Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Under-building of new homes, high construction cost perpetuate housing shortage

redfin.com

Post reply on HN
Print view View original

11–20 of 72 posts

Re: Under-building of new homes, high construction cost perpetuate housing shortage

#11

Post by tehlike »

chiefalchemist wrote: post #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…

I am not sure if banks care about lower loan balance vs high. Sure, high is more lucrative, but there are a number of government-backed loan programs that could make up for it.

As for cities, yes. They like the house pricing go up. It helps with school budgets, particularly. Then it goes into positive feedback loop with better schools raising house prices, too.

For cities like seattle, it's not hard to see houses in different price bands (single tech earner, couple tech earner) and so on. Hard to find a solution, unless the big employers diversify their locations.

Re: Under-building of new homes, high construction cost perpetuate housing shortage

#12

Post by thriftwy »

pxeboot wrote: post #4

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 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.

Can't you contract the building part if you have a suitable piece of land?

Re: Under-building of new homes, high construction cost perpetuate housing shortage

#13

Post by tehlike »

WalterBright wrote: post #10
chiefalchemist wrote: post #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…

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.

Construction price, yes, but i think it kind of scales semi-linearly with the sale price. When average sqft price is 1000$, a 2500sqft house goes for 2.5M even though construction was much much smaller.

Re: Under-building of new homes, high construction cost perpetuate housing shortage

#14

Post by tehlike »

thriftwy wrote: post #12
pxeboot wrote: post #4

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 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.

Can't you contract the building part if you have a suitable piece of land?

Or you can build larger homes and make profit.

Re: Under-building of new homes, high construction cost perpetuate housing shortage

#15

Post by Simulacra »

taprun wrote: post #2

No, 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.

Do you have a source for this? Huge loans at very low rates? The current is about 3.85% even for an FHA loan. Even then they won't loan you huge amounts unless you have the income to justify it. Even if interest rates were allowed to "creep up" the government will not stop guaranteeing loans, and banks won't stop lending. They'll find some other way to offset. With higher interest comes higher payments which means only higher income people will be able to afford that housing. That will horribly exacerbate the problem. Now the middle and low income people don't even have a prayer of owning a home. Is that your intention?

Re: Under-building of new homes, high construction cost perpetuate housing shortage

#16

Post by pxeboot »

thriftwy wrote: post #12
pxeboot wrote: post #4

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 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.

Can't you contract the building part if you have a suitable piece of land?

Sure, but that's going to cost a lot more, as it is now a "custom home". Economies of scale apply strongly to houses.

Re: Under-building of new homes, high construction cost perpetuate housing shortage

#17

Post by closeparen »

taprun wrote: post #2

No, 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.

Nominally cheaper, sure, but not more affordable, since ability to pay would fall proportionally.

Re: Under-building of new homes, high construction cost perpetuate housing shortage

#18

Post by bradleyjg »

tehlike wrote: post #6
taprun wrote: post #2

No, 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

Even if the monthly payment for a 30 yr fixed were to stay the same the buyer would be better off with a lower price. American mortgages have no prepayment penalty, so the buyer has the possibility of refinancing at a lower rate sometime over the payback period or even just making extra principal payments.

Re: Under-building of new homes, high construction cost perpetuate housing shortage

#19

Post by thriftwy »

tehlike wrote: post #14
thriftwy wrote: post #12

Earlier quoted context omitted.

Can't you contract the building part if you have a suitable piece of land?

Or you can build larger homes and make profit.

What if you are building your own home?

Re: Under-building of new homes, high construction cost perpetuate housing shortage

#20

Post by thriftwy »

pxeboot wrote: post #16
thriftwy wrote: post #12

Earlier quoted context omitted.

Can't you contract the building part if you have a suitable piece of land?

Sure, but that's going to cost a lot more, as it is now a "custom home". Economies of scale apply strongly to houses.

How much more? Is it $300,000 versus $200,000? But now you still get an affordable house that you wanted.

I don't think economies of scale rule in house building. I can see how you would out-compete mass production because you a) care, b) pay attention.

Post reply on HN