Lessons from across the Pond

Often our blog is a one way communication but today is different. Today is simply a question – what is the home of the near future? Over the past several decades America has moved from simple flats to small suburban homes to McMansions and then a crash. Taking the long view, we must ask ourselves what is the ordinary home in America’s future.

To help us with this question, we can look at other countries and how they have evolved. While our situation is different, we can get some good ideas from beyond our borders.

There are a number of lessons from Japan, but that model may not be applicable. Japanese systems of finance, land use and intrinsic value are vastly different from the US. A better model may be Europe where the culture is more similar to ours. Given this huge assumption, I will venture some thoughts:

• European cities developed different land use patterns due to transportation. Although autos and open spaces beckoned, most people remained close to the cities and used public transportation. As such, they became more immersed in the urban culture with ‘living areas’ other than their homes.
• Europeans never drank the Kool-Aid of 30 year mortgages with tax advantaged interest, so there was no artificial stimulation of home investment. Instead, home investments were weighed against all other spending and investment decisions and optimized in that context. This resulted in smaller, more durable dwellings which delivered greater value over the life cycle. In fact, many European homes seem to have almost endless life cycles due to refurbishments and upgrades (as opposed to replacement).
• Lastly, US land investment may also have been skewed by the above factors. Expansive subdivisions with relatively large lots make sense only if they can be easily financed. Otherwise, the investment in roads, water lines, sewer systems, power distribution and communication distribution appears excessive. Case in point -- the available subdivisions throughout the nation which have been stranded by the recent downturn.

So what will homes in the US look like going forward? Maybe that is the subject of another blog. I’m thirsty and need some Kool-Aid.