Why That McMansion May Yet Rival The Edsel As A Bad Idea

Calculated Risk, if you don't read it already, never fails to inform with its pithy style.

This offering  courtesy of CR.

He states the obvious, which went unsaid for the past almost forty years:  A house is something you buy to live in, raise and enjoy the family in, and with a bit of good fortune, you get your inflation-adjusted money out of it, or maybe even make a few bucks.

To quote Elmer Fudd, that wisest of pundits: 'EbydyEbydyEbydy--That's All, Folks!'

And that is as it should be.  There are no free lunches.

The realtors and the bankers and the politicians made out like bandits selling the idea of 'home as investment vehicle' or 'home as ATM machine'. 

Shouldn't capital be directed toward enterprise?  You know, activities that make stuff that people need or want(once basic needs are fulfilled).  We've all tied up our family capital in these lovely things that don't produce anything of value for our fellow man.  Sort of like 'investing' in Beanie Baby or Barbie Doll collections.  It happens!

But if the politicians punish enterprise, and encourage borrowing to buy big houses, where's the money gonna flow?  Especially if you guarantee those borrowings with the Treasury?

In 1969, my folks bought a small three-bedroom brick ranch, built in 1955 for $29,000(with some real trepidation).  They borrowed part of the down payment from one of my father's sisters. House payment of $129, raised two boys and lived life.  Long story short--it's unsaleable any time soon, and is now a rental.  At the height of the bubble in '05-'06, it would have been a 'tear-down' for a McMansion, the lot alone worth 250K.


I was the unheeded younger son, quietly raising my hand and saying, 'Maybe now is the time to cash out, and live with your friends at (fill in the blank) Assisted Living Village?  You are in your eighties, and Dad's health is failing.

'No, no, no, no, they replied. No need for that.'

 Dad dies, Mom now lives in a tiny assisted living apartment, and the McMansions down the street aren't selling...haven't checked to see if the 'For Rent' signs have blossomed there yet.


Jim the Realtor, up close and personal.