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Second Home Madness (September 21, 2006) 
Consider this new vacation home in Smith Lake, Alabama, which was featured in the latest edition of the Costco Connection magazine. It has seven bedrooms. From Costco's point of view, this is a wonderful opportunity to fill a gigantic house with cheaply made furniture and "home entertainment" electronics from Costco. What can we divine from such a second home as this? 1) What is the difference between this "vacation/second" home and a primary residence? None. Gone, it seems, are the days when a second home on the lake meant a small, inexpensive cabin; now, it is a full-blown McMansion with 7 bedrooms and Lord only knows how many bathrooms (Five? Six? Eight?). 2) The housing bubble/boom is not limited to "hot spots" like Florida, San Francisco, Phoenix or Boston. Pundits claim that there is no national real estate market, but what does a 7-bedroom second home in Alabama say about real estate locally and nationally? It would be rather absurd to claim this kind of home is unique to Alabama. Perhaps the truth is the housing boom/bubble is national in scope, as evidenced by 7-bedroom second homes being built in supposedly non-bubble states like Alabama. 3) What might the carrying costs of this second home be? How much is the mortgage? What are the property taxes of such a large and obviously expensive home? How much will it cost to heat and cool such a vast interior expanse? A small cabin was inexpensive to maintain, and low in value; the same cannot be said of this monstrosity. A small cabin bespoke a modest getaway; a 7-bedroom manse communicates a pretension to opulence and prestige even away from home. 4) While this McMansion might be well-built with quality materials, it might also be a typical McMansion constructed largely of wood chips, glue, various veneers and drywall. Lest you think I exaggerate, go visit the construction site of a standard bloated McMansion like this: the subfloor, wall and roof sheathing are all OSB (oriented strandboard) or equivalent "engineered wood product"; the siding is vinyl (PVC), painted pressed-wood, or laminate (a thin veneer of real wood over wood chips and glue); the "hardwood" flooring is a veneer; the cabinetry is particle board with "hardwood" doors, the "stone" is either colored cement or glued-on veneer, and so on. This house of glue and wood chips is then finished off with granite counters and a few other ersatz "luxury touches" to provide a sheen of quality over the particle board and drywall. Might the ersatz nature of McMansions' actual quality be a metaphor for the "quality" of the entire housing boom/bubble? The "glue" which holds the entire shoddy structure together is cheap and easy money, and as long as that spigot flows freely, then 7-bedroom "vacation homes" will continue to be built (and filled with cheap imported furniture). But if--and it is a big if, for perhaps the Fed and the bond market can manage to keep money cheap and easy for decades to come--if the money spigot should ever close, then owners of 7-bedroom McMansions throughout the country may find their real estate wealth has the same durability of particle board left exposed to the weather. For more on this subject and a wide array of other topics, please visit my weblog. 
copyright © 2006 Charles Hugh Smith. All rights reserved in all media. I would be honored if you linked this wEssay to your site, or printed a copy for your own use.
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