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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?

#271

Post by mrep »

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.

If you are referencing property taxes funding schools, you should know that it actually only funds about half of total school funding. The other half comes from federal and state governments and the way they give out funding is to selectively counteract that misallocation such that 47 states actually allocate more per-student funding to poor areas than to wealthier ones and according to this article [0], it has been this way since at least 1995.

So if you actually informed people that the wealthy areas don't get more funding, I don't see why it would be an issue.

[0]: https://apps.urban.org/features/school-funding-do-poor-kids-...

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

#272

Post by kevin_thibedeau »

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…

The funny thing is that the straight grained radiata pine is sold at a premium imported from Australian and New Zealand plantations when it's an American tree that could be farmed domestically.

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

#273

Post by blitzar »

djdjfhsje33edh wrote: post #214
ClumsyPilot wrote: post #166

Earlier quoted context omitted.

In UK you can buy a house that was built in the dark ages, before Americas were 'discovered', were declared a listed building and the owners are legally barred from making major changes. They cost like 3x what a newbuild does, this "but building codes" stuff doesnt stand up to scruitiny. You dont have to use wood, we have brick. We've had automation and 100 years of growth in productivity.

> They cost like 3x what a newbuild does, this "but building codes" stuff doesnt stand up to scruitiny. I don't think that's a fair comparison. There is a fixed supply by definition of those old buildings, so their price will be pushed up by demand with little relation to their cost to build since they can't be built anymore. A better comparison would be to look at the cost of new houses in developing places like SE…

The building code certainly allows homes to be built with 3 foot brick walls, but home builder building 100 cookie cutter homes on a plot of land are in it for the money (despite saying they are in it to build peoples dreams in their ads).

They build using the cheapest methods allowed by law, see the choice to build with fireproof cladding (£24 psm) vs flamable (£22 psm). Building codes are about setting a floor in the construction quality, not a ceiling (pun intended).

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

#274

Post by blitzar »

joe_the_user wrote: post #211
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…

Comparing houses now to houses then is like comparing a horse to a Honda Accord. I don't think that's a fair comparison. I've lived in a Sear kit house. It had everything someone now would recognized as necessary for a house (including everything you mention, plumbing, wiring, etc and as opposed to a house built in the 1800s, which could have or not-have anything). A fair comparison is a VW bug versus a modern SUV. T…

Herbie the love bug was special. You dont see modern SUV's with all their fancy electronics and AIs doing what he could do.

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

#275

Post by mrep »

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.

Also, land is not scarce in the south and midwest which is we haven't really seen a rise in price per square foot in 40 years [0] as it is basically all construction costs as you can build a new home in a new suburb at the edge of the city.

[0]: https://www.supermoney.com/inflation-adjusted-home-prices/

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

#276

Post by 88840-8855 »

watt wrote: post #262
gjhh244 wrote: post #231

Earlier quoted context omitted.

You could consider working remote / hybrid with a bit longer commute. There is no need for everyone to live in a big overpriced city.

Just forget it. There's no special need to breed. India and China makes up the slack for the rest of the world.

That's not correct. Chinese population is decreasing. Indian population will also decrease once it arrives in the muddle class.

The issues are in borderline countries that have a high population growth and are prone to migration.

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

#277

Post by mrep »

coldtea wrote: post #63
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…

> The price (of anything) is determined by one thing alone: how much someone is willing to pay for it. Which, as a catch-all condition, is next to useless to examing why the price of something is what it is. The question then moves to the next turtle: why are people willing to pay X for a house in area Y. > The cost of building is not relevant in any way to that. Well, that's not true. In a place were land is plentif…

> Well, that's not true. In a place were land is plentiful and cheap, the price to get a house is dominated by the cost of building. Doesn't matter if there's an existing house that someone is willing to pay 100 for it. If people can trivially buy land and build for 20, that would be the cost to own a house in the area (note: a house, not THAT particular house).

Definitely true, just look at home prices in the south and midwest where there is plenty of land [0].

[0]: https://www.supermoney.com/inflation-adjusted-home-prices/

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

#278

Post by KoftaBob »

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…

> Blue collar wedges (wages?) are pretty similar across time, but the cost of house construction (ignoring land) is dramatically higher.

Blue collar wages as a whole may have, but construction workers' wages since 2006 have increased 47% when adjusted for inflation. This should come as no surprise, since that field historically has strong unions. You also have more rigorous safety codes for those workers.

On top of that, building codes have changed dramatically (thankfully) in those past 100 years. Whether it's structural, insulation, windows, electrical wiring and capacity, plumbing (older homes pipes were narrower, so couldn't handle things like a garbage disposal).

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

#279

Post by pydry »

giantg2 wrote: post #117
pydry wrote: post #114

Earlier quoted context omitted.

>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…

"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…

>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.

You're saying that it doesnt matter if supply and demand remains unchanged, rent goes up coz every landlord independently decided that it does?

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

#280

Post by coldtea »

mrep wrote: post #277
coldtea wrote: post #63

Earlier quoted context omitted.

> The price (of anything) is determined by one thing alone: how much someone is willing to pay for it. Which, as a catch-all condition, is next to useless to examing why the price of something is what it is. The question then moves to the next turtle: why are people willing to pay X for a house in area Y. > The cost of building is not relevant in any way to that. Well, that's not true. In a place were land is plentif…

> Well, that's not true. In a place were land is plentiful and cheap, the price to get a house is dominated by the cost of building. Doesn't matter if there's an existing house that someone is willing to pay 100 for it. If people can trivially buy land and build for 20, that would be the cost to own a house in the area (note: a house, not THAT particular house). Definitely true, just look at home prices in the south…

>where there is plenty of land

It's not about there being cheap land in the state in general, it's about being cheap land where people want to live.

Or, inversely, sure, home prices in the south and midwest might be high in expensive areas (e.g. major city), but they're much lower where land is cheap.

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