Back in the mid-2000s, McMansions, or homes that were larger than 3,000 square feet, helped fuel the housing bubble as people started building bigger and better homes. Coupled with subprime mortgages, banks couldn’t keep up when people stopped paying their mortgages, and the market collapsed.
Now, according to Newsweek, the popularity of McMansions is surging once more, and the median price of McMansions is approaching what it once was in 2007
According to information put out by Zillow, the median McMansion price in the year 2000 was $330.5 thousand. That number climbed to $519.5 thousand before the collapse in 2007. Since then, home prices have rebounded to a median $482.3 thousand as of May 2017. Compare those figures to the median value of all other homes in the year 2000—$119.8 thousand—and the May 2017 figure of $199.2 thousand, which is at an all-time high.
McMansions have a contagious effect on neighborhoods, according to a report put out by Clement Bellet of the CEP, and which ultimately causes a snowball: once a McMansion moves into a neighborhood, it fuels more people to upgrade. The article estimates that there are 794,000 large homes that have been built in May.
“I further show that when bigger houses get built closer to smaller houses, house satisfaction is lower among the smaller households. The effect is concentrated in suburbs where size inequality is high but segregation is minimal due to geographical constraints on developable land. Thus the relative size effect depends on economic segregation within counties, defined by the distance separating superstar houses from houses below median size,” Bellet said.
Will the rise in popularity create another housing market crash? The data could be pointing toward that. If the Fed doesn’t slow down expansion by increasing interest rates, a collapse could be imminent.