The housing bubble is back, baby! At least for the rich, anyway -- another sign of how Fed policies have most directly helped the wealthy by pumping up markets.
Those garish McMansions that were a feature of the pre-pop housing bubble, the KFC Famous Bowl of residences, are back, and bigger than ever, the Wall Street Journal noted on Tuesday. New homes averaged 2,642 square feet in size in the second quarter, according to the Census Bureau, topping a record of 2,561 square feet in the first quarter of 2009. New-home prices, meanwhile, set record highs this Spring.
But these houses are not for the huddled masses of low-income or first-time buyers. Banks won't touch those suckers with a ten-foot swimming-pool skimmer any more, the WSJ notes. (And who can blame them? It was the Poors, not the banks, that caused the financial crisis, after all, according to former Treasury Secretary Hank Paulson.)
Interest rates have until recently been at record lows, thanks to the Fed buying up billions of dollars' worth of mortgage bonds, ostensibly to help boost the housing market for all. But banks' reluctance to lend means the market for new homes has been left mostly to the wealthy, who of course desperately need gigantic houses.
Naturally, the very biggest McMansions are reserved for the wealthiest of the wealthy: Wall Street bankers (who, you will recall, had absolutely nothing to do with causing the financial crisis). The New York Times reports that the business of building massive, cookie-cutter mansions in the Hamptons for wealthy bankers is stronger than ever.
The biggest local builder of these domiciles, Farrell Building, has 20 new projects going right now and plans for many more. The company's proprietor, Joe Farrell, himself has a 17,000 square-foot home, with bowling lanes and its own ATM, which he has rented to Jay-Z and Beyonce.
"We're as busy as we've ever been," Farrell told the NYT. His biggest projects are not quite as pricey as at the height of the bubble, when some houses went for $20 million. But he's making up for the lower prices with volume, building more homes in the modest $3 million to $10 million range, according to the NYT.
For somebody described as "a local version of Donald Trump, without the history of debt, the lush hair or the insults," Farrell, a former commodities trader, showed a surprising amount of self-awareness. He pointed out that the only reason these Wall Street bankers have so much money to burn is because the Fed has been pumping cash into markets.
"The stock market's flying through the roof and who's that helping, the middle class? No, I mean that's the reality," he told the NYT.
But this housing-bubble comeback might cool for a while. Partly in an effort to pop speculative bubbles, the Fed has announced its own plans to pull back on stimulus, starting next month. That has rattled global financial markets, causing interest rates to jump and putting the stock market on pace for its worst month since May 2012.
Of course, a financial crisis only temporarily iced the market for McMansions, so it may just be that the wealthy have to settle for three-car garages for a bit.