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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?

#141

Post by com2kid »

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.

1960s split levels, knock down a single wall and you have an open floor plan. It is an incredibly common remodel.

They often have vaulted ceilings and front bay windows.

While I do Related, 2 bedroom 3 bath houses make me want to scream.

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

#142

Post by jjav »

pydry wrote: post #114
giantg2 wrote: post #101

Earlier quoted context omitted.

"It would do nothing to rents or mortgages intrinsically" Most people have their property taxes escrowed with their mortgage payments. Taxes can easily account for 25% of one's monthly payments. As for rent, the property owners just pass the cost on to the tenants by increasing rent. So property taxes are related to rent and mortgage payments. Even if not included directly in the mortgage payment, it affects how much…

>As for rent, the property owners just pass the cost on to the tenants by increasing rent Rents would either remain unchanged or go down. I dont magic myself a raise because income tax goes up. It works the same for landlords. If supply and demand remains unchanged, prices remain unchanged. The only change I could forsee to affect either is previously empty properties being put up for rent in order to cover tax payme…

> >As for rent, the property owners just pass the cost on to the tenants by increasing rent

> Rents would either remain unchanged or go down.

The rent must cover all the costs of the property (+ some profit). If any cost goes up, the rent will go up by at least that much. Anything else is wishful thinking.

If the costs go up so much that it's no longer possible to rent because nobody can afford it, that still won't make the rent go down because the owner isn't going to start taking a loss on it for fun. Instead, they'll sell the property and now it is off the rental market for good.

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

#143

Post by com2kid »

throwaway0a5e wrote: post #73
com2kid wrote: post #24

Earlier quoted context omitted.

> 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 subd…

> 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.

My city has passed so many building code requirements on remodels that now days it is, from what contractors have told me, about the same price to remodel as to tear down and replace.

I was quoted over 150k to add a new bedroom to the 2nd floor, most of that is because the city would require me to completely replace my roof structure with a brand new one to bring it up to modern insulation standards.

I imagine, without doing the math, that the carbon footprint of tearing down a house and building a new one is much higher than whatever energy is going to be wasted by having amazing-but-not-the-best-insulation in my attic.

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

#144

Post by mpalczewski »

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.

A not insubstantial cost of that rebuild is permitting.

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

#145

Post by bumby »

giantg2 wrote: post #111
pydry wrote: post #58

Earlier quoted context omitted.

Land value tax. It could be made palatable to regular people by making a high tax free threshold. Most homeowners could be left unaffected. That leaves 50% of land owned by the 1%. A fair chunk. Additionally the money could be funneled initially into pensions for the impoverished elderly. Capital/billionaires would fight back by arguing that it would hit the elderly the hardest just as the howard jarvis taxpayers fou…

"That leaves 50% of land owned by the 1%." Is a lot of that farm land, like with Gates? I thought a lot of the investors are involved with apartments, which don't take up much land?

Maybe somebody can clarify, but wouldn't that land also be much less taxable per acre because the value is lower?

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

#146

Post by orev »

joebob42 wrote: post #85
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…

Well, except that the cost affects how much people are willing to pay, because if people are not willing to pay more then the cost then there won't be enough supply -> it will cost more -> people will either pay more or go without.

You seem to be ignoring my second paragraph. Supply only goes down because the builder has decided it’s not worth it to build any more to sell. That’s the market force that equalizes the price to remain above cost. At that point, as prices begin to rise, the buyer’s decision is once again only related to “how much are they willing to pay”.

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

#147

Post by jjav »

svachalek wrote: post #115
brailsafe wrote: post #44

Earlier quoted context omitted.

I don't necessarily disagree, but I have been thinking about what it would take to hypothetically limit the ability for people to buy multiple properties within some geographical boundary, or even put some pressure on low density owners in that geographical boundary while the cost of housing/vacancy rates are within some extremely scarce range. It's a naive thought atm, but I would be curious if everyone basically ha…

I don't think it's possible with all the shell corporations and other gimmicks the rich use. It's just too easy to conceal who owns what. I think simply removing all the market restrictions that make homes such a valuable investment would do it, when demand meets supply suddenly housing markets start to look like any other market. But this seems to be politically unthinkable just about everywhere.

> I don't think it's possible with all the shell corporations and other gimmicks the rich use.

If there was the political will to do it, it would be very easy.

Just pass a law that every residential property must be owned by real people with their names on the title.

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

#148

Post by zizee »

brimble wrote: post #134
zizee wrote: post #130

Earlier quoted context omitted.

I'm really curious to know why, in our hyper-industrialized world of today, is lumber so expensive when compared to yesteryear? Is it cost of land on which it grows? Is it increased demand because of population growth? Increased demand because of new uses? Increased demand because of global markets? Is it because lumbar prices were artificially depressed because the cost of growing new trees was not included (because…

My dad, born in toward the end of WWII, has complained for at least the last three decades that it keeps getting harder every year to find usable boards at lumber yards. Tons of them warped, damaged, way too many knots or other problems, and so on, and that's when you are shopping a couple tiers up from the worst stock. I don't know why that is, but that seems to be the trend he's seen over his life. Makes sense, if…

Interesting. This might be explained by the switch from old growth to new growth^. Older trees would be larger, and have more core to work with (I think knots are mostly from the outer layers of the tree).

^ this is pure speculation

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

#149

Post by rootusrootus »

R0b0t1 wrote: post #135
s1artibartfast wrote: post #100

Earlier quoted context omitted.

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.

Just interjecting "but building codes!" doesn't make a lot of sense. If the codes are so strict that we can't actually build houses they are failing at their purpose. I dunno if you've dug deeply into most building codes but they're almost always overly specific in pointless ways and in ways totally unrelated to safety. Getting an engineer to sign off on a design should be enough, especially for a freestanding (tiny)…

OTOH, hiring an engineer to actually put their name on your home construction will almost certainly cost significantly more than the city inspection cost.

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

#150

Post by bumby »

giantg2 wrote: post #112
paulryanrogers wrote: post #74

Earlier quoted context omitted.

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

I would love to see no tax on primary home property at all. Just for commercial/investment properties. Unfortunately, a lot of that would be passed on to renters unless income taxes were assessed differently. But that would also mean drastically changing school funding, which could be a good opportunity but would likely turn this into every more of an impossible shitshow.

I think one argument is this incentivizes in the wrong way regarding home buying. It seems similar to the mortgage interest rate deduction argument: it incentivizes larger homes, it's regressive because it benefits those with more wealth in property than those with less, increases the likelihood of defaults due to people being incentivized towards more expensive homes, and potentially distorts housing prices, related to excessive borrowing.
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