in an urban area with smallish, older, charming (and not)
homes.  And although I can't wait to turn my carport into a 3rd bedroom
for my daughter and laundry room for me, I still can't imagine more
than 2500 sq. ft, since I'm living in a mere 1250 now.  

I was really fascinated by the guy in NY living in under 200 sq. ft. 
I assume you met no one living in smaller quarters than that.  
  

    
Hello "a plague in cilantro." Thanks so much for reading HOUSE LUST.
First, you needn't feel particularly sheepish if you recognize parts of
yourself or your own behavior in my book. As I write in the
introduction, I have a fair bit of it myself. My family is currently
trying to find a way to do a mudroom on our house... and renovate the
basement... and redo the downstairs bath. So long as one doesn't get
carried away with these things, I'm not sure this is something to feel
guilty about.

Re Martha Stewart, I devote a chapter of the book to the rise of HGTV
and other home-related media, so I do think you're onto something
there. I think it's inevitable that after so many people have spent so
many hours watching other people do makeovers and renovations on TV,
watching them take imperfect houses and make them perfect, that a lot
of the us are more aware of the flaws in our own homes, and willing to
go to great lengths to fix them. I really do think HGTV is an
under-recognized driver of the housing boom (and of HOUSE LUST), so I
don't think you're far off when you blame Martha Stewart.

Regarding the sub-prime crisis, my book was already put to bed when it
broke out this summer. I was able to convince the publisher to let me
open it back up and make some very small adjustments to the
introduction and epilogue, reflecting the gravity of the crisis. But as
I make clear, this is not a book about housing finance. Since the fall
I have been writing very often about the sub-prime crisis in my column
at Newsweek.com, and I expect someone will do a book-length
post-mortem on the subprime collapse. But it won't be me. I'm more
interested in the consumer side of this, and looking at why so many
people borrowed so much for their homes, than I am in the evolution in
home finance.

I'd love to hear more about your house, how happy you are with it, and
whether you're worried about it losing value as the bust deepens.
Thanks for reading.. and writing.
  

    
Hi Lisa, and welcome. I, too, am fascinated by floorplans. (The NYT
Magazine runs a lot of them in advertisements, and I always find them
weirdly fascinating). I'm hoping there are a lot more people out there
like you who discover my book.

Regarding house size, I should come clean at the get-go: My name is
Dan, and I live in a house that measures 2472 square feet. So I am
/just/ under your 2500 threshold. I would add, though, that my square
footage is far from perfect. We rarely use the living room, while the
kitchen is way too small. The family room, in contrast, is too big.
I've always wished that we could do to our houses what plastic surgeons
increasingly are able to do to our bodies, taking some stuff (or
square footage) out of places we dont want it and injecting it or
moving it around to places that need it. I was particularly happy with
the way the book captures this idea that talking about homes in terms
of square footage is a relatively new concept, and it does capture one
interesting facet of House Lust.

And yes, the 170 s.f. New York apartment was the smallest I visited.
It reminded me of a really small, really bad single-person college dorm
room. On the flipside, I was also in a 29,000 s.f. suburban residents
(along with a lot of 9,000-10,000 sf. homes). Migrating between big and
small homes is a great way to get a sense of how much space we really
need, and of how we can justify needing more and more. (One argument
for more space that I actually find compelling: in modern society, our
relatives often live far away and tend to visit for extended periods,
which is why so many people feel they need a dedicated "guest room.")
So, Lisa, how big will your home be when you turn the carport into
living space?
  

    
A whopping 1600 sq. ft.  

My former business put us (my husband and me) in and near some of the
largest and grandest homes in Palm Beach.  There is a weird sort of
sub-culture in these wealthy communities.  It's the people that work
there - the butlers and maids and gardeners, the pool companies, the
maintenance companies.  All of us make nice livings working for the
very wealthy, and we get to see first hand, every day all the latest
and greatest gadgets and decorating ideas.  It's like being a looky loo
every day.  

On the flip side, though, it starts to get to you that you know what
is new and beautiful and good, but in a million years you could never
afford to live like that.  That's the down side of House Lust.  The
side that's bad for the soul.  

As for The NYT magazine section, I began reading it for the real
estate listings (and the crossword puzzle) while I was still a
teenager.  I didn't discover the articles until well after college.
  

    
Oh wow, the NYT magazine section... I was totally hooked on it in the
early 80's when I worked a block away from the American quasi-consulate
in Taipei. They had a great library and would toss out the NYT
regularly, right into my sweaty (literally) palms. That was one of the
beginnings of house lust for me, too, with their wonderful listings and
gorgeous articles on home design. And I have to admit that I've pored
over the floorplans in the NYT, sometimes printing them out and trying
to figure out how people in places like Brooklyn Heights can live in
four-story buildings with bathrooms on every other floor.

Thanks for the great answers, Daniel! I've been more of a Martha
magazine and book person than a devotee of her programs, and I've been
fascinated by how her taste has permeated right down through Target and
BB&B stores, as well as throughout her own K-mart products, of course.
As for HGTV, I don't get to watch that much teevee, so my lustings
tend to find their outlet in shelter magazines. However, I do remember
the first time I became aware of HGTV: it was when it was just a tiny
office in the Pacific Design Center in LA; I was ogling the bath
fixtures and Thai umbrellas in the shops down there and saw the HGTV
office. It was still a small operation then, and I wondered what it was
all about. About ten years later we finally got cable, and there it
was, a whole channel devoted to houses. Amazing.

We live in a rental that serves as an office/home for my husband and
me, as well as our daughter. We sold our home (we did the renovate and
sell thing a couple of times until a few years ago when it looked like
we should get out of Dodge) and love our rented home on the edge of
town. It's 2800 sf Mediterranean and about 30 years old, but over half
of it is work space for us. There's lots of windows, no cathedral
ceilings, good workmanship, just about the most perfect floor plan I've
ever seen in terms of flow and size, and a big yard. We just keep
hoping that the landlord will sell it to us someday in the future,
because we definitely couldn't buy it at present prices. Until then, we
just happily fork over the rent every month.

So, what will your next book be about? I'm ready to preorder...
  

    
Hi, Daniel!

I'm still in the process of enjoying your book.

For some background; my experience with mega-homes predates the era that
you cover in it, but it resonates for me:  I used to work at an
architectural firm that designed a lot of developments for Toll Brothers
and other developers, back in the 80s, up to and just shortly after the
stock market crash of 1987.

What amazed me, and most of the other designers, was just how BAD the
things we were designing were, and how the clients just kept coming back
for more just like the last development.  Mullions on the windows made of
tape!  All Dry-Vit, all the time!  All of this cheap cost-cutting schlock
was to afford a huge appearance from the outside and some spacious formal
spaces that rarely if ever got used.  And there's still a lot of that going
on.

It strikes me as just short of mad: to put your money in the grand foyer
and the upgraded kitchen, and take that money from the kinds of things that
make a house last more than the mortgage without some serious repair
costs.

But that, too probably came from the refinancing thinking, even back then.
  

    
Alan brings up a great point, which my husband and I don't understand.
Where's the architecture in these homes?  Why is it that huge and
unusable is what is marketed over manageable and sustainable and hip? 
Why isn't well-made valued as much as size?  

My small home was built in 1958.  We have the original roof.  It has
withstood 3 hurricanes in the past 3 years alone.  The original kitchen
cabinets do not stick and are in mint condition.  The terrazzo floors
are shinier today (thanks to diamond polishing) than they were back
then.  

The new homes west of town are not built to last in the original for
50 years or more.
  

    
Philippe--I think you're right on when you say that the advent of home
equity loans is really what fueled the vacation home frenzy. In one
chapter of HOUSE LUST, I ended up buying an investment property, sight
unseen over the Internet, in Idaho. (I'm in Boston.) While I used a
conventional loan, not a HELOC, it was almost scary how easy it was to
get financing for it. While I have a ton of sympathy for people who've
become overextended and are now suffering, I do think there's probably
some good in going back to a system where lenders did enough due
diligence to try to ensure that people taking out mortgages could
actually afford them.
  

    
Lisa--I'd love to hear a little bit more about the super-homes you saw
in Palm Beach. Could you actually have imagined living in them, even
if money were no object?
  

    
Cilantro--Your house sounds downright dreamy.... Re next book, I'm
still recovering, to a certain extent, from writing HOUSE LUST. I wrote
it in 15 months, and the housing bust was worsening the whole time I
wrote it, which made it a challenge in terms of tone. I'm very happy
with how it turned out, and most of the reviews have been quite
positive. So I'm definitely in a catch-my-breath mode before I think
about another book--but if you've got good ideas for one, I'm more than
open to suggestions!
  

    
Hi Alan. You definitely bring an insightful in-the-trenches
perspective to this. When I've visited with Toll Bros (I've been to
their HQ twice over the years) their architects are fairly unapologetic
for their designs. They're what the customers want, and who's to
argue? But your comments clearly reminded me of the time I spent with
Sarah Susanka while reporting the book; she definitely shares your
sentiments.

I live in 35-year-old Cape Cod home in Massachusetts. We did a big
renovation in 2004. My wife's one non-negotiable condition was that we
get windows with actual wood mullions. It added about $5K to the job
but I do think she made the right call. As I write in the book, I do
think a lot of the prevailing attitude stems from people's increasing
focus on square footage and cost-per-square foot. People building new
homes seem so focused on that number it's amazing that more corners
aren't cut to get the most space for the least money.

There have been tons of predictions over the years that American's
love for big, badly designed houses might change. Alan, what do you
think about this--will the subprime crisis and housing bust lead large
numbers of people to revise their sense of what makes makes a home
desirable? Or is square footage still going to take precedent over
refined architecture?
  

    

Give me architecture, please.

And as much square footage as will fit inside of it.
  

    <scribbled>
  

    
As I read about the monster houses in the book, I wondered how much of
the phenomenon is about house lust and how much is about a rampant
consumer culture that values flash and glitz over substance and longer
term value.

My nephew's 20 something peers all want to drive BMWs and other flashy
cars and wind up buying cars that barely run as long as they have good
paint and big rims.  Is it any wonder that the same societal traits
are reflected in our housing choices?
  

    
I think that the sub-prime crisis is just a blip in the trend to huge,
badly designed houses compared to a larger issue.  In nearly all of these
developments, you have to get in your car and drive if you need a quart of
milk or a pack of cigarettes.  The banking crisis will shake out in the
long run (I hope without too much trauma), but oil prices will continue to
rise in the overall trend.

And that brings up another issue, one that also amazed me:  Just to get
these big houses built on new land, they're cheek to jowel to each other,
but there's no neighborhood.  So you spend 1/4 of a million dollars on a
house and your only interaction with your neighbor is the teenaged kid next
door who practices his garage band on Friday night.  There's a playground
for your kids, but it's a mile and a half away.

I'm seeing an interesting trend in Philadelphia, in some neighborhoods like
Kensington.  Old, mixed use neighborhoods are seeing a lot of development
now.  These neighborhoods came before zoning, so things like corner stores
and bars and goofy things like bakeries and day-care centers are already
built into the neighborhood's fabric.  These neighborhoods also have the
advantage of being near mass transit.

Zoning laws are gradually changing to allow that kind of development; it
used to be illegal to do a development with a speck of retail in it.

But even in Kensington, these new townhouses are large.  Lacking width,
they go for high ceilings.  I'm sure they have granite kitchens or whatever
the current thing is on TV.
  

    
There are many houses in Palm Beach that might fit my style, but the
social contract of living in that town would do me in.  Without a
doubt, the architecture is real, the workmanship is flawless, the
up-to-date technologies abound.  It's the people and lifestyle that I
couldn't stomach.  

What is possible in Palm Beach is possible mostly because the homes
are cared for by professional service people.  So you can have a silver
box collection on display and never worry about polishing the silver,
or dusting underneath the boxes, because someone is there to do that
for you.  You can have 6 bathrooms, because someone else cleans them. 
You can have a specialty turf that doesn't really grow well in a windy,
salty environment (but it looks great) because someone else will keep
it looking perfect.
  

    <scribbled>
  

    
One thing we forget about the recent "subprime" collapse is how much
of an artificial stimulant it was for the American economy.  The last
seven years have been unprecedented for how easy it was for people to
share the dream (the lust) for homeownership.  This (along with
another artificial economic stimulant for the military-industrial
complex when we entered a dubious war in Iraq) sustained an American
economy that was cooling off after the dot.com/information age
explosion of wealth in the 1990's.  

It should have come as no surprise that people with poor credit and
none of their own investment in their own home would foreclose in
record numbers.  Other than creditworthiness, what was the real pain
of bolting when they got into their house with a 100% loan, rolled the
closing costs on top of the price of the home, agreed to an
interest-only A.R.M. that kept the monthly nut down? Of course they are
bolting (foreclosing) in record numbers when those locked rates adjust
upwards and they simply can't afford their monthly payments. And, it's
not as though these homeowners are walking away from equity.    

So, while the easy-money boom lasted, the economy chugged along on the
backs of all those developer-related dollars (builders/land
speculators/lumber/ plumbing suppliers/electrical
suppliers/mills/lenders/realtors, etc).  This went hand-in-hand with
the Halliburtons/Grummans/Boeings reaping obscene profits from an
obscene war.  

People do "lust" for a share of the American Dream of homeownership,
and will typically "invest" in the most home that the market will
allow them to acquire. I see this firsthand having been a Realtor for
the last 11 years.  

The question of the hour should be whether America has yet to feel the
full consequences of what we can view as George W. Bush's "war lusts"
and fiscal "adultery"?  How much will we continue to pay in the future
for his administration's economic "sins"?