6 ms·

Price per square foot for housing has remained remarkably constant over time. People are spending more on houses than they used to because they are buying bigge

by harryh 10y ago

Price per square foot for housing has remained remarkably constant over time. People are spending more on houses than they used to because they are buying bigger houses.

shorodei 10y ago
Got data on this? In my anecdotal experience price per square foot has shot up in urban places, which is where the jobs for young people tend to be concentrated.
- harryh 10y ago
  http://www.aei.org/publication/todays-new-homes-are-1000-square-feet-larger-than-in-1973-and-the-living-space-per-person-has-doubled-over-last-40-years/ http://www.aei.org/publication/todays-new-homes-are-1000-squ...
  - jpmattia 10y ago
    It looks like they applied CPI directly to the cost of housing. That is not correct. CPI has a component of "owner's equivalent rent", which should be removed before cost-correcting the price of housing. Otherwise, you are removing the increase of the item you are searching for an increase of (Housing accounts for 1/3 of the CPI correction.) Their graph is instead showing that the buying power of a dollar is roughly constant when 1/3 of the CPI basket-of-goods is corrected with CPI. Calculated Risk has a more sane analysis, you will note that the graphs are corrected with "CPI less Shelter": http://www.calculatedriskblog.com/2016/11/real-prices-and-price-to-rent-ratio-in.html http://www.calculatedriskblog.com/2016/11/real-prices-and-pr... He doesn't include price/sqft, but note that there is a 44% increase in real prices between the 90s and now. Square footage has not gone up by that much in 20 years. As a side note: AEI is a fairly political org, I wouldn't rely on their accuracy for anything involving stats, or math in general.
- massysett 10y ago
  "the inflation-adjusted price of new homes has been relatively stable since 1973 in a range between about $105 and $125 per square foot" However this is only new homes, not used homes. http://www.aei.org/publication/todays-new-homes-are-1000-square-feet-larger-than-in-1973-and-the-living-space-per-person-has-doubled-over-last-40-years/ http://www.aei.org/publication/todays-new-homes-are-1000-squ...
  - deleted 10y ago
    [deleted]
  - seanp2k2 10y ago
    Maybe true in aggregate, but not true of many cities these days. For example, you can't touch a new home of any size in the Bay Area for less than about 750k, and that's even a long stretch. 250k for 2,000sqft would be a dream for many here.
notadoc 10y ago
That's simply not true, at least on the west coast in any reasonably active real estate market. It was never $1,455/sq ft like it is today in Palo Alto, nor $500/sq ft or even $200 per sq ft. This is a recent phenomena. Furthermore, price per square foot actually tends to increase nowadays on smaller homes, where you'll pay even more per square foot if you're trying to buy anything under 2000sq ft, and it gets really crazy when you approach 1200sq ft. Shop around for a house, see for yourself.
- harryh 10y ago
  Yes, there are exceptions to the rule. Palo Alto, home to one of the biggest wealth booms in human history, is one of them.
  - notadoc 10y ago
    This applies to any west coast market. You'll encounter it yourself if you ever shop for a home out here.
    - seanp2k2 10y ago
      Yep, anywhere within a 2-hour drive of San Jose or San Francisco is crazy. You're lucky to get a single-family home for under a million, or a condo for under about 600. It's a big question of "do you have the right to live in a city you grew up in if you can no longer afford to live there", property tax laws, etc. It creates a situation where people are buying run-down houses I'd consider unlivable for close to a million dollars, and have neighbors who couldn't afford the smallest apartment in a 30 mile radius, but get to stay there and inflict their blight upon the neighborhood from which they are now very much priced out of. One would think it's a kind move to not tax them on the actual value of their property, but everything else gets more expensive too, so now a quesadilla is $15 at the corner store and they can barely afford to eat, and their options for other housing are in a different state. It's very strange to me that people aren't taxed out of their homes, since if they can no longer pay for anything else in the area, their quality of life goes down dramatically , in a community who mostly just wants them gone, fighting against the merciless tide of economic "progress" just because they grew up there (and sometimes not even). If you can't afford the rent, you have no say. Property tax is a form of city rent, from my perspective. Why are the rules different? It seems like people just like to pretend they can still afford to be in a place and resist the change for as long as possible rather than accept the world around them.
downrightmike 10y ago
* Because builders choose to make bigger homes to bring in more money.
- harryh 10y ago
  It is true that suppliers do, to some degree, drive buyer preferences but I am skeptical that it's the primary driver of change.
JPKab 10y ago
I think you know that in any kind of major metropolitan area with a strong economy that price per square foot is much, much higher (adjusted for inflation) than previously. Taking the aggregate is deceptive because housing is much cheaper in economically depressed areas of the country. Edit: Looked at the source of your data. It includes only new homes, and ignores existing housing stock. Your entire argument is deceptive and wrong. I regret wasting my time reading the source and realizing that you are cherry-picking.
djb_hackernews 10y ago
30 year olds are buying larger houses because typically those are the only options. It comes down to NIMBY local regulation enacted by the boomers with their FU I got mine attitude. Municipalities enforce size restrictions, ie you can't build too small, in order to ensure there isn't housing poor folk can afford. They enact parcel size restrictions which means a piece of land that could have 20 homes on it can only fit 5. They enact stricter and stricter building codes that the only way to make a profit for a builder is to build big and cram in features so the real estate agents can beat you over the head with them so you feel as though you'd be an idiot not to buy this massive house with things you don't need.
- harryh 10y ago
  Houses getting bigger due to regulatory changes (as opposed to buyer preference) is a perspective I had not considered. Interesting! Thanks!
  - mulmen 10y ago
    Say's law was the most counterintuitive concept I was exposed to in undergrad econ classes. After consideration it does make sense but runs counter to an entrepreneurial view of the world where products are created to serve a need.
    - empthought 10y ago
      It's counterintuitive because it is not true.
- RUG3Y 10y ago
  My uncle lives in an area where a new house must be on a minimum sized lot of 1 acre. A nearby area requires 5 acres for a new house! I'd never heard of those kinds of restrictions before.
  - mulmen 10y ago
    I live in Seattle and while I am aware that not everyone lives in a similar environment the concept of a minimum 5 acre lot staggers me. I consider myself lucky to have 600 square feet. What kind of area has these rules and who sets them? To me a lot with 5 acres is officially "the country" where I would expect very little to zero regulation of what you can build.
jpmattia 10y ago
Real house prices are currently up 44% since the nineties. https://3.bp.blogspot.com/-OOfzxFgh8YE/WD2XUyaZeqI/AAAAAAAApec/LpxQXvVd6KAVayKcZrGtGNxjRGrYBQgQQCLcB/s1600/RealSept2016.PNG https://3.bp.blogspot.com/-OOfzxFgh8YE/WD2XUyaZeqI/AAAAAAAAp... That is not accounted for by sq footage. Interest rates are a much more likely culprit.
- deleted 10y ago
  [deleted]
- AnimalMuppet 10y ago
  > Interest rates are a much more likely culprit. To expand on that a bit: Supply and demand in houses doesn't work on the price. Supply works on the price; demand works on the monthly payments. When interest rates go down, the same people can now spend more on a house for the same monthly payments, and so the price rises.
- int_19h 10y ago
  It would also be worth looking at the geographic distribution. I suspect that most of that growth is from urban areas. Which, then, would also reflect the ongoing urbanization (and corresponding rise in demand).
falcolas 10y ago
Anecdotally, this is not the case, even in more rural areas. My parents bought 5 acres and built a house for $100,000 (adjusted for inflation). I recently bought a house with half the square footage and 1/10th of the land for double the amount. And I got a great deal in the current market by being willing to live even further from town.
- hiram112 10y ago
  Yep. Moved to high cost of living city almost a decade ago. Always lived frugally, even though I'm now making decent money. The plan was to get the hell out of this overpriced, over crowded area with a stash of cash and head back to Midwest to pick up a nice home. It's terrifying watching Zillow on a few Midwestern cities that had avoided the bubbles so far. It seems as if the coastal cash and / or Chinese money has now trickled its way inward. 25% price increases in 2 years for some of the newer condos I'm interested in. I don't want to move just yet cause I like my job and wouldn't be able to find something similar in a smaller city, but now I fear I'll be priced out again. This sucks.

by harryh 10y ago

Price per square foot for housing has remained remarkably constant over time. People are spending more on houses than they used to because they are buying bigger houses.

shorodei 10y ago

Got data on this? In my anecdotal experience price per square foot has shot up in urban places, which is where the jobs for young people tend to be concentrated.

harryh 10y ago
http://www.aei.org/publication/todays-new-homes-are-1000-square-feet-larger-than-in-1973-and-the-living-space-per-person-has-doubled-over-last-40-years/ http://www.aei.org/publication/todays-new-homes-are-1000-squ...
- jpmattia 10y ago
  It looks like they applied CPI directly to the cost of housing. That is not correct. CPI has a component of "owner's equivalent rent", which should be removed before cost-correcting the price of housing. Otherwise, you are removing the increase of the item you are searching for an increase of (Housing accounts for 1/3 of the CPI correction.) Their graph is instead showing that the buying power of a dollar is roughly constant when 1/3 of the CPI basket-of-goods is corrected with CPI. Calculated Risk has a more sane analysis, you will note that the graphs are corrected with "CPI less Shelter": http://www.calculatedriskblog.com/2016/11/real-prices-and-price-to-rent-ratio-in.html http://www.calculatedriskblog.com/2016/11/real-prices-and-pr... He doesn't include price/sqft, but note that there is a 44% increase in real prices between the 90s and now. Square footage has not gone up by that much in 20 years. As a side note: AEI is a fairly political org, I wouldn't rely on their accuracy for anything involving stats, or math in general.
massysett 10y ago
"the inflation-adjusted price of new homes has been relatively stable since 1973 in a range between about $105 and $125 per square foot" However this is only new homes, not used homes. http://www.aei.org/publication/todays-new-homes-are-1000-square-feet-larger-than-in-1973-and-the-living-space-per-person-has-doubled-over-last-40-years/ http://www.aei.org/publication/todays-new-homes-are-1000-squ...
- deleted 10y ago
  [deleted]
- seanp2k2 10y ago
  Maybe true in aggregate, but not true of many cities these days. For example, you can't touch a new home of any size in the Bay Area for less than about 750k, and that's even a long stretch. 250k for 2,000sqft would be a dream for many here.

notadoc 10y ago

That's simply not true, at least on the west coast in any reasonably active real estate market. It was never $1,455/sq ft like it is today in Palo Alto, nor $500/sq ft or even $200 per sq ft. This is a recent phenomena. Furthermore, price per square foot actually tends to increase nowadays on smaller homes, where you'll pay even more per square foot if you're trying to buy anything under 2000sq ft, and it gets really crazy when you approach 1200sq ft. Shop around for a house, see for yourself.

harryh 10y ago
Yes, there are exceptions to the rule. Palo Alto, home to one of the biggest wealth booms in human history, is one of them.
- notadoc 10y ago
  This applies to any west coast market. You'll encounter it yourself if you ever shop for a home out here.
  - seanp2k2 10y ago
    Yep, anywhere within a 2-hour drive of San Jose or San Francisco is crazy. You're lucky to get a single-family home for under a million, or a condo for under about 600. It's a big question of "do you have the right to live in a city you grew up in if you can no longer afford to live there", property tax laws, etc. It creates a situation where people are buying run-down houses I'd consider unlivable for close to a million dollars, and have neighbors who couldn't afford the smallest apartment in a 30 mile radius, but get to stay there and inflict their blight upon the neighborhood from which they are now very much priced out of. One would think it's a kind move to not tax them on the actual value of their property, but everything else gets more expensive too, so now a quesadilla is $15 at the corner store and they can barely afford to eat, and their options for other housing are in a different state. It's very strange to me that people aren't taxed out of their homes, since if they can no longer pay for anything else in the area, their quality of life goes down dramatically , in a community who mostly just wants them gone, fighting against the merciless tide of economic "progress" just because they grew up there (and sometimes not even). If you can't afford the rent, you have no say. Property tax is a form of city rent, from my perspective. Why are the rules different? It seems like people just like to pretend they can still afford to be in a place and resist the change for as long as possible rather than accept the world around them.

downrightmike 10y ago

* Because builders choose to make bigger homes to bring in more money.

harryh 10y ago
It is true that suppliers do, to some degree, drive buyer preferences but I am skeptical that it's the primary driver of change.

JPKab 10y ago

I think you know that in any kind of major metropolitan area with a strong economy that price per square foot is much, much higher (adjusted for inflation) than previously. Taking the aggregate is deceptive because housing is much cheaper in economically depressed areas of the country. Edit: Looked at the source of your data. It includes only new homes, and ignores existing housing stock. Your entire argument is deceptive and wrong. I regret wasting my time reading the source and realizing that you are cherry-picking.

djb_hackernews 10y ago

30 year olds are buying larger houses because typically those are the only options. It comes down to NIMBY local regulation enacted by the boomers with their FU I got mine attitude. Municipalities enforce size restrictions, ie you can't build too small, in order to ensure there isn't housing poor folk can afford. They enact parcel size restrictions which means a piece of land that could have 20 homes on it can only fit 5. They enact stricter and stricter building codes that the only way to make a profit for a builder is to build big and cram in features so the real estate agents can beat you over the head with them so you feel as though you'd be an idiot not to buy this massive house with things you don't need.

harryh 10y ago
Houses getting bigger due to regulatory changes (as opposed to buyer preference) is a perspective I had not considered. Interesting! Thanks!
- mulmen 10y ago
  Say's law was the most counterintuitive concept I was exposed to in undergrad econ classes. After consideration it does make sense but runs counter to an entrepreneurial view of the world where products are created to serve a need.
  - empthought 10y ago
    It's counterintuitive because it is not true.
RUG3Y 10y ago
My uncle lives in an area where a new house must be on a minimum sized lot of 1 acre. A nearby area requires 5 acres for a new house! I'd never heard of those kinds of restrictions before.
- mulmen 10y ago
  I live in Seattle and while I am aware that not everyone lives in a similar environment the concept of a minimum 5 acre lot staggers me. I consider myself lucky to have 600 square feet. What kind of area has these rules and who sets them? To me a lot with 5 acres is officially "the country" where I would expect very little to zero regulation of what you can build.

jpmattia 10y ago

Real house prices are currently up 44% since the nineties. https://3.bp.blogspot.com/-OOfzxFgh8YE/WD2XUyaZeqI/AAAAAAAApec/LpxQXvVd6KAVayKcZrGtGNxjRGrYBQgQQCLcB/s1600/RealSept2016.PNG https://3.bp.blogspot.com/-OOfzxFgh8YE/WD2XUyaZeqI/AAAAAAAAp... That is not accounted for by sq footage. Interest rates are a much more likely culprit.

deleted 10y ago
[deleted]
AnimalMuppet 10y ago
> Interest rates are a much more likely culprit. To expand on that a bit: Supply and demand in houses doesn't work on the price. Supply works on the price; demand works on the monthly payments. When interest rates go down, the same people can now spend more on a house for the same monthly payments, and so the price rises.
int_19h 10y ago
It would also be worth looking at the geographic distribution. I suspect that most of that growth is from urban areas. Which, then, would also reflect the ongoing urbanization (and corresponding rise in demand).

falcolas 10y ago

Anecdotally, this is not the case, even in more rural areas. My parents bought 5 acres and built a house for $100,000 (adjusted for inflation). I recently bought a house with half the square footage and 1/10th of the land for double the amount. And I got a great deal in the current market by being willing to live even further from town.

hiram112 10y ago
Yep. Moved to high cost of living city almost a decade ago. Always lived frugally, even though I'm now making decent money. The plan was to get the hell out of this overpriced, over crowded area with a stash of cash and head back to Midwest to pick up a nice home. It's terrifying watching Zillow on a few Midwestern cities that had avoided the bubbles so far. It seems as if the coastal cash and / or Chinese money has now trickled its way inward. 25% price increases in 2 years for some of the newer condos I'm interested in. I don't want to move just yet cause I like my job and wouldn't be able to find something similar in a smaller city, but now I fear I'll be priced out again. This sucks.