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Solving the housing crisis requires fighting monopolies in construction (2020)

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Re: Solving the housing crisis requires fighting monopolies in construction (2020)

#171

Post by SilasX »

dtgriscom wrote: post #168
jschveibinz wrote: post #2

According to this resource ( https://www.newhomesource.com/learn/stick-built-vs-modular-h... ): - Modular home construction is an $11 billion industry, growing at 8.5% per year - The cost of modular/factory vs. stick built construction is about a 10-20% savings. On a $500k home, that’s going to be less than $25k difference in price. That’s not the problem. Additionally from this source ( https://blog.lotnetwork.com/l…

> The cost of modular/factory vs. stick built construction is about a 10-20% savings. On a $500k home, that’s going to be less than $25k difference in price. Isn't 10-20% of $500k actually $50k-$100k? (Could buy some really nice appliances...)

I assume the parent was using $500k as the total home price (building + land[1]), so the savings is only off the building cost, which is a fraction of the total price. Should have made that assumption explicit though.

I think the OP's core point is sound -- (total) home prices are like 50% over historically reasonable levels, so it's daft to explain it by even 20% overpricing for construction (which, again, applies to only a portion of the total sale price).

[1] And the typical home does not cost $500k to build.

Re: Solving the housing crisis requires fighting monopolies in construction (2020)

#172

Post by snapplebobapple »

jschveibinz wrote: post #2

According to this resource ( https://www.newhomesource.com/learn/stick-built-vs-modular-h... ): - Modular home construction is an $11 billion industry, growing at 8.5% per year - The cost of modular/factory vs. stick built construction is about a 10-20% savings. On a $500k home, that’s going to be less than $25k difference in price. That’s not the problem. Additionally from this source ( https://blog.lotnetwork.com/l…

You mentioned in a few words the biggest problem, which is zoning. The vast majority of land is zoned single family, which is actually a money loser for most municipalities in the USA. Crushing the local nimby zoning boards and forcing a much higher percentage of the land to be zoned for higher density would cause a boom of missing middle (and high rise) construction that could mostly solve this problem for very minimal capital outlay by municipalities vs trying to build enough single family zoned stuff to push prices down.

Re: Solving the housing crisis requires fighting monopolies in construction (2020)

#173

Post by Patrol8394 »

whimsicalism wrote: post #121
Patrol8394 wrote: post #98

Solving housing crisis requires making housing not an investment. Make very very very tax inconvenient to buy places for the sole purpose of renting them out. Do this, and most problems are solved. But banks and legislators have no interests in doing so, therefore nothing will ever solve housing crisis. Make peace with it. It will only get worse.

Make supplying rental units illegal? Your "solution" involves evicting half the stage of California.

Why would you allow a foreign billionaire that does not live and produce any value in US, buy properties for the sole purpose of speculating and driving price high? There are countries like Denmark where you can’t just buy properties, you have to be authorized.

That would be a good start.

Re: Solving the housing crisis requires fighting monopolies in construction (2020)

#174

Post by lazide »

zamfi wrote: post #128
lazide wrote: post #89

Earlier quoted context omitted.

Demand is driven by those factors you say don’t matter. That’s the point folks are trying to make. It doesn’t just magically appear.

Demand is people moving to the Bay Area for work and needing to live somewhere, wanting to have kids, etc. It’s not driven by Fed policies around interest rates. It’s not driven by speculation. It’s driven by people wanting to own homes. Period. The other factors are small.

People always want a nicer house in a nicer area.

That doesn’t create real demand on it’s own (as in anything that will impact a market). As any experienced realtor will tell you, every house is always ‘in demand’ by a near infinite amount of people that can’t afford it.

They have to be able to do something about that desire in a concrete way - high salaries count of course, but it’s always modulated by interest rates unless they are buying cash outright. Then it’s usually moderated less directly by other things they can be doing with that cash that are more interesting, and relative rents in the area.

Re: Solving the housing crisis requires fighting monopolies in construction (2020)

#175

Post by lazide »

zamfi wrote: post #129
lazide wrote: post #76

Earlier quoted context omitted.

‘Demand’ includes availability of funds by potential buyers (and what they consider expensive) which is directly influenced by stock prices (which have seen major drops this year), and by interest rates. The amount that can be loaned/supported by a given income, and hence a lot of underwriting standards, are based indirectly on the cost to service the loan relative to the income the person has. The lower the interest…

Yes of course demand is influenced by all these things. But it’s driven by people moving to a location and wanting to buy homes. The market clearing price is also driven by these things. But let’s be clear: the primary driver of sky-high prices in the Bay Area is (1) people moving here, getting well-paying tech jobs, and wanting to buy housing, and (2) not nearly enough new construction to meet that demand.

If the fed continues on it’s current course, I guess we’ll find out over the next few years huh?

Re: Solving the housing crisis requires fighting monopolies in construction (2020)

#176

Post by lazide »

imtringued wrote: post #150
sokoloff wrote: post #84

Earlier quoted context omitted.

Is monopoly the right word for a set of thousands of developers competing to develop land and build new neighborhoods?

No, because the only monopolies in real estate are land and maybe grandfathered construction that would be illegal to build today. The construction industry might be considered a cartel though if they coordinate behind the scenes.

Knowing and working with a large number of custom home builders, a single ‘cartel’ is as far from the on the ground reality as you’re likely to get.

In some areas, maybe more like ‘collection of competing cartels that hate each other’.

Re: Solving the housing crisis requires fighting monopolies in construction (2020)

#177

Post by jschveibinz »

innagadadavida wrote: post #93

It’s not just the cinateuction lobby, Right now there is deluge of vacant commercial properties. SF alone has around 20Msqft - this translates to 15-20k apartments. Why cannot this be converted? Same glut situation with warehouses, they can be used for housing homeless people.

Probably because of the cost to convert and the building codes. There is another article on HN that discusses this situation in NYC right now. It just can’t be done according to the “experts.”

Re: Solving the housing crisis requires fighting monopolies in construction (2020)

#178

Post by zamfi »

lazide wrote: post #174
zamfi wrote: post #128

Earlier quoted context omitted.

Demand is people moving to the Bay Area for work and needing to live somewhere, wanting to have kids, etc. It’s not driven by Fed policies around interest rates. It’s not driven by speculation. It’s driven by people wanting to own homes. Period. The other factors are small.

People always want a nicer house in a nicer area. That doesn’t create real demand on it’s own (as in anything that will impact a market). As any experienced realtor will tell you, every house is always ‘in demand’ by a near infinite amount of people that can’t afford it. They have to be able to do something about that desire in a concrete way - high salaries count of course, but it’s always modulated by interest rate…

Again, I am not saying those other factors do not matter, obviously they do.

But if it was "interest rates" driving everything -- then every area would be very expensive, not just the areas where there are high salaries and lots of inflow and basically zero new construction.

The Bay Area population grew 7.4% from 2010 to 2020 -- that's 614,901 residents according to census. New construction in that same time period was under 200,000 units.

So: where are all those people living? Many of them are living with roommates, etc., and because of the scarcity of housing, having your own place has become a luxury that costs extra money. If 600k people are complying for 200k units, prices will go up regardless of what interest rates do. Then, salaries rise in response where they can, because tech companies need to pay enough for people to be able to move here (always more expensive, thanks to rent control and Prop. 13, than already living here) -- which then pushes home prices even higher, because there still isn't enough housing to go around, and the 30% of people who can bid the most are the ones who clear the market. (And then, of course, everyone else who isn't pulling in tech salaries is just shut out of the market.)

Interest rates matter on the margin, yes, of course -- but the cost of capital is still low compared with availability. A couple making $400k combined is going to be able to bid more on a house at 3% interest than at 5% interest, but the only reason they're bidding so much at all is that there aren't enough homes to go around and they want one.

Re: Solving the housing crisis requires fighting monopolies in construction (2020)

#179

Post by zamfi »

lazide wrote: post #175
zamfi wrote: post #129

Earlier quoted context omitted.

Yes of course demand is influenced by all these things. But it’s driven by people moving to a location and wanting to buy homes. The market clearing price is also driven by these things. But let’s be clear: the primary driver of sky-high prices in the Bay Area is (1) people moving here, getting well-paying tech jobs, and wanting to buy housing, and (2) not nearly enough new construction to meet that demand.

If the fed continues on it’s current course, I guess we’ll find out over the next few years huh?

I wish -- but I suspect we won't, sadly, because many factors are at play, including the move to remote work for many, many tech companies. If we see both higher interest rates and dramatic drops in demand, then everyone will be able to spin their own story out of it.

Re: Solving the housing crisis requires fighting monopolies in construction (2020)

#180

Post by lazide »

zamfi wrote: post #178
lazide wrote: post #174

Earlier quoted context omitted.

People always want a nicer house in a nicer area. That doesn’t create real demand on it’s own (as in anything that will impact a market). As any experienced realtor will tell you, every house is always ‘in demand’ by a near infinite amount of people that can’t afford it. They have to be able to do something about that desire in a concrete way - high salaries count of course, but it’s always modulated by interest rate…

Again, I am not saying those other factors do not matter, obviously they do. But if it was "interest rates" driving everything -- then every area would be very expensive, not just the areas where there are high salaries and lots of inflow and basically zero new construction. The Bay Area population grew 7.4% from 2010 to 2020 -- that's 614,901 residents according to census. New construction in that same time period w…

Every area in the United States (and every major city) has gotten a lot more expensive!

This tracks prices nationwide [https://fred.stlouisfed.org/series/CSUSHPINSA]

Everything else you’re talking about is from side effects.

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