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

constructionphysics.substack.com

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

#241

Post by bobthepanda »

giantg2 wrote: post #8

It's all about consumer preference. It seems this article largely misses this. People want to live in specific locations, or have to in order to find work. This drives land values up as demand increases. Policies can make this worse, but the problem will still manifest itself to some degree. (Potentially as affluent people, especially in suburban areas, buying up more land to create setbacks, or simply buying because…

So yes and no.

One important factor to increasing house size is that localities in the US tend to have fairly large lot sizes. To recoup the cost of building on more expensive land, builders build more house, because the opposite (building 2 or more houses and subdividing the land) is just illegal.

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

#242

Post by bobthepanda »

csee wrote: post #57
bumby wrote: post #39

Earlier quoted context omitted.

> I’m pro densification but highly against sprawl. My natural inclination is to agree with this statement, but I'd like to hear your rationale. Can you elaborate on your preference? Is it location dependent?

Sprawl is environmentally unfriendly (transport distance and construction material usage), financially expensive (sparse service provision, roads), and it excludes poor people from the city center (since everyone has to compete to be within 15 minutes)

also, it's actually bad for public health as well. Walking rates have declined significantly over the past few decades due to sprawl making it impossible to walk anywhere.

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

#243

Post by kube-system »

gjhh244 wrote: post #229
kube-system wrote: post #198

Earlier quoted context omitted.

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…

So you think tearing down a house every 50 years isn't an environmental problem? It absolutely is. Concrete especially causes major Co2 emissions.

+1 for wooden American homes, made from naturally sequestered carbon :)

I haven't done the math, but I'd bet the energy efficiency requirements would more than make up for it. Uninsulated/underinsulated homes are a huge waste of energy.

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

#244

Post by wincy »

brimble wrote: post #127
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.

Quality lumber is incredibly expensive now compared with 1914. I owned a 1910s-construction house for a while, and they used huge, thick wooden boards around the foundation where the structure met the stone-and-mortar basement walls, and in the floor joists (visible in the basement), and in the diagonally-run underfloor boards (used where we'd use plywood, today). Nearly knot-free, perfectly straight, that stuff woul…

This reminded me of the fact that the US Navy maintains a forest of trees that are of appropriate size to keep planks for the USS Constitution, the last remaining wooden US Navy vessel.

https://taskandpurpose.com/mandatory-fun/constitution-grove-...

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

#245

Post by asiachick »

kube-system wrote: post #83
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…

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.

900sqft is larger than most Japanese houses. Americans are spoiled

https://graphics.reuters.com/HEALTH-CORONAVIRUS/TOKYO-HOMES/...

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

#246

Post by Thorrez »

alar44 wrote: post #234
bigyikes wrote: post #215

Earlier quoted context omitted.

The question is, why can you chop down one tree at $100/tree?

Because it's a 0 effort renewable resource.

The question is why is the sale price $100. If it's 0 effort, you would think it would be cheaper.

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

#247

Post by Terry_Roll »

throwaway19423 wrote: post #129
brimble wrote: post #127

Earlier quoted context omitted.

Quality lumber is incredibly expensive now compared with 1914. I owned a 1910s-construction house for a while, and they used huge, thick wooden boards around the foundation where the structure met the stone-and-mortar basement walls, and in the floor joists (visible in the basement), and in the diagonally-run underfloor boards (used where we'd use plywood, today). Nearly knot-free, perfectly straight, that stuff woul…

I live in Canada, where we are swimming in lumber (in theory). I just don't understand why it is so expensive. I know the processing and treatment is very sophisticated but there is so much automation throughout the whole chain. My only explanation is that lumber is a globally traded commodity .. price isn't determined by just Canadian demand for lumber but the global demand. It makes me wonder .. if the US shutdown…

>It makes me wonder .. if the US shutdown Canadian wood imports, would that significantly lower prices for Canadian consumers? How low would it go?

It probably wouldnt go low because you are not recognising global demand and a growing global population, cost of automation for factory (automated built) furniture, bespoke furniture by individual or small teams of carpenters, cost of transporting wood to other countries where costs are different.

Here in the UK we have this place https://www.oakfurnitureland.co.uk/ it does real solid (oak) wood furniture, not some furniture made of chipboard.

It seems quite cheap but there are visible cost savings, like the furniture isnt that big, its suited to smaller homes than some grand mansion or luxury home, and with a lot of businesses, where finance/credit is available, sometimes the company main business is actually a credit broker/finance specialising in a niche market product.

Some people have said GE (General Electric) is now more a financial entity than a manufacturer, this is business diversification over the decades.

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

#248

Post by arcticbull »

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 sure? The 2000 sqft apartments at 181 Fremont are going for $7M. [1]

If you want to live in a secluded detached single-family with a huge yard, live outside of town.

[1] https://www.redfin.com/CA/San-Francisco/181-Fremont-St-94105...

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

#249

Post by JoakimOA »

VikingCoder wrote: post #20

Going off on a tangent here: There's a sci-fi novel I want to write some time... You know how some countries have mandatory military service? Well, what if all of the "Essential" jobs, all had mandatory service? I want to do my own cherry-picking, selecting the "Essential" jobs, and especially those that are toilsome but that you can do with not a lot of training, and then do the math to see how many hours each able-…

Adding another sci-fi book recommendation that explores these themes; in The Quantum Thief by Hannu Rajaniemi there is a moving city on Mars where citizens that run out of time, their currency allowing them to live in the city, have their consciousness transferred to machine servants that maintain the city. Being a servant for a number of years earns them enough time to return to their bodies and the city.

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

#250

Post by pydry »

jjav wrote: post #142
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…

> >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. The rent must cover all the costs of the property (+ some profit). If any cost goes up, the rent will go up by at least that much. Anything else is wishful thinking. If the costs go up so much that it's no longer possible to rent because nobody can afford it, that still won't m…

>The rent must cover all the costs of the property (+ some profit). If any cost goes up, the rent will go up by at least that much. Anything else is wishful thinking.

When businesses that can't raise prices get taxed more than their profits they go out of business.

Anything else is wishful thinking.

>Instead, they'll sell the property and now it is off the rental market for good.

It's almost as if there were an army of renters complaining vociferously that prices are to high for them to get on the housing ladder.

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