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Where are the economies of scale in homebuilding?

construction-physics.com

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Re: Where are the economies of scale in homebuilding?

#51

Post by hombre_fatal »

Avicebron wrote: post #8
socalgal2 wrote: post #4

Earlier quoted context omitted.

The reason prices are high is lack of supply. Lowering costs of construction is one way to get slightly more supply but it's mostly governments and NIMBYs preventing construction. The high prices would bring in lots of people willing to build but they're blocked constantly.

> Lowering costs of construction is one way to get slightly more supply but it's mostly governments and NIMBYs preventing construction. In some places this is true. But in others it's just as true that builders would be happy to build but the people who need the houses can only leverage their 35k/year income in making that happen. And if you brought in some equity firm to then build the houses, they do so at market r…

That doesn't make sense. Developers don't wait around until you pool your money together with strangers to fund apartment construction. Density and supply explosion are what bring down prices.

Re: Where are the economies of scale in homebuilding?

#53

Post by nradov »

bluGill wrote: post #36
r-bryan wrote: post #13

Why does a carpenter cut the end off a 10-foot board to get a required 9ft-2in, thereby wasting 8% of the input and incurring dumpster charges? Suppose the architect's design specified the cutlist, to be transmitted to the board "factory", which would cut boards to the required lengths, tagging them with RFID serial numbers indexed to the design, stacking them so the first ones to be used are on the top, and truck to…

The vast majority of the boards and carpenters gets come pre-cut to 92 and 5'8". That is exactly the size you need for an 8' wall. It is only a tiny minority of borders that the carpenter is actually cutting on site. The majority are already pre-cut to the exact size needed. It would be possible to cut boards to the exact site in a factory. However, you would lose more in the logistics cost of managing all the differ…

All but the cheapest new residential construction has moved to 9'+ walls. Buyers like higher ceilings.

Re: Where are the economies of scale in homebuilding?

#54

Post by josh_s »

Lots of interest comments on the efficiency of building homes.

The bigger issue is the cost of land. The differential for land to build is often 10:1.

So even if the prefab shave 10-20% the price for a custom build, it's still not making much of a difference for the normal buyer.

unless a develop or government was opening up mutiple parcels of land well below the costs to build a house, prefab is not really going to be worth it.

Re: Where are the economies of scale in homebuilding?

#55

Post by toast0 »

hedora wrote: post #31

I think standardized codes would help a lot. Another major issue is labor mobility: Here in California, there's a big labor shortage for all blue collar trades, and even if they do live in the area, they have to spend a lot of time going to/from the job site. I think this can be largely solved by technology, but with a change of regulations, code, and division of labor in the trades. 1) Put all the power conduit, plu…

1) I don't think this is really a problem? When the walls are open, running stuff is fast. But when the walls are done, the trades come back to make the connections, which is slow amd expensive. Or if you messed up and have to fix it when the walls are up.

2) prehung doors help. Drywall is already the cheaper, faster option... but yeah, finish takes a lot of time. Innovations such as giant oversized outlet trims help a little bit.

3) simple rooflines help even when not using prefab, but people seem to prefer complex roofs. Again, asphalt shingles are the cheap option. If you have a single or two surface roof, a roof goes very fast. Where planes intersect is where all the time is. Material costs on a metal roof are still way more than asphalt.

4) most people don't have a somewhere else for the solar to go. Solar tiles are too expensive (materials and labor)... Panels as roof sounds good until you want to have roof penetrations as is normal for plumbing vents, combustion flues, and bathroom ventilation. Gotta make that all mostly waterproof too.

5) framing seems to be getting some labor saving. Prefab sections can save on-site labor. Things like roof trusses fit on a truck nicely. I think I've seen wall segments too, maybe? Stair sections?

Re: Where are the economies of scale in homebuilding?

#56

Post by nradov »

JumpCrisscross wrote: post #48
nradov wrote: post #45

Earlier quoted context omitted.

Really? Some of the least dense areas are also among the most affordable.

> Some of the least dense areas are also among the most affordable Taking into account job opportunities and cost of goods, it’s often a wash or worse, particularly if you consider standard of living.

Really? Cities like Cleveland, Memphis, or Wichita aren't particularly dense but they're affordable in terms of median price-to-income ratio. The unemployment rate in Cleveland is only 4% so there would seem to be job opportunities.

Re: Where are the economies of scale in homebuilding?

#57

Post by JumpCrisscross »

nradov wrote: post #56
JumpCrisscross wrote: post #48

Earlier quoted context omitted.

> Some of the least dense areas are also among the most affordable Taking into account job opportunities and cost of goods, it’s often a wash or worse, particularly if you consider standard of living.

Really? Cities like Cleveland, Memphis, or Wichita aren't particularly dense but they're affordable in terms of median price-to-income ratio. The unemployment rate in Cleveland is only 4% so there would seem to be job opportunities.

> Cities like Cleveland, Memphis, or Wichita aren't particularly dense

I’d still call them dense. (I suspect Mister “density trashes a location” would.)

Re: Where are the economies of scale in homebuilding?

#58

Post by idiotsecant »

fragmede wrote: post #37
JumpCrisscross wrote: post #7

> You could vertically integrate backwards into the production of raw materials and components, in the hopes of driving down those costs This is my takeaway: to reduce home-construction costs, we need to apply economies of scale further to the inputs. What is the idiot index for lumber, drywall, et cetera ?

The number of different trades that are involved with building a house is what complicates things and drives timelines and cost up. I wonder if you mass produced a (large) widget that was water and sewer and an AC/heating unit and an electrical panel all in one, so the widget would be a bathroom/kitchen/living room central core, with electrical, that homebuilders could just drop in, if that would reduce coordination…

Sounds like an absolute nightmare. All those components connect to other things and all you did was make a single enormous node that everything hooks to.

Re: Where are the economies of scale in homebuilding?

#59

Post by elzbardico »

There's also the other path of making homes more durable, less maitainance intensive. This would also increase the housing stock and probably reduce total costs over the utilization time by a household.

More durable materials and construction techniques would also reduce the insurance costs which are basically overhead in the economy.

Re: Where are the economies of scale in homebuilding?

#60

Post by idiotsecant »

hombre_fatal wrote: post #51
Avicebron wrote: post #8

Earlier quoted context omitted.

> Lowering costs of construction is one way to get slightly more supply but it's mostly governments and NIMBYs preventing construction. In some places this is true. But in others it's just as true that builders would be happy to build but the people who need the houses can only leverage their 35k/year income in making that happen. And if you brought in some equity firm to then build the houses, they do so at market r…

That doesn't make sense. Developers don't wait around until you pool your money together with strangers to fund apartment construction. Density and supply explosion are what bring down prices.

This is not universally true. There are vast swathes of the country where you can explode all the supply you want, the people who live there will be simply unable to afford them. As in they can not afford the cost of material and labor, even assuming supply drops profit to zero.

Supply is not magic. It can't reduce the cost of something below the cost of material and labor.

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