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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?

#181

Post by kube-system »

s1artibartfast wrote: post #100
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.

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.

I wouldn’t exactly characterize that as “construction costs going up” though. We’re building different things. The standard of living has changed significantly.

The 1910’s were a very different time. Comparing houses now to houses then is like comparing a horse to a Honda Accord. We’re not just talking luxury features here —- You can be pretty certain that a home built in 2022 has indoor plumbing, a refrigerator, and a furnace that doesn’t require shoveling fuel.

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

#182

Post by waiseristy »

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.

As an owner of 90+ year old home. Yes. It's quite dramatic how underbuilt old homes are. 2x4 joists spanning 10+ feet was commonplace. Foundations were cinderblocks holding up whole timbers. Insulation wasn't even a thing!

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

#183

Post by ClumsyPilot »

clpm4j wrote: post #121
arcticbull wrote: post #81

Earlier quoted context omitted.

I dont think there's any justification for this position, really. Density in Macau is 20,000 people per square kilometer. Parts of the NY/NJ metro area like Guttenberg are 22,000. San Francisco is 6,600. Hong Kong is 6,300. London is 5,700. There is a ton of room to increase density before we start reducing demand.

High density is not desirable to affluent families when the alternative could be a 3,000sqft single family home with a sizeable backyard in San Francisco, and these people tend to make the rules.

You don't get that in Central London, you get a 400 sqft apartment and no yard and people are lining up to pay over the odds.

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

#184

Post by [deleted] »

irrational wrote: post #161
zizee wrote: post #148

Earlier quoted context omitted.

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

The core (heartwood) is the worst part of the tree. Now the trees are harvested so young that the entire things are junk heartwood.

[deleted]

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

#185

Post by ClumsyPilot »

lifeisstillgood wrote: post #133

There was a fascinating conference filmed and on youtube at UCL on this subject (in my history, looking for it). The upshot is roughly that the owner of farm (hedonic) land knows how much their land is worth both with and without planning permission and the minute housing is thought of the price of the land 10x. And that's fair - no one wants to look like a chump. So any house building scheme to solve the housing cri…

"A 100% land value tax. If you bought land for 10k and sold it for 100k you owed the government 90k."

I think this is fair - the land itself is a natural resource that the owner has (presumably) done nothing to improve - they are just hogging it so that nokne else can use it

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

#186

Post by Waterluvian »

imgabe wrote: post #164

Construction costs and land costs are not independent. A big part of the construction cost is the cost of labor. You can't do construction work remotely, so you need to hire workers who live relatively near the construction site. Which means they have to pay the high housing costs so you need to pay them more. It's a feedback loop where the more expensive housing is, the more expensive it will be to build housing.

On a macro scale this is likely true. Unless you ship in cheap workers for a season.

On a micro scale, where I live, it’s not. A $2M home in Toronto is maybe $400k where I live, an hour down the road. And I know a lot of local workers who commute to Toronto every day to work on sites. (They do 7-3 to avoid traffic and the neighbours hate their nail gun wake ups)

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

#187

Post by majormajor »

ClumsyPilot wrote: post #171
dockd wrote: post #132

Earlier quoted context omitted.

Did the 1914 house have electricity? With "acetylene lighting plant" being extra, I think not. Did the 1914 house have more than one toilet? Cost per square foot doesn't cover what goes into the square foot, and fixtures cost a lot more than an empty room.

Does it cost 5x to add electrical wiring into a house? I would happily take a 1915 house and upgrade it. I love in a 'premium' newbuild block in a 1st world country, and the construction quality is so atrocious it would be condemned in some 2nd world countries! The builders forgot to connect the extractor fan to any ducting, it just sits inside the ceiling and makes noise, the piping of the sprinkler system in not se…

> I would happily take a 1915 house and upgrade it.

Why do you think it's so much easier/better to upgrade an old house than fix constructions errors with a new one?

I live in an early-20th-century house with minimally-acceptable plumbing and electric (pipes not secured to the structure? welcome to the club!), no insulation, terribly cold windows, one tiny bathroom, sometimes-wobbly feeling floors, etc.

"Upgrading it" would basically be "rip it down to the studs and redo it all" which is basically "everything but one of the easiest parts of new construction" anyway.

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

#188

Post by kube-system »

plasticchris wrote: post #123
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.

Have you checked on the prices for prefab homes? Even in the Midwest 40k won’t even get you the cheapest ones unless you go with something like a used mobile home.

Yes, I checked before I posted the comment, and I found many around the 62,000 range with delivery ($40k+22k is cited in the parent).

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

#189

Post by majormajor »

lurgburg wrote: post #156
giantg2 wrote: post #117

Earlier quoted context omitted.

"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." What you're missing is that the market floor get universally pushed up. There's no competition from cheaper places because they all increased their rent to cover the new coat so they can still make their same margin. The demand is still there because people still…

> they all increased their rent Why would they not have done this before, if they could? Landlords aren't trying to maintain some fixed margin, they want as much as possible, always.

The last few cities I've lived in have seen 10+ straight years of rent increases (with a brief drop then rapid spike again from COVID) so... they do already do this?

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

#190

Post by imgabe »

Waterluvian wrote: post #186
imgabe wrote: post #164

Construction costs and land costs are not independent. A big part of the construction cost is the cost of labor. You can't do construction work remotely, so you need to hire workers who live relatively near the construction site. Which means they have to pay the high housing costs so you need to pay them more. It's a feedback loop where the more expensive housing is, the more expensive it will be to build housing.

On a macro scale this is likely true. Unless you ship in cheap workers for a season. On a micro scale, where I live, it’s not. A $2M home in Toronto is maybe $400k where I live, an hour down the road. And I know a lot of local workers who commute to Toronto every day to work on sites. (They do 7-3 to avoid traffic and the neighbours hate their nail gun wake ups)

It's still relatively true. A $400k home is only cheap in comparison to a $2M home. That's quite a lot compared to the average laborer's wages. Maybe if those homes were $200k, the homes in the pricier area would be only $1M (not exactly obviously). $400k to live with an hour commute is not that great a deal IMO.
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