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How much do construction costs matter to the price of housing?

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Re: How much do construction costs matter to the price of housing?

#61

Post by ghaff »

dragonwriter wrote: post #45
bumby wrote: post #34

Earlier quoted context omitted.

> But somehow a 1960s split level at 1800sqft is spacious. I've actually found the opposite. Modern builds seems to prefer open floor plans and higher ceilings that older homes do not. To me at least, this can make the equivalent square footage seem less cramped. To your point though, it's much more common for newer homes to have more bathrooms than older builds of similar size which obviously erodes living space.

> it's much more common for newer homes to have more bathrooms than older builds of similar size which obviously erodes living space. Newer homes also seem to be kitchen heavy, and have larger closets (and also bedrooms), all of which reduces shared (and, but for the bedroom part, total) living space with the same square footage.

Yes, although the dining area is often part of a largely open common area that includes the kitchen and living room.

My brother recently rebuilt a house in Maine and largely went with an open floor plan with relatively modestly-sized bedrooms and bathrooms. It makes pretty efficient use of space. The downside is that if someone want to have their own space, they pretty much have to go outside or retreat to their bedroom.

My house is fairly standard 200 year old New England Cape (though some of it isn't original). I've largely opened up the downstairs to be a common space that I use heavily. Upstairs are four fairly small bedrooms and one small bathroom. It's fine for myself and guests. But even with just two people, there's really only one spare room which I tend to use for staging trips and various hobby stuff I don't want to clutter my office.

I'd add that for a lot of people, one small bathroom would be a deal-breaker although shared bathrooms were considered the norm a few decades ago.

Re: How much do construction costs matter to the price of housing?

#62

Post by sbelskie »

orev wrote: post #25

The price (of anything) is determined by one thing alone: how much someone is willing to pay for it. That’s it. The cost of building is not relevant in any way to that. Nicer materials, better design, etc. can make people willing to pay more, but if it’s too much they won’t pay. The only one who the cost of materials matters to is the builder. If it costs them more to build than they can sell it for (within whatever…

Except how much someone is willing to pay for something depends on, among other things, prevailing market prices, which are influenced by marginal costs.

I may be happy to buy a house for anything less than 200k but if all houses are selling for 100k, then that (or something like it) will be the amount I am actually willing to pay.

If construction costs rise and now builders are only selling houses for 150k, I will now be willing to pay that price.

Re: How much do construction costs matter to the price of housing?

#63

Post by coldtea »

orev wrote: post #25

The price (of anything) is determined by one thing alone: how much someone is willing to pay for it. That’s it. The cost of building is not relevant in any way to that. Nicer materials, better design, etc. can make people willing to pay more, but if it’s too much they won’t pay. The only one who the cost of materials matters to is the builder. If it costs them more to build than they can sell it for (within whatever…

>The price (of anything) is determined by one thing alone: how much someone is willing to pay for it.

Which, as a catch-all condition, is next to useless to examing why the price of something is what it is.

The question then moves to the next turtle: why are people willing to pay X for a house in area Y.

>The cost of building is not relevant in any way to that.

Well, that's not true. In a place were land is plentiful and cheap, the price to get a house is dominated by the cost of building. Doesn't matter if there's an existing house that someone is willing to pay 100 for it. If people can trivially buy land and build for 20, that would be the cost to own a house in the area (note: a house, not THAT particular house).

Re: How much do construction costs matter to the price of housing?

#64

Post by brimble »

bumby wrote: post #34
com2kid wrote: post #19

Earlier quoted context omitted.

> For a personal example, my wife complains that an 1800 sqft house is too small. A modern blueprint 1800sqft house, yeah, for sure. But somehow a 1960s split level at 1800sqft is spacious. We are throwing square footage away on multiple large bathrooms, 2 living rooms, 2 dining rooms, and then wonder why the rooms we actually occupy are so small. The recent trend towards 4 story narrow houses doesn't help. A literal…

> But somehow a 1960s split level at 1800sqft is spacious. I've actually found the opposite. Modern builds seems to prefer open floor plans and higher ceilings that older homes do not. To me at least, this can make the equivalent square footage seem less cramped. To your point though, it's much more common for newer homes to have more bathrooms than older builds of similar size which obviously erodes living space.

Having more rooms and more division between them is part of why older houses feel bigger to me.

Modern ones also do some really stupid stuff with square footage. One house we owned had a massive master suite the size of the entire 2-car garage (it was over it) plus some more carved out for the bathroom, but without any dividing walls or doors (even the [large] bathroom was just an open, wide doorway entry, no closing doors). It was huge, but also not quite big enough to divide into multiple spaces with furniture and rugs or whatever without it looking and feeling weird. A kind of awkward fake-luxury size. And it was a front-back split with a living room in the lower part alongside the entryway, with a fireplace and big window... the layout of which made it almost impossible to set up actual living room furniture in a decent way, so we basically didn't use that entire room and used the basement instead.

The house could have been a solid 500 sqft smaller and felt just as large, with some tweaks to the design. Nearly every other house we've owned, aside from one very old one (by American standards-1910s construction), had similar issues with large areas being wasted for one reason or another, due to how they were designed.

I think the "open floor plan" trend is mostly to look impressive in photos and to get that "wow" factor when you first walk in. In practice, as commonly realized at least, it's terribly wasteful of space and makes houses feel smaller, because it's harder to get a wall between you and someone else, than it is in older houses. Harder to furnish, and arrange furnishing properly, too (not enough wall space, more backs of things visible)

[EDIT] I'd actually liken the open-floorpan trend to the haphazard McMansion appearance of the outside of houses. One thing I've noticed looking at lots of houses over the years is that nice, big, older houses, or newer ones built with balanced and regular exterior layouts, tend to look smaller on the outside than they actually are—or, put differently, McMansion-style houses look much bigger than they actually are. They're loud, and deceptive. Open floor plans are like that for interior space.

Re: How much do construction costs matter to the price of housing?

#65

Post by pydry »

giantg2 wrote: post #53
pydry wrote: post #37

Earlier quoted context omitted.

>People want to live in specific locations, or have to in order to find work. This drives land values up as demand increases. This ignores the world's giant pool of floating capital ravenous for returns that jumps on trends and amplifies demand by buying up what it thinks will have good resale or rental value. I saw this happen in the area I grew up in recently. Some people I know who were struggling to gather a depo…

I was including that under "or simply buying because they can afford it now". "Of the two, B is a more prudent way of making property prices sane again." Maybe if you taxed unused land. Otherwise that tax will end up increasing a resident's rent/mortgage substantially (as it's a perpetual annual expense). So really, you'd have to tax way above what a normal person can afford (average US household about $75k, so $7500…

>Otherwise that tax will end up increasing a resident's rent/mortgage

It would do nothing to rents or mortgages intrinsically but it would cause property prices to fall and it could add to the tax burden of regular property owners depending on how it were implemented (i.e. if the tax free threshold were set too low).

>that still wouldn't be much of a disincentive to the wealthy

It would be a massive disincentive to the wealthy, since they own the most property and are used to it being an asset not a liability.

They would dispose of properties that were nonperforming because taxes > capital appreciation + rent and this would spiral as falling prices leads to more hoarded properties being given up.

They would also scramble to rent out previously unrented properties where capital appreciation wasnt covering taxes. More rentals on the market means even lower rents which makes their properties worth even less to them.

Re: How much do construction costs matter to the price of housing?

#66

Post by ghaff »

OnionBlender wrote: post #52
VikingCoder wrote: post #20

Going off on a tangent here: There's a sci-fi novel I want to write some time... You know how some countries have mandatory military service? Well, what if all of the "Essential" jobs, all had mandatory service? I want to do my own cherry-picking, selecting the "Essential" jobs, and especially those that are toilsome but that you can do with not a lot of training, and then do the math to see how many hours each able-…

The Expanse briefly mentions this in one of the books. Earth has universal "basic" income but if people want to go to university they have to do 2 years of working less desirable jobs to show they can handle working. I heard that Starship Troopers book had something like what you described but I haven't read it.

In Starship Troopers, as I recall, you had to serve for some period in order to be a citizen/vote. I don't remember if this was necessarily military service (although that is certainly what the book highlighted).

Re: How much do construction costs matter to the price of housing?

#67

Post by 71a54xd »

The price of construction matters considerably whether you're planning on building mass market apartments or condominiums. Most cities have explicitly different building codes based on the intended use of the dwellings, interestingly most of the time to avoid civil litigation with the city. Condos generally have much higher quality duct-work / fresh air exchange not to mention thicker walls, more sound dampening etc. All of this is more expensive, but the cost is passed onto the buyer and ensures the contractor isn't on the hook for tenants levying lawsuits against the architect / contractor / city that conducted inspections.

Re: How much do construction costs matter to the price of housing?

#68

Post by chaxor »

bumby wrote: post #34
com2kid wrote: post #19

Earlier quoted context omitted.

> For a personal example, my wife complains that an 1800 sqft house is too small. A modern blueprint 1800sqft house, yeah, for sure. But somehow a 1960s split level at 1800sqft is spacious. We are throwing square footage away on multiple large bathrooms, 2 living rooms, 2 dining rooms, and then wonder why the rooms we actually occupy are so small. The recent trend towards 4 story narrow houses doesn't help. A literal…

> But somehow a 1960s split level at 1800sqft is spacious. I've actually found the opposite. Modern builds seems to prefer open floor plans and higher ceilings that older homes do not. To me at least, this can make the equivalent square footage seem less cramped. To your point though, it's much more common for newer homes to have more bathrooms than older builds of similar size which obviously erodes living space.

Yeah those higher ceilings are very popular, andextremely inefficient. We recently saw this in the new constructed homes in Texas, which made their problem with the power grid last year even worse. The few minutes they gave power to those fancy new home regions (during the time they were cycling power steering) basically went to waste, because the ceilings were so insanely high, and everyone has the open and spacious aesthetic. Many of them had 2 story entrance like ceilings, and few doors to close off where the heat should be directed. Older homes in the north tend towards lower ceilings and smaller rooms with doors - so heating one room can be efficient and fast

Re: How much do construction costs matter to the price of housing?

#69

Post by anonAndOn »

bumby wrote: post #46
pydry wrote: post #37

Earlier quoted context omitted.

>People want to live in specific locations, or have to in order to find work. This drives land values up as demand increases. This ignores the world's giant pool of floating capital ravenous for returns that jumps on trends and amplifies demand by buying up what it thinks will have good resale or rental value. I saw this happen in the area I grew up in recently. Some people I know who were struggling to gather a depo…

How do you implement B) without causing a disproportionately negative impact on existing homeowners? For example, would you just tax "new" purchases more heavily? Or scale it into existing homes? Give caveats for fixed-income (elderly and disabled)? Politically, this seems like a tough road, even if it's the best choice. You have to essentially convince people to vote against their own economic self-interest. I think…

Homestead exemption. If it's your primary residence you get a tax exemption on the first $[geographically_appropriate_median_goes_here].

Re: How much do construction costs matter to the price of housing?

#70

Post by bumby »

chaxor wrote: post #68
bumby wrote: post #34

Earlier quoted context omitted.

> But somehow a 1960s split level at 1800sqft is spacious. I've actually found the opposite. Modern builds seems to prefer open floor plans and higher ceilings that older homes do not. To me at least, this can make the equivalent square footage seem less cramped. To your point though, it's much more common for newer homes to have more bathrooms than older builds of similar size which obviously erodes living space.

Yeah those higher ceilings are very popular, and extremely inefficient. We recently saw this in the new constructed homes in Texas, which made their problem with the power grid last year even worse. The few minutes they gave power to those fancy new home regions (during the time they were cycling power steering) basically went to waste, because the ceilings were so insanely high, and everyone has the open and spaciou…

Sure, I was going to mention the tradeoff with the inefficiency but left it out for brevity.

I will say, though, that the same inefficiency in those geographic areas exist when building multistoried buildings. A ranch is much easier to cool in west texas/new mexico/arizona than a multistory building where the bedrooms and living areas need to be cooled.

I've notice the construction style also mitigates this somewhat. In the west where slab-on-grade is the norm, ducts run through the attic, meaning diffusers are in the ceiling. This makes natural convection of cold air more efficient, especially when coupled with something cheap like a ceiling fan. But at the end of the day, you're right that there's still substantially more air to condition.

I don't know if I'd say that was even a proximate cause of the texas power grid situation though which was largely due to weatherization issues. Can you elaborate?

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