Mini-Mansion Mania!

Mini-Mansion Mania!

When Toll Brothers, America's leading luxury home builder, reported earnings after the bell on Monday afternoon, CEO Douglas Yearley called the US housing market "the strongest I have seen in my 30 years at [the company]." Yearley elaborated, but anyone who's been paying attention could have written the press release. The de-urbanization trend catalyzed by the pandemic, along with a durable shift to work-from-home arrangements and record-low mortgage rates, have created a new housing bubble. I
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3 thoughts on “Mini-Mansion Mania!

  1. Awesome article.

    When I read about the burgeoning suburbs, and hollowed-out urban cores, and so on and etc., here, and on other outlets, I’m reminded of what the experience was like for ex-urban and suburban living in the decades post WWII. Many books and dissertations have been crafted about how, well, how, hollow the suburbs are, alienating, and so on. The tally on ex-urb and suburban living in America contains a checkered tally of negatives and positives.

    If suburbs do continue their explosion, there will be additional, knock-on effects. Two, perhaps, are wages and urban-center rents.

    An effect we haven’t seen yet is what happens when 80% (just spitballing) who can work from home do. Employers may very well lower the wage level. If we do somehow get into a period of inflationary pressures (maybe, maybe not), forget regaining that purchasing power after taking the pay cut. Worker income, this time for the professional class, fails to grow.

    We haven’t heard much about how many real estate bankruptcies there will be for space in the urban cores. We may start seeing more of these in Q1. Let’s say bankruptcy re-org lowers obligations. Let’s say rents crater. We know what follows on…lower start-up costs (if you can find the capital), re-discovery by hipsters, and an opportunity for the young in small towns, towns they consider dreary and dead, who can now afford a 700 sq ft apartment in the city.

    There are also the difficult to measure reasons for why urban centers have been so successful for so long (barring the highway building period and “reclamation” project post WWII). Good luck finding a mate while in line at at the McDonalds drive through. Good luck landing that cool machine learning job while in the same drive-thru line.

    The generational hollowing out of the urban centers is too early to call. Let’s see where the trends and data go. Let’s check back on the death of the city when this plague is behind us.

  2. I have lived in NYC on and off since the early 80s. It has experienced at least 3 downturns since then. Post crash of 1987, post 9/11, and now pandemic of 2020. It will be several years before it bounces back. But it will- once there is a reasonable treatment and vaccine for covid- that is probably 2021-22, you will see the post graduates come back. It has too much to offer for singles both young and old. Lets face it you are not going to a Yankee game or the NY Philharmonic or a cool bar or restaurant in most suburban NY areas. And you don’t have to drive everywhere. Things will be bleak for a few years- but the cure will be relative costs in the suburbs vs NYC and relative benefits. Right now the suburbs have the edge- but pretty soon the bloom will go off the rose re. WFH and being isolated at home. These preferences wax and wane- you will see it in 5 years or less.

  3. I don’t see a future where most professionals work from home. The only reason it sort of works now is because the necessary human relationships were established in person before the virus. I remember back in the 90’s when we tried to cut travel costs and do videoconferencing. The tech standards weren’t what they are today, but it was nearly impossible to get something done when you’d never met in person those on the other end. I found it very helpful to break bread with someone I was going to work with as a colleague or supplier. Humans are programmed to develop relationships in person. Companies may keep some flexible work-from-home relationships, but they will bring lots of people back into the office when it’s safe to do so.

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