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American’s like everything big. Not a surprise to hear that our homes are getting bigger as incomes and appetites rise. Homebuilders are building the homes bigger, and in some communities of 1950’s ranch homes, the original homes are being torn down and larger homes are being put in their place.

CBS’s 60 Minutes take one side of this equation, that Americans are garish and just want bigger and better. They may be right.

The “Hampton” is Toll’s best selling model. How does it compare in square footage with his best selling model of five or six years ago? “Well, five or six years ago the best selling model had about 3,200 feet in it,” Toll says. “And the standard model of this has, I believe, about 4,600 feet.”

Fueling this market for larger homes, Toll says, is the fact that the number of families with an income above $100,000 a year has grown six times faster than the overall U.S. population.

A family of 3.6 people is a typical customer for the Hampton model, which has five bedrooms, five bathrooms, kitchen, a dining room, living room, family room, study, conservatory and a nameless room, simply called a bonus. via CBS 60 Minutes

I however, think something else may be afoot. Housing prices have risen in parts of the country astronomically while construction prices are not rising as quickly. So you own a home that costs 75,000 to build. The quaint Cape Cod built in 1947. The home has done a great service. But the land underneath it that sold for 3,200 dollars in 1947 now sells for 700,000 dollars.

The rule of thumb I heard growing up was that the land should be 1/3 to 1/4 the cost of the housing that was on it. If that is the case, the marketplace has no room for the Cape Cod sitting on this property. Even if the person replaced the smaller home with a “McMansion”, the property will still be higher than the homes worth.

So as you are looking at tear downs and larger homes replacing the older homes in your neighborhood, celebrate. It is just a sign that the marketplace is working.

Hat Tip to The Bubblemeter

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2. Toll Brothers See New Homes Sales Slow Down
3. Washington DC Experiencing Correction Not Crash
4. Atlanta McMansion Tear Down Moratorium
5. KB Homes Shifts Strategy and Starts Building Smaller Homes