Obesity in Housing – Gluttony Personified

Obesity in housing is just as detrimental as being overweight is hazardous to your health. Let’s be honest here. We are a gluttonous society with an insatiable desire to have more and indulge more without regard to the consequences. This is a selfish and arrogant philosophy of life that we have pursued with vigor for years with no letup in sight.

There is obesity in food, vehicles and housing to name a few. There is no point in discussing the obesity problem with food. You can see it each and every day as our bodies become wider and wider. The epidemic has now spread to China where the once-thin Chinese are becoming Americanized thanks to McDonalds, Burger King, Pizza Hut, Kentucky Fried Chicken et al. The Chinese are now facing obesity as well.

Obesity in HousingWe are now experiencing the negative effects of not only obesity in housing, but in the vehicles that we drive. You know what I am talking about: Hummers, Lincoln Navigators, Cadillac Escalades, GM’s Yukon Denalis, and Ford’s Excursions. You might as well be driving the Queen Mary down the highway. They both get about the same gas mileage.

The big three automakers in the U.S. are suffering financially because their gas-guzzlers are not as popular anymore since you have to mortgage your home to pay for a tank full of gas. The only two smart manufacturers are Toyota and Honda, who both are making a profit. They do not produce the oversized gas-guzzlers that the U.S. manufacturer’s produce.

Yes, there are still those people who will continue to buy Rolls Royces, Bentleys and Lamborghinis without any regard for gas mileage. This is an prime example of status symbol vs practicality.

Obesity in housing was presented on 60 Minutes a couple of times by Morley Safer. He interviewed one lady with her small pet living in a “monstrous” home. Morley asked her how many bedrooms and bathrooms were in the house and the lady had a difficult time answering that question because she could not remember. The answer was 5 bedrooms and 7 bathrooms. There are probably rooms in her house that she has not seen in months. This is truly gluttony personified. Had she had six children, I could understand, but she did not.

I always liked to see the news articles of the husband and wife, emptynesters, standing alone in their 12,000 square foot McMansion saying that they just could not live in a “small” 3,700 square foot home anymore. I remember several years ago when Richard Roberts, son of Oral Roberts, announced that same dilemma. They moved into a new home that had a master bedroom closet that was almost the size of most master bedrooms. A good example of obesity in housing.

I could give you other examples of obesity in housing, but my purpose is to educate you on the causes and effects of this gluttony in housing and to offer some practical solutions to the problem. G-R-E-E-D is the primary cause of obesity in housing.

Causes

Greed, not common sense, is the primary motivation for obesity in housing. We want to surpass the Jones’, not keep up with them. If someone builds a 3,000 or 4,000 square foot home, then the next guy wants one 5,000 square feet. Forget the fact that many of the rooms will never be occupied or used. It is a status symbol. You have seen this situation with regard to automobiles. It is very similar only on a much larger scale.

As a former structural engineer and retired builder, I can remember some years ago when developers and builders of office buildings competed with each other to see who could build the tallest building in the downtown area of a major city. However, 911 sort of tempered that competition.

The desire for the tallest office building was a result of greed, not practicality. Years ago it was referred to as a “phallic symbol” competition. The office space was rarely 100% occupied, but that did not matter.

Our greed and the resulting obesity in housing has had, and will continue to have unless abated soon, a detrimental effect on our society. Our gluttonous ways have resulted in additional burdens placed on our society for now and in the future. Let’s itemize the effects.

Effects

Foreclosure is probably the most significant effect and result of our gluttonous ways regarding the obesity in housing problem. This fact is proven by the recent survey conducted by RealtyTrac, an industry organization that maintains a nationwide database of foreclosures, that showed that the number of foreclosures during the period of January thru March of 2006 increased 72% over the same period last year.

How many of you have heard or read about people building these “McMansions” costing in excess of $1,000,000 and then later on were unable to resell them? There were over 323,000 foreclosures in the U.S. during the time period mentioned above. As the saying goes, “Only the lawyers win in this situation.”

Indianapolis leads the nation, with one out of every 69 homes in foreclosure. Atlanta is second with one in 70 homes. Dallas is third with one in 99. Memphis is next with one in 101. Denver is fifth with one in 105. These are astounding figures and it is not getting any better. Folks, we need to go on a “housing diet.”

Just as those restaurants that offer the all-you-can-eat buffets, I refer to them as the “horse-trough cuisines,” have enticed us to overindulge in less-than-quality food, lenders have contributed to the obesity in housing problem. Those adjustable-rate and interest-only loans have enticed us into overindulging in the size of a home that we can actually afford.

What many people fail to recognize is that those adjustable-rate loans are just that: ADJUSTABLE RATE. That means that during the term of the loan, the interest rate can increase substantially, thereby, increasing your monthly mortgage payment significantly. Some of these loans can increase a maximum of 2% per year up to a total maximum of 6% over the term of the loan. You do the math.

Don’t kid yourself into thinking that your adjustable-rate won’t go up. Foreclosure is a real possibility. You have purchased a large home, more than you can afford, based on a low interest rate and now that rate has gone up 2% per year. As we used to say, “the cheese is becoming a little more binding.” Once again, greed and gluttony have overshadowed practicality and resulted in foreclosure and obesity in housing.

How many of you succumbed to the interest-only loan? How long did you think that would last? Yes, those loans are enticing because you could purchase a larger home than you could really afford. The surprise comes in either the second or third year. Your new mortgage payment becomes an albatross that is difficult to deal with. Word of advice: AVOID THESE TYPES OF LOANS.

Homebuyers fail to realize that it is not the monthly payment that you worry about, it is the total cost of owning the house. A banker friend of mine told me the story of a small builder in the Atlanta area who built nice houses in the $200,000 range. He was having a difficult time marketing them based on the price. He changed his strategy and began selling them based on the low monthly payment. He sold all of the houses and now builds 160 – 200 houses per year on that basis. He can’t build them fast enough to meet the demand.

One of the most significant effects from the obesity in housing problem that many are ignoring is the taxing effect on our natural resources, like water. I have mentioned in another webpage that there is a subdivision here in the Atlanta area that built so many homes that the homeowners were without water. They overtaxed the water supply.

Likewise, there is not an endless supply of gas and electricity. Ask New Yorkers about “blackouts.” Until developers allow windmills on each lot, there will be a problem with sufficient electricity.

However, water supply and waste disposal will be our downfall if we don’t get serious about our gluttonous and wasteful ways. How many times are you going to use your 7 bathrooms when there are only 2 people occupying the house. I know, when you entertain the masses.

We need to do more research on “recycling water” for our homes to ensure an adequate supply for the future. The reservoirs are drying up from demand and the drought. Water supply will be a significant concern as a result of obesity in housing.

Finally, the South is becoming more populated as people move from the North. In the Atlanta area, people from New York, New Jersey, and California moved here anticipating purchasing a $1,000,000 McMansion for only $500,000. Little did they realize that the quality of construction is not comparable to that in their previous location.

For over 10 years, I was a Senior Structural Estimator for a large insurance company handling major losses over $50,000. You would not believe how some houses are being built. When homeowners filed insurance claims, they realized that they were living in “high-dollar trash” homes with major physical problems. These buyers wanted large homes, but not with all of the problems. This is another effect of the obesity in housing problem that, potentially, could result in foreclosure.

Homeowners have been buying homes way beyond their means because they haven’t considered what the house costs. Everytime a problem occurs with a McMansion, the cost to fix it is greater than that of a smaller home. This is one area where homeowners get into trouble when they only consider the monthly mortgage payment. That along with an adjustable-rate mortgage can cause some serious problems that ultimately could cost them their pride and joy.

To put it into perspective. If you choose to buy a gluttonous vehicle like a Hummer instead of a Honda Accord, when it comes time to replace those monstrous tires, you will be taking out a loan to purchase them. The cost is at least double that of the tires on a Honda Accord. I know, the monthly payment on the Hummer is barely within your budget. Wait until you have major problems with the mechanical systems of your Hummer vs the Honda Accord. This is all a part of the total overall cost of owning this vehicle. Some of you forget to allow for it.

Remember this expression “Moderation in all things.” It applies to the size of your home as well. Avoid the obesity in housing problem by realistically determining the size home that youNEED, not want, based on the size of your family and what you expect to do in your home. Which would you rather be: Owner of a McMansion that you cannot afford and potentially, going broke or an owner of a moderate-sized home with functional rooms and discretionary funds available to do other things like furnish your home and entertain yourselves?

Now, let me give you some solutions to the obesity in housing dilemma that will eliminate some of the stress in your life.

Solutions

Now I know that some of you are saying that you have the right to gorge yourselves in anything that you want. Yes, but remember that someday you will have to “pay the piper.” (Day of Reckoning).

Select the size of your home based on family requirements.What is the total cost, including financing, of my new home? Will the monthly mortgage payment, including taxes and insurance, fit within my budget?

Consider the functionality of your home. Eliminate the useless rooms. Design your house to incorporate your needs and reasonable wants. Avoid the “status symbol” approach to your design.

Consider reducing the strain on natural resources. Conserve water and energy. Avoid excessive use of building materials. Future home building will have to rely on new construction materials that are more efficient, readily available and less costly.

Adopt the downsizing philosophy of the active adults and their lifestyles. This segment of the market is the largest segment of the population and growing while overshadowing the younger generation. Smaller and functional is better.

Rethink your investing objectives to achieve greater and more rewarding results. Use your income wisely and frugally. Prepare for the future financial needs by reallocating your funds.

Obesity in housing is a worldwide problem that is not going away anytime soon. You can lose your entire future by being a glutton. It is not too late to rethink your philosophy and change it for the better.

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