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

constructionphysics.substack.com

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

#71

Post by whoisburbansky »

chrisseaton wrote: post #55
s1artibartfast wrote: post #50

Some interesting historical context on construction costs: 100 years ago the cost of construction was about $45/sqft when adjusted for inflation and today it is closer to $220/sqft, approximately 5x the cost. Blue collar wedges are pretty similar across time, but the cost of house construction (ignoring land) is dramatically higher. The 1914 sears Model 147 house was 900sqft and cost $872 for materials, estimated at…

Baker is a strange salary to look at. Back then bakers were everywhere churning out a staple food by hand. Today a baker is likely to be an artisan of some kind, with a specialist product.

It's odd, don't you think, that an "artisan" of some kind, with a "specialist" product, would only make about 10% more per annum, adjusted for inflation, than a generalist churning out a staple food by hand?

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

#72

Post by nemo44x »

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.

Big kitchens with islands and casual dining space add so much value to a home today. People absolutely love making the kitchen a centerpiece room. It can be used for so many things.

I think in older homes the thought at the time was that the kitchen was a utility room meant for cooking, food storage and dishes. And that the living room was the center of it all.

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

#73

Post by throwaway0a5e »

com2kid wrote: post #24
rabuse wrote: post #4

Almost nothing, especially with the cheap materials used in current modern construction (unless requiring some hurricane code; ex. South Florida). It's all due to zoning limitations, and homeowners voting in their own interests to keep the supply down, and values to rise.

> Almost nothing, especially with the cheap materials used in current modern construction New construction requires higher quality electrical panels with fancier breakers, more GFCI outlets, and much, much, better insulation. Builders have always used the cheapest materials they could get away with, and the cheapest labor they can hire. That has always been the case. The old houses still around are the exception to t…

>The old houses still around are the exception to the rule, not the norm.

You need to get outside the beltway or at least go to some of the "bad" neighborhoods within it.

The only place your statement is close to true is very wealthy areas that are constantly being redeveloped. Other than the occasional prime lot or desirable commercial site new construction fills in around the old or adds on to it. Big lots get subdivided and a new structure goes on the empty chunk and buildings get additions. Basically nobody is demolishing any building that is sound because buildings are expensive and why would you waste a perfectly good one.

Generally speaking you only see good buildings get demolished when the land becomes worth so much relative to the structure that it makes economic sense to knock it all down and do a clean sheet because the little extra optimization you get from doing that is worth more than what you would have saved by keeping the sub-optimal structure.

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

#74

Post by paulryanrogers »

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 exemptions for older folks already exist. Perhaps a higher tax rate for those not living in a property?

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

#75

Post by ghaff »

whoisburbansky wrote: post #71
chrisseaton wrote: post #55

Earlier quoted context omitted.

Baker is a strange salary to look at. Back then bakers were everywhere churning out a staple food by hand. Today a baker is likely to be an artisan of some kind, with a specialist product.

It's odd, don't you think, that an "artisan" of some kind, with a "specialist" product, would only make about 10% more per annum, adjusted for inflation, than a generalist churning out a staple food by hand?

I expect that most "bakers" in the US today work for grocery chains (or maybe for manufacturers of packaged bread and pastry products--not sure how precisely the category is defined). They're probably mostly not working for artisan specialty bakeries although I wouldn't be shocked if people at those places weren't exactly raking it in either.

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

#76

Post by chrisseaton »

ghaff wrote: post #75
whoisburbansky wrote: post #71

Earlier quoted context omitted.

It's odd, don't you think, that an "artisan" of some kind, with a "specialist" product, would only make about 10% more per annum, adjusted for inflation, than a generalist churning out a staple food by hand?

I expect that most "bakers" in the US today work for grocery chains (or maybe for manufacturers of packaged bread and pastry products--not sure how precisely the category is defined). They're probably mostly not working for artisan specialty bakeries although I wouldn't be shocked if people at those places weren't exactly raking it in either.

I don't think those large industrial bakeries really have 'bakers'? They have automation engineers, food scientists, mechanics.

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

#77

Post by ehnto »

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…

> ignoring the fact the the market would collapse

I think that is the point. The market doesn't make sense already for people who actually use the homes because of the investors. If there were property policies that targeted investors and forced their money elsewhere, prices would drop dramatically, making housing affordable again.

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

#78

Post by jzwinck »

whoisburbansky wrote: post #71
chrisseaton wrote: post #55

Earlier quoted context omitted.

Baker is a strange salary to look at. Back then bakers were everywhere churning out a staple food by hand. Today a baker is likely to be an artisan of some kind, with a specialist product.

It's odd, don't you think, that an "artisan" of some kind, with a "specialist" product, would only make about 10% more per annum, adjusted for inflation, than a generalist churning out a staple food by hand?

Modern bakers are competing in a market dominated by extremely cheap mass production. The economy of scale has moved out of the local bakery and into the regional bread factory.

People are willing to pay double or triple for artisanal bread compared with mass produced bread. But are they willing to pay 10-20x? If not, and the extreme cost efficiency of modern food factories inexorably lowers prices, the market clearing price of artisanal bread is limited and declining.

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

#79

Post by ghaff »

brimble wrote: post #64
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.

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…

>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.

I don't know. I live in an old house that I've incrementally opened up the first floor of. And I find the largely opened up space much airier and lighter and a generally better use of space than the more closed spaces were. That said, I do mostly live by myself so I don't really run into the issue of not being able to get away from other people unless I retreat to my office or small bedroom.

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

#80

Post by ghaff »

chrisseaton wrote: post #76
ghaff wrote: post #75

Earlier quoted context omitted.

I expect that most "bakers" in the US today work for grocery chains (or maybe for manufacturers of packaged bread and pastry products--not sure how precisely the category is defined). They're probably mostly not working for artisan specialty bakeries although I wouldn't be shocked if people at those places weren't exactly raking it in either.

I don't think those large industrial bakeries really have 'bakers'? They have automation engineers, food scientists, mechanics.

As I say. I don't know who is counted. In any case, I certainly imagine grocery chains that bake on-premise have "bakers" and there are more of them in that type of job than working in high-end artisan bakeries.
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