Under-building of new homes, high construction cost perpetuate housing shortage
1–10 of 72 posts
Re: Under-building of new homes, high construction cost perpetuate housing shortage
#2No, the #1 reason it's so hard to find an affordable home is that potential buyers can get huge loans at very low rates. Since buyers compete with each other, prices go up.
I guarantee that if interest rates were allowed to creep up, and the government stopped guaranteeing loans made by the banks, we'd have cheaper homes almost immediately.
Re: Under-building of new homes, high construction cost perpetuate housing shortage
#3Tldr: new homes cost too much due to labor. And building affordable housing doesn't make sense when the costs to build a larger, luxury home are not radically more, but the profits are.
I wish they'd talked about the problem in a more systemic manner.
They didn't address:
* Commuting
* Land prices
* Price to rent ratios
* Density
* Economic opportunity where housing is cheaper
Re: Under-building of new homes, high construction cost perpetuate housing shortage
#4We would love to build more affordable starter homes, but when high-end homes cost the same to build and are far more profitable, we lose the incentive to build smaller units
This is a major reason why prices are so out of control. Land prices aside, there is no reason somebody couldn't build a nice ~1000sqf house for under $100k. But without literally doing the work yourself, these places just don't get built.
Re: Under-building of new homes, high construction cost perpetuate housing shortage
#5No, the #1 reason it's so hard to find an affordable home is that potential buyers can get huge loans at very low rates. Since buyers compete with each other, prices go up. I guarantee that if interest rates were allowed to creep up, and the government stopped guaranteeing loans made by the banks, we'd have cheaper homes almost immediately.
Agreed. There'd be some howling from the mortgage and real estate industries though.
I have often thought that the mortgage interest deduction is actually a subsidy to banks (because if you pay cash you get no deduction) and existing homeowners (because it supports existing prices).
Re: Under-building of new homes, high construction cost perpetuate housing shortage
#6No, the #1 reason it's so hard to find an affordable home is that potential buyers can get huge loans at very low rates. Since buyers compete with each other, prices go up. I guarantee that if interest rates were allowed to creep up, and the government stopped guaranteeing loans made by the banks, we'd have cheaper homes almost immediately.
Cheaper house, sure, but does that also mean less monthly payments? Or would i still pay the same monthly, but most would go to interest.
Alternatively in the bay area there are a lot of wealthy people. I dont know how it would affect them
Re: Under-building of new homes, high construction cost perpetuate housing shortage
#7I hear an argument a lot, "housing in the Bay Area is expensive because because labor cost is so high." According to this report in San Francisco it costs $269,000 to build a new housing unit. With the median home sale price over $1,000,000 it seems fair to say that the labor component isn't the primary driver of the high costs, it's probably related to the inability to legalize enough housing.
Re: Under-building of new homes, high construction cost perpetuate housing shortage
#8"We would love to build more affordable starter homes, but when high-end homes cost the same to build and are far more profitable, we lose the incentive to build smaller units,” said Isaac Stocks of Azure Northwest Homes, a Seattle-area home builder.
That sums it up.
Plus, more expensive homes means more property tax revenue, so there's little incentive for state/local gov to encourage lower end housing.
Finally, it would help to know about financing. How willing are banks to issue loans at the lower end?
The whole system is "tuned" for larger more expensive houses. It works for those it works for, and doesn't for those with little to none socio-political clout.
Re: Under-building of new homes, high construction cost perpetuate housing shortage
#9I hear an argument a lot, "housing in the Bay Area is expensive because because labor cost is so high." According to this report in San Francisco it costs $269,000 to build a new housing unit. With the median home sale price over $1,000,000 it seems fair to say that the labor component isn't the primary driver of the high costs, it's probably related to the inability to legalize enough housing.
Labor is definitely not the main driver.
Often quoted construction price is about 300$/sqft around where i live. If you were to build new, you would spend 750k-850k. Now, you cant buy land for less than 1.8 in mountain view that can hold 2500sqft home. And sale price would be close to 3m anyways.
Re: Under-building of new homes, high construction cost perpetuate housing shortage
#10"We would love to build more affordable starter homes, but when high-end homes cost the same to build and are far more profitable, we lose the incentive to build smaller units,” said Isaac Stocks of Azure Northwest Homes, a Seattle-area home builder. That sums it up. Plus, more expensive homes means more property tax revenue, so there's little incentive for state/local gov to encourage lower end housing. Finally, it…
This is one reason why the per-square-foot cost metric is lousy. Making a house bigger with the same quality level reduces the square-foot cost substantially. This is because the cost of walls goes up linearly while the square footage goes up as the square (!), and most of the cost is in the walls.