How much do construction costs matter to the price of housing? • Hacker News Board

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

#191

Post by majormajor » Thu, Feb 17, 2022, 2:13 AM UTC

ehnto wrote: post #77

giantg2 wrote: post #53

Earlier quoted context omitted.

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.

If it was just investors why would rent be as close to mortgage payment amounts as it is? The vacancy rate is low. Demand is high. Demand is high even among people with more money than me so there are a lot of places that both sell for more than I can afford, and rent for more than I can afford.

People are competing for the more desirable neighborhoods, whether renting from an investor or buying outright, that's what makes it an attractive investment in the first place. They'd still be competing, so the prices would still go up until an equilibrium was reached. Maybe just slower?

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

#192

Post by s1artibartfast » Thu, Feb 17, 2022, 2:18 AM UTC

kube-system wrote: post #181

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.

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…

I agree that they are clearly different houses.

That said, I think the difference is overstated. I have lots of friends who live in craftsmen homes. They resell at basically the same price as similar sized houses built 25 years ago (even with single pane windows ect) . If somehow you got one that wasn't upgraded since 1920, you are looking at a few tens of thousands to put in electrical, plumbing, and appliances.

Still, you are right that that they are not the same. But a lot of people today would kill to own a beautiful new craftsman home for 40k! I wouldn't trade out my car for a horse, but I would trade 40k a year rent for a craftsman home!

The point is that even you wanted to replicate an original craftsman home today, you wouldn't be able to do it for that price, even ignoring regulations. Labor costs have gone up, wood has gone up, minimum cost of every material used has gone up.

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

#193

Post by ClumsyPilot » Thu, Feb 17, 2022, 2:18 AM UTC

fleddr wrote: post #165

Mountain_Skies wrote: post #5

Thought for conversation: if you are able to work remote but still live in or near a major employment center, are you at least somewhat morally responsible for pricing out those who cannot work remote?

Practically speaking, the areas you speak of will always have high demand, no matter the type of demand. It's never going to be affordable. Accept it. Second, somebody living in a small super expensive apartment whilst fully working remotely is likely to have a miserable time (COVID situation). If they would have the type of job security guaranteeing they can continue working remotely for a long time, surely many of…

> 'no such thing as morality in markets'

Is it okay to sell people? Do you own your children? If you own land, do you also own anyone who lives on that land?

At various point in history answers to all of the above were yes.

Should we have a market for organs? There is a market for intellectual property, but what is intellectual property - maybe there should be a patent for everything that exists, say a pencil, and they should never ever expire. So noone except that owner should be allowed to make pencils.

Should we have laws against Dumping, self dealing, wash teading, antitrust, insider trading, tragedy of the commons, negative externalities, collusion, cartels, misselling?

All those behaviours arise naturally from markets.

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

#194

Post by abdel_nasser » Thu, Feb 17, 2022, 2:20 AM UTC

im building a house and i got a bid from a foundation guy. he wanted 40k for a job that costs 10k in material. and i can easily do it myself. once i finish the house i will be able to offer a full breakdown of just how much you can save by doing it yourself.

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

#195

Post by learc83 » Thu, Feb 17, 2022, 2:24 AM UTC

anm89 wrote: post #168

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.

also as someone who is working with architects and builders right now on a house, I can say the houses you are getting at the 250 /sqft range in many cases are terribly built. They are going to last a fraction of the time that that $45 / sqft house from 100 years ago lasted

Many houses built 100 years ago were incredibly shoddily built / assembled. Have you ever looked at the foundations on old houses? Wooden piers that are lucky to last 40 years were very common. You’re seeing survivorship bias at work.

Also 250/sq ft is far from cheap/shoddy quality in much of the US. And with proper maintenance just about any house built to code in most places in the US will easily last longer than the average house built 100 years ago.

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

#196

Post by ClumsyPilot » Thu, Feb 17, 2022, 2:29 AM UTC

majormajor wrote: post #187

ClumsyPilot wrote: post #171

Earlier quoted context omitted.

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…

The idea was basically 'I would rather upgrade a well-built 1900 house than try to fix a poorly built, possibly structurally flawed modern one'.

I am not sure it would be easier, but my genereal experiece is telling me the outcome is usually better.

I think the new 'buy to let' phenomenom makes it possible to sell shoddy construction as premium houses to investors based in tax heavens becuase it looks shiny and htey don't give two shits.

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

#197

Post by ClumsyPilot » Thu, Feb 17, 2022, 2:30 AM UTC

I don't know anything about construction, but I do know that my landlord is based in cayman islands.

Why do we allow tax-heaven based shell companies to buy housing in areas where we officially declared a shortage, especially when we know much of that money is either stolen, or comes from dictators, or is doing tax evasion? It can't be helping the problem

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

#198

Post by kube-system » Thu, Feb 17, 2022, 2:34 AM UTC

anm89 wrote: post #168

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.

also as someone who is working with architects and builders right now on a house, I can say the houses you are getting at the 250 /sqft range in many cases are terribly built. They are going to last a fraction of the time that that $45 / sqft house from 100 years ago lasted

I don’t need a house that lasts 100 years. My estate will be selling it in 50 years, if I don’t sell it in the average ownership duration of 10 years.

Lasting a long time does not mean a structure is better in every way. Old housing can be a challenge in terms of safety, cohesive design, lifestyle fit, land use, environmental concerns, etc.

In Japan, for instance, it is popular to frequently tear down housing rebuild it, and it works well for them.

I have lived in and fixed up many old houses with strong bones. They might stand for hundreds of years but everything attached to those bones is a patchwork of afterthoughts.

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

#199

Post by mauvehaus » Thu, Feb 17, 2022, 2:37 AM UTC

irrational wrote: post #159

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 understanding is that the trees no longer exist. We cut down ancient hardwood forests that took hundreds and thousands of years to grow. All of that is gone now except in a few places like national parks and monuments. In its place are tree farms that are harvested after growing for a few years. Instead of cutting down trees that are 4 feet across with beautiful straight grain knot free lumber, we get crap heartwo…

This. You buy a 4"x4" post (nominal. Actually 3.5"x3.5") at your local home improvement store and it has wane on all four corners and the pith running down the middle.

Translation: it's made from the smallest possible tree you could plausibly saw a 4x4 out of. And the pith (the center of the trunk) running through the middle guarantees that the post will split along the radial plane as it dries.

If you go to a better lumber yard, you get better lumber. Except, apparently, for 2x3's. They are universally crap. Source: built a chicken coop with 2x3's and bought from a local outfit because they deliver inexpensively. Everything else was gorgeous compared to the box home improvement store. The 2x3's were pretty much the same.

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

#200

Post by learc83 » Thu, Feb 17, 2022, 2:40 AM UTC

s1artibartfast wrote: post #192

kube-system wrote: post #181

Earlier quoted context omitted.

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…

I agree that they are clearly different houses. That said, I think the difference is overstated. I have lots of friends who live in craftsmen homes. They resell at basically the same price as similar sized houses built 25 years ago (even with single pane windows ect) . If somehow you got one that wasn't upgraded since 1920, you are looking at a few tens of thousands to put in electrical, plumbing, and appliances. Sti…

The average craftsman home built 100 years ago isn’t going for the same price as a 25 year old house.

The craftsman homes that have survived for 100 years in good condition are. That’s a very different thing.

Old houses also have tons of problems even when upgraded, and they just aren’t anywhere near equivalent to a modern home unless you essentially gut them and rebuild.

Insulation isn’t nearly as good. Bathrooms aren’t nearly the same size. The floor plans aren’t nearly as open. This last one in particular is a big cost difference because creating large open spans is expensive.

Those things might not matter as much to you, but they are big differences.

>The point is that even you wanted to replicate an original craftsman home today, you wouldn't be able to do it for that price, even ignoring regulations. Labor costs have gone up, wood has gone up, minimum cost of every material used has gone up.

Depends on the part of the country and whether or not you can use modern equivalent materials.

Where I live, assuming pre pandemic prices, I could probably build a 900 sq ft, single story house with a wooden pier foundation, no plumbing, no electrical, no insulation (or maybe old newspapers like my great grandmothers house used for insulation), no driveway, no sod, and no inspections for $40-$50k.

That would be roughly equivalent to your average house built 100 years ago.