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

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

#51

Post by lg »

freeloop3 wrote: post #35
theseus7 wrote: post #29

Earlier quoted context omitted.

The first part of the solution is to completely eliminate mortgage subsidies and mortgage interest deductions. These do not increase the supply of housing, they only subsidize demand for more expensive houses and increase indebtedness, and increase the flow of capital into non-productive areas of the economy such as mortgage lending and mortgage backed assets. The second part of the solution is to convert all propert…

You're putting the poor in an awfully tight position there. Between no tax deduction for a mortgage and paying the same property tax (what you call land value tax) for their trailer as the mansion next door, they're kind of getting screwed. And what about old people that have owned their own house for decades? If the local economy goes up, increasing the land value tax, they either leave or go bankrupt. And the kicke…

When an area gets better economically, it becomes more desirable, so home prices (and land prices) go up. Outside of California, property taxes go up too, and retired owners often do the math and cash out.

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

#52

Post by jdavis703 »

maccard wrote: post #22
tehlike wrote: post #9

Earlier quoted context omitted.

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.

Maybe one of the issues is the expected sizes of homes in the US - 2500 sq ft is about 250 sq m - which is pretty darn big. The average home in the uk is about 85 sq m...

No, this doesn't have to do with construction costs (which are about linear with square footage), it's other factors. For example, even if someone wanted to build a tiny home (i.e. less than 500 square feet), it's illegal in many places because of minimum square footage requirements. The problem comes from bad land use planning, not because "dumb" Americans don't understand a larger house costs more money.

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

#53

Post by ashark »

madengr wrote: post #25

Here in the Kansas City area, it seems most of the new housing is mixed use; commercial on the bottom and apartments on top. Not many single family homes. Maybe it is because millennial not wanting/affording a house, and prefer dense urban living. Though that is beginning to change as they have kids, and are now moving to suburbs. So they now build little cities within the suburbs.

In the northland, at least, there are tons of new boring ol’ suburban houses going up. Construction slowed for a couple years after the crash, but came back fast and now they’re putting up new houses and plotting new neighborhoods as fast as they can.

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

#54

Post by planteen »

sytelus wrote: post #48
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.

Not really... these days 20% downpayments are the norm. I know several people holding off purchases because they simply don't have downpayment. Higher home prices reduces number of potential customers but right now we have so many of them that reduction doesn't matter and margines are much higher on higher end.

80-10-10 loans are quite popular right now from talking with friends.

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

#55

Post by wbl »

sytelus wrote: post #49

This is also because of mass migration to urban centers in recent times. Every major urban center in US is currently facing massive number of incoming people. When everybody wants to live in same little place, prices are obviously going to shoot up. This should also explain why there are no too many new homes being built - because urban centers have little room to expand. This is current phenomenon in much of the wor…

Urban centers can grow vertically. 80% of SF is single story construction.

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

#56

Post by scarface74 »

freeloop3 wrote: post #35
theseus7 wrote: post #29

Earlier quoted context omitted.

The first part of the solution is to completely eliminate mortgage subsidies and mortgage interest deductions. These do not increase the supply of housing, they only subsidize demand for more expensive houses and increase indebtedness, and increase the flow of capital into non-productive areas of the economy such as mortgage lending and mortgage backed assets. The second part of the solution is to convert all propert…

You're putting the poor in an awfully tight position there. Between no tax deduction for a mortgage and paying the same property tax (what you call land value tax) for their trailer as the mansion next door, they're kind of getting screwed. And what about old people that have owned their own house for decades? If the local economy goes up, increasing the land value tax, they either leave or go bankrupt. And the kicke…

You're putting the poor in an awfully tight position there. Between no tax deduction for a mortgage and paying the same property tax (what you call land value tax) for their trailer as the mansion next door, they're kind of getting screwed.

Poor people don’t benefit from the mortgage interest deduction. With todays low interest rate, you have to have a mortgage of over $300,000 to have more than the $120000 standard deduction in interest.

With the median household income being $60,000 a year, it would be nearly impossible to come up with a scenario where many would itemize deductions after mortgage interest, state taxes and property taxes.

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

#57

Post by scarface74 »

sytelus wrote: post #48
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.

Not really... these days 20% downpayments are the norm. I know several people holding off purchases because they simply don't have downpayment. Higher home prices reduces number of potential customers but right now we have so many of them that reduction doesn't matter and margines are much higher on higher end.

FHA loans are easy to get and the down payment required is 3.5%. Even with mortgages that don’t qualify for FHA it’s relatively easy to get 5% down payment loans.

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

#58

Post by eikenberry »

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…

Building high end units does help the housing market for low incomes. This article explains it pretty well.

http://cityobservatory.org/urban-myth-busting-new-rental-hou...

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

#59

Post by tehlike »

jdavis703 wrote: post #52
maccard wrote: post #22

Earlier quoted context omitted.

Maybe one of the issues is the expected sizes of homes in the US - 2500 sq ft is about 250 sq m - which is pretty darn big. The average home in the uk is about 85 sq m...

No, this doesn't have to do with construction costs (which are about linear with square footage), it's other factors. For example, even if someone wanted to build a tiny home (i.e. less than 500 square feet), it's illegal in many places because of minimum square footage requirements. The problem comes from bad land use planning, not because "dumb" Americans don't understand a larger house costs more money.

True that. There's the other side of the coin though. South bay (excepting San Jose) is what you'd call suburbs. People who choose to live low density areas. Part of it is because of the employers. I, for one, do not like a lot of people around me, and I grew up in a city of > 15M. I like the low density.

I think it goes both ways. companies in the bay area choose to headquarter in low density areas (so they can grow).

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

#60

Post by prostoalex »

scarface74 wrote: post #57
sytelus wrote: post #48

Earlier quoted context omitted.

Not really... these days 20% downpayments are the norm. I know several people holding off purchases because they simply don't have downpayment. Higher home prices reduces number of potential customers but right now we have so many of them that reduction doesn't matter and margines are much higher on higher end.

FHA loans are easy to get and the down payment required is 3.5%. Even with mortgages that don’t qualify for FHA it’s relatively easy to get 5% down payment loans.

They generally require PMI, so still an extra payment out of pocket, are usually hard-capped at 30% of buyer’s current income, and take looong time to close compared to strong cash offers with conventional loans, so sellers view them as last-resort. It’s possible, but not very realistic for an FHA applicant to outbid everyone else on price.
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