Temper Dream Houses with Sense
By Dennis Goodenough

Wisconsin State Journal
July 31, 1994

It probably comes as no surprise to anyone that the cost of new housing in Dane County has gone up in the last year.  As a result, house hunters are shuffling about new developments with the "sticker shock" blazed across their faces.  Wouldn't it be swell if we could blame price increases on one group of people, like builders or brokers, and then take them out and pillar the heck out of them?  Why should be so simple.

I have done some thinking about the problems in the house buying in the 90’s and the following is my take on the current feeding frenzy.

For openers, when demand goes up, so do prices, and product quality usually goes down.  No surprise here.  You can't blame builders forgetting all the traffic will bear.  I can hear it now, "lynch the builders!"  Not so fast, there’s a lot more to it.

At the risk of being unpopular, I'll point the finger at home buyers and say that they have to accept some responsibility for driving up the cost of housing.  They haven't always been the shrewdest shoppers and in some ways, they're getting the housing market they deserve.  The industry isn't going to hold down prices, as long as there is a clamor for ever larger homes with more amenities.  My colleagues lament, "you've got to give the customers what they want."  True, and in doing so, the size and amenities of a single-family dwelling have steadily increased over the past 25 years, despite a decline in family size.  Has anyone ever considered the fact that a bigger, fancier housing just might not be better, but it sure costs more money?

Many times I have sat with prospective clients who are pursuing a dream home that will drive them into chapter 11.  Often I can suggest compromises in floor area or amenities that will yield a big cost savings while having minimal impact on life style.  The response is always the same.  "We don't care if we go broke, as long as we think were enjoying the experience.  Thank you very much, will look around until someone will tell us what we want to hear, rather than what we need to know."  What they usually want to hear is this, "I will gladly build you a $140,000 house and it will only cost $110,000."  Could their expectation be too high?  Are "wants" larger than "wallets?"

I would suggest taking a new tack.  Instead of maxing out in the pursuit of house happiness, why not adopt a policy of "form follows function?"  Maybe buyers should list their housing needs, set priorities and then be willing to make trade-offs.  For most of us, priority number one will be affordability.  After all, the dream House has yet to be built that will keep a family functioning well when the mortgage puts them in the financial danger zone.

I raved on enough about the house buyers’ contribution to high prices.  Of course there are any number of causes; most of them we don't have a lot of control over.  As an example: lumber prices have doubled in the past year.  Why?  With chilling regularity, trees are disappearing from the planet.  The US consumes more wood than any other nation on earth.  90% of the Pacific old-growth forests are gone, with lumber companies salivating for the remaining 10%.  Is it any wonder lumber prices are volatile?

Here is something else to consider.  The population of Dane County will soar in the next 10 years, making it the fastest growing county in the state.  Finding a building site isn't going to get any easier, and like lumber, it's not going to be any cheaper.

As unsettling as it is, it's not too difficult to see why the real buying power of the American worker is declining and home costs are drifting toward the stratosphere.  Increasing population and decreasing resources mean stuff just plain costs more.  We should feel alone; it's a worldwide dilemma.

Given our circumstances, you would think the building industry and to the nation for that matter, would move toward sustainability as fast as possible.  By doing so, I think we would have the best shot at stretching our resources and mitigating environmental and economic erosion.

I know there are economists who would have us believe that growth can continue on for ever.  It's a nice thought.  But let's not forget that economics is not an exact science.  The real world operates according to the laws of biosphere dynamics, a forced economists know little about and really consider when making their predictions.  The facts remain, resources are limited, the planet is only so big and a whole team of noble economists can't change that.

But I don't think we should all get suicidal about it.  I do think it's time to be more judicious about how we spend our housing dollars.  In the meantime, who knows, we might just be surprised to find that our quality of life will improve as our appetite for the "dream House" declines.