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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?

#91

Post by s1artibartfast »

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 is just a point of comparison. You can ignore it and focus on inflation and dollar purchasing power for consumer goods, also included. Point being that house construction costs have grown on a different trajectory than dollar value and salary.

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

#92

Post by sudosysgen »

loeg wrote: post #84
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.

The rebuild cost, as estimated by my insurance company, is more than half the total value of my house. And I live in Seattle, where land is relatively expensive. Construction cost is not "almost nothing" by any means.

Doesn't that include the cost of demolition? Demolition done right is very expensive.

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

#93

Post by datadawg »

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.

Just wanted to say I've enjoyed this HN rabbithole gold, where we've gone from talking about increasing house costs to discussing the role of bakers in modern day industrial bakeries :)

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

#94

Post by dzhiurgis »

kube-system wrote: post #83
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…

The standard of construction has also changed since 1914. Not only do few people want to build a 900sqft freestanding home, if they did it today with that Sears kit, it would break nearly every building code in the book. A more equal comparison would be to a prefab or mobile home, which you can get for that inflation adjusted price.

Did standard improve 5x tho? Probably by like 2-3x I'd guess. Or standard maybe even decreased in some ways, but we're actually paying for complexity.

Also - building larger typically reduces price/sqm.

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

#95

Post by ghaff »

nemo44x wrote: post #72
dragonwriter wrote: post #45

Earlier quoted context omitted.

> 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.

>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 in some cases, it was where the servants dealt with such things out of site of any guests.

The house I grew up in had such an arrangement. And although we didn't have a cook, etc., in the sixties, my parents did a lot of large dinner party entertainment. While my mother did the cooking, it would still have been pretty much unthinkable for guests to be hanging out in the kitchen much less helping to clean up etc.

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

#96

Post by kube-system »

dzhiurgis wrote: post #94
kube-system wrote: post #83

Earlier quoted context omitted.

The standard of construction has also changed since 1914. Not only do few people want to build a 900sqft freestanding home, if they did it today with that Sears kit, it would break nearly every building code in the book. A more equal comparison would be to a prefab or mobile home, which you can get for that inflation adjusted price.

Did standard improve 5x tho? Probably by like 2-3x I'd guess. Or standard maybe even decreased in some ways, but we're actually paying for complexity. Also - building larger typically reduces price/sqm.

There's a lot of ways that the standards have changed, it's not just one dimension.

Complexity and feature set are probably the biggest. New construction single-family homes today are more likely to be customized, not kits, have way more features and way better mechanicals. That 1914 house had no kitchen appliances, no laundry appliances, no driveway, no garage, no insulation, no central HVAC, etc.

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

#97

Post by rr808 »

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…

Yes its interesting example, but 1914 Sears house didn't have electricity, or hot water (was an extra), no shower, I'm guessing its single glazed and lightly insulated.

Certainly I think most modern houses are too luxurious with marble and complicated accessories that aren't really needed.

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

#98

Post by hattmall »

This sort glosses over the real percentage of construction costs by giving only a 20 or so percent of profit. A large portion of construction though is the individual sub-contractors profits. I would guess that the large difference in costs vs 100 years ago is proportional to the increased number of subcontractors. A hundred years ago a lot of lumber was even at least partially milled on site too.

The actual costs of real labor and real materials is pretty cheap. Even with the elevated building costs today you could still build an average home for sub $40,000 dollars if you control all aspects of the process.

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

#99

Post by sokoloff »

dzhiurgis wrote: post #94
kube-system wrote: post #83

Earlier quoted context omitted.

The standard of construction has also changed since 1914. Not only do few people want to build a 900sqft freestanding home, if they did it today with that Sears kit, it would break nearly every building code in the book. A more equal comparison would be to a prefab or mobile home, which you can get for that inflation adjusted price.

Did standard improve 5x tho? Probably by like 2-3x I'd guess. Or standard maybe even decreased in some ways, but we're actually paying for complexity. Also - building larger typically reduces price/sqm.

In 1925, only half of homes in the US had electric lighting. None had air conditioning. Many would have had only steam boilers (which can function without electric pumps) fired by hand-shoveled coal. Most would have had no insulation. In 1940, half of homes had no indoor flush toilets and no hot running water.

If you built a house today without electricity, with only cold water service, and an outhouse, I think you’d save a fair bit on skilled trades (and be pretty damn unhappy when you visited a neighbor and saw their utilities).

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

#100

Post by s1artibartfast »

kube-system wrote: post #83
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…

The standard of construction has also changed since 1914. Not only do few people want to build a 900sqft freestanding home, if they did it today with that Sears kit, it would break nearly every building code in the book. A more equal comparison would be to a prefab or mobile home, which you can get for that inflation adjusted price.

I totally agree that the take away is construction costs are going up over time! This holds true even if you look at price/foot opposed to total cost.

Like you said, part of this is differences in what you get, building codes, and amenities.

That said, Craftsmen homes are wonderful and in some respects have better build quality than modern homes.

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