Conspicuous Consumption: Why Large Homes Actually Do Impress The Neighbors
Conspicuous consumption is a term used to describe the behavior of displaying one’s wealth for the purpose of projecting one’s social status. In short, it’s keeping up with the Joneses.
It seems logical to think that less people would be worried about keeping up with the Joneses in a post-recession economy, but some experts are saying that just the opposite is true. People actually have more incentive to display status, now that there is seemingly less opportunity to build wealth. This means that people want even more to show that they’re not effected by the economic collapse, but they want to do it in a way that doesn’t seem overt.
“It’s en vogue to spend money,” says Sherif Mityas, a retail expert at A.T. Kearney. “[People] don’t need to hide their luxury anymore.”
So what does this mean, aside from the fact that high-rise architects and 2-story home builders in Perth are more in demand than ever? Real estate has always been a classic indicator of social status. A large or well-kept home is like the real estate equivalent of a Gucci handbag: Everyone knows that you only have it if you can afford it, which sends a message to the world that you aren’t struggling, that you’re different from the rest. You enjoy a higher social “rank” than those around you.
Having a large home in a post-recession economy is a way of showing that you’re not easily effected by the downturn. Like an old oak tree in a tornado, you’re demonstrating the fact that you were strong enough to survive.
There are drawbacks, however, to flaunting too much of your wealth. Many people are still struggling, and gauche displays of riches can trigger jealousy and resentment from those less fortunate. You’ll be judged even as you’re envied, and that’s no way to establish good ties in your community. The trick is moderation – a home that’s large but not too large, or a home that’s moderately impressive but immaculately kept, signaling that you have the money and leisure time to keep your affairs well in order.
The other drawback is the tendency many people have to rely too much on large bank loans to maintain their social status. They become ‘house poor’ despite living in a large house. In essence, people are returning to the very behavior that led to the housing bubble of recent years. This means banks will have to continue to do a better job of managing home loans in order to prevent loan defaults.
According to Erika Maschmeyer, a stock analyst in Chicago, this trend of conspicuous consumption will hold as long as the economy does.
“We’re far enough away from the disaster of 2008,” she says. “We’re back to normal.”
We certainly hope she’s right.