Big Houses Up for Sale

[wolverine]

My hometown economy is obviously very reliant on the automotive industry. Many of the homes, or shall I say, McMansions dotted across the outskirts of the city are home to GM employees who work higher up in management.

My father also works for GM and is pretty high up within the company, and now his position within GM is possibly in jeopardy. But he saw disaster coming and worked to get his PhD, giving him the experience and knowledge necessary to go somewhere else in case his job was pulled out from under him, or perhaps guarantee him more permanent status within th ecompany. This isn't the case for many people though. A lot of employees are very worried, and it seems many of the big houses they live in are starting to go up for sale. I have a lot of friends at my university whose parents are set to lose their jobs or have already lost them. Fortunately many of them have found other work, but we've all had to make serious cutbacks. For many that has been selling the big brand new house.

So, what do you think is going to happen? Could this be the end of the McMansion era in Michigan?

[monsoon]

While I am not that familiar with the area, I don't think GM is going to disappear either. They will still continue to exist as a fairly significant global company once their blood letting is done and that means some well paid management and others will still exist.

I do think the extremely low interest rates, historically speaking, have caused the proliferation of McMansions because the rates have allowed people to make bad decisions on their housing. It's going to end regardless of what happens at GM.

[Jin Kim]

It's going to end regardless of what happens at GM.

Both the new and existing home sales dropped in past November (new home sale drop being 12 year high). There are also anecdotal evidence in the increases in the rental market in the later half of 2005. So, yes, there appears to be general cooling of the housing market.

http://www.cbsnews.com/stories/2005/12/29/...in1169146.shtml

http://www.msnbc.msn.com/id/10585961/

It is probably true, though, that GM's (among others) woos will have an accelerating impact in this region on home sales and even home ownership as some may be sitting on homes that they no longer can afford - if anything because the scale of negative ecomic impact will be so large.

While I don't expect mass foreclosures, there are some rougher roads ahead in this region compared to the rest of the country.

However, my guess is that as there has been increasingly uneven distribution of wealth as of late (rich getting richer while poor getting poorer) there will also be unevenness in who'll be most greatly impacted by the economic downturn.

First, all the indications are that the white colar (particularly in upper management) workers will be largely spared, though they probably didn't get the kind of year end bonus or raises they may have in the past. These are also more highly educated section of the workforce who have a better chance at finding other jobs.

Secondly, from what understand, while we had a great economic growth in 2005, the median income has declined for 4th year in a row. That means that the top 20% of Americans (those who could afford one of those McMansions) have had their wealth increase faster than what some econimists have called a "banner growth" in the GDP.

Thirdly, if the deflation in housing market does come, it just means that price of those McMansion will adjust to match the demand. In this area, I doubt that the demand for them will decrease. Virtually everyone buys the maximum (read size wise) home that they can afford.

[edit]

Oh also, there's a general concensus that the bottom of the housing market is about to drop (though not catestophically like the Internet boom of the late 90's) with ever increasing interest rates. So there's some houses being put on market as a last minute sell off in hopes that they can catch the tail end of the boom. It's rather typical.