From McMansions to Ghost Towns?

There has been much attention drawn lately to the fact that many homeowners are opting to downsize, and new buyers are choosing smaller homes. According to several recent articles, gone are the days of the so called “McMansion.” Unfortunately this creates a problem in certain areas where many of these properties were built in the housing boom of the early 2000s.

If the trend is to steer away from these types of homes, what will become of them and their neighborhoods? Could we see a surge in vacant homes in these neighborhoods, bringing back the proverbial ghost town? Some neighborhoods are already partial ghost towns–those that were never completed due to the housing market downturn. Let’s take a look at what could happen if there were less of a demand for big homes:

Substantial price reductions. This could effect neighborhoods by bringing down property values. Furthermore, if these big homes are not attractive to buyers it could lead to …

Vacant homes. Vacant homes in a neighborhood obviously are not appealing , and if they do not sell it may lead to…

More foreclosures. If these homes do not sell, or if subsequent homeowners in these neighborhoods decide they want to move (and are unable to sell their homes), they may not have many options other than to foreclose. If the banks cannot sell them it could lead to…

Neighborhood deterioration. At some point, no matter how low the home prices may drop in our fictional neighborhood, they still may not sell. Even if a large home is reduced to the same price as desirable smaller homes, there is still a hefty maintenance cost in purchasing these large homes (more landscaping, higher utility bills, etc.). If buyers felt they were getting a huge discount they would still have to take this into consideration.

So what are the options?

1. Help from builders. This would be an opportunity for builders to come in and buy the land for cheap, then build more smaller energy efficient homes. But the cost of doing so would be very high, as the current neighborhood would have to be dismantled. Disposal of so much building material is not environmentally advantageous.

2.  Multiple family dwellings. The large homes could be subject to minor changes and marketed as multiple family dwellings.  This might appeal to people and help to keep maintenance costs down by sharing the fees.

3.  Tax reductions. Current homeowners in these homes could be given property tax breaks based on the new value of their homes. This quite possibly might allow them to stay in the home. Maybe a special tax deduction could apply to multiple family dwellings as well-just an idea.

4.  Loan modification assistance. This could possibly assist some big home owners to stay rather than move.

5.  Bill reduction incentives. Maybe there could be incentives given or city assistance provided to those homeowners who follow steps to reduce their bills. For example, installing drought-resistant landscaping to cut back the water bill, using solar energy to heat the home.

There are likely many other options to be explored. What do you think? Is the ghost town scenario possible, or far-fetched? I am not the first one to consider it so I think it is something to be discussed. I welcome your ideas.

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