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Is there even a shred of evidence that the housing crisis is a result of higher construction costs? Or is the Fed trying to draw attention away from the catast
by oldgradstudent 4y ago
Is there even a shred of evidence that the housing crisis is a result of higher construction costs?
Or is the Fed trying to draw attention away from the catastrophic impact of its zero interest and other policies on the massive increase in asset prices?
- epistasis 4y agoThere is an entire paper linked here that's exactly what you ask for in your first question. What about it do you find unconvincing?
- oldgradstudent 4y agoIt just asserts that without proof. The paper essentially argues that construction costs can be lowered significantly using factory production methods, especially for small-modular homes. I have no problem with that part. The title has no basis in the paper, though. It is unrelated to the massive increase in housing (and other asset) prices in recent years which are the cause of the current housing crisis.
- vinceguidry 4y agoYeah. Like, anyone who has ever tried to get anything custom out of builders these days has been confronted with the fact that none of these guys want or care to do anything even close to custom work anymore. The diversity has been squeezed out of the market ages ago, cookie cutter houses are the norm everywhere. I only read the abstract, but it doesn't surprise me in the least that this paper just asserts conclusions without justification. Houses are already as close to factory-built as is possible to do with today's tastes. Everything is pre-engineered and merely assembled on site.
- eesmith 4y agoI didn't find it convincing. Elsewhere here I asked why factory-built housing doesn't seem to be popular world-wide, which is what you would expect if it's only US Federal policy which prevents it from being popular in the US. I'll add that I saw no discussion of how local housing policies were designed to prevent "Large numbers of low-income, city residents [from moving] to these areas", in order to keep property values high. Or the classism that caused people to look down on mobile homes. The author rhetorically asks "But what stops public transportation from expanding upon the arrival of new residents?", when I've heard so many New Urbanist videos answering that question. I didn't understand how "a uniform building code across the country would be a great benefit to factory producers" is a meaningful goal, given that the needs for Florida, Arizona, and Alaska are quite different, making me question his understanding. I read "There is a literature that asks why the poor live in cities." and counter with the observation that the poverty rate is higher in rural areas - https://en.wikipedia.org/wiki/Rural_poverty#Rural_versus_Urban_Poverty--United_States https://en.wikipedia.org/wiki/Rural_poverty#Rural_versus_Urb... says "rural poverty rates are higher and more persistent than in urban areas, rural workers are disadvantaged by lower wages and less access to better paying labor markets" - note that housing prices aren't part of it. And I didn't see mention that "stick housing" has moved towards factory methods. As https://priceonomics.com/in-defense-of-mobile-homes/ https://priceonomics.com/in-defense-of-mobile-homes/ points out: > Windows, doors, and other parts arrive prefabricated, Rybczynski writes, so labor costs have actually halved since 1949. Levitt and Sons spent $4 to $5 per square foot building Levittowners, and, adjusted for inflation, builders today spend the same amount. > Instead the problem is almost wholly that land is too expensive. Reduce the size of a new, modern house by 50%, Rybczynski notes, and houses in metropolitan areas will still cost over $200,000. > That’s the secret to the extreme affordability of a mobile home—take land out of the equation. We aren't really using "traditional methods" - engineered wood is not traditional and is very common. "As of 2005, approximately half of all wood light framed floors were framed using I-joists" says https://en.wikipedia.org/wiki/Engineered_wood#Beams https://en.wikipedia.org/wiki/Engineered_wood#Beams . These were made in a factory, and not "on-site" as the author describes the house-building process.
- adam_arthur 4y agoPopulation is flat over the last two years, while housing units are up and the construction rate is all time high. There is no crisis, just rampant speculation that ate through active inventory. The actual data is very clear on this (FRED), despite the word of mouth "shortage" narrative. Now that the narrative is turning, inventory is skyrocketing as you would expect, and we will be in a glut within 6 months. Look at the "all time low inventory" of the 2000s as another example. How quickly did the inventory narrative collapse back then? A few months
- jelliclesfarm 4y agoI don’t know why you are downvoted. You are right. Upvoted.
- adam_arthur 4y agoYup, I can cite as needed when the angry comments show up. Too many with a vested belief in the narrative.
- epistasis 4y agoYou are preventing an extremely selective and unrepresentative view of the stats.
- adam_arthur 4y agoProve me wrong. Show me the stat for housing units per capita. Housing units per working age person is an all time high. Show me the stats for housing units per household. Hint, it's the same as the year 2000 and in line with historically normal levels. 1.1 housing units per household Show me the stat for rate of construction relative to population growth. Hint, it's at an all time high. Show me the demographic trends? Hint, it's towards flat or negative population growth, with most boomers dying over the next 10y, and each successive generation being smaller than the last. Where are your stats? Inventory, which has nothing to do with actual supply? What happened after the generationally low inventory of the 2000s? Anyone holding to that peg as confirmation of anything is in for a rude awakening
- frankfrankfrank 4y agoI think what is being referred to here in typical mush mouth obtuse language is the "monopolization" that corporations are engaging in buying up massive amounts of real assets with essentially free money the fed it printing at the rate that even the "printing press goes brrrrrr" meme does not do justice. I don't know that people are really aware of the scale of what is going on here. The big finance houses have essentially been handed over ownership and control to corner the whole housing market ... by the captured and corrupt government.
- oldgradstudent 4y agoThe monopolization the paper refers to is how industry and government prevent the adoption of factory methods in construction, increasing construction costs.
- lazide 4y agoEh, it’s a lot more than that. But the paper is specifically pointing out that cost of land seems to be the driving factor, not cost of construction which is relatively flat. A cheaper manufactured home would of course be nice if looking at costs, but dropping it on a $1.5m acre lot isn’t going to change the math that much.
- whimsicalism 4y agoSure, if you are only building SFH.
- frankfrankfrank 4y agoI get that especially here people would love to think that "factory methods in construction" are wonderful, but the reality is that it is way more "human soul crushing communist block building" and far less utopian wonderland.
- tetris11 4y agoIn defence of brutalist architecture, at least its functional, spacious, and sensibly planned enough to build communities around those blocks. The concrete monstrosities of the 1960 and 70s built in London are still standing and are worth just as much as the newer builds which typically sport newer materials but come with higher rents and smaller spaces.
- schaefer 4y agoHere's a shred of evidence: Las Vegas is a city mostly surrounded by public lands. New private parcels are no longer made available as lots appropriate for single family homes. They are carved onto neighborhood sized chunks, sold to developers directly, and locked into HOA's for all eternity. Only the big boys that can tackle multi-million dollar bids can enrich themselves by the sale of our public lands.
- lazide 4y agoThat…. Has nothing apparently to do with what the message you were replying to was asking?
- rmbyrro 4y agoSeems to me it does. Question was for a shred of evidence for any cause other than FED policies. There it is an evidence, at least for Las Vegas. Most interesting is it shows this is not a single variable issue. There are lots of factors involved and they probably change across geographies.
- softfalcon 4y agoI think they’re trying to say that “higher construction costs” is literally the “multi-million dollar bids” to own property without going through a HOA. For the average person, this makes the land and construction costs unobtainable for the average person, effectively creating a monopoly for the builders and the HOA organizations with deep pockets to bid.
- mslate 4y agoThis is not a constructive or informed comment. Interest rate policy is not singularly to blame for the housing crisis, just as it wasn't in 2008. The issue in 2008 was lack of internal enforcement at banks or by federal regulators of interest rate products. In the case facing us today it is less to do with Fed policy, more to do with land use policies that have made housing construction literally illegal.
- riku_iki 4y ago> it is less to do with Fed policy How did you quantify "less"? Low Fed rate made mortgage body 60-70% cheaper, hence prices are higher.
- TedShiller 4y agoDon't assume there is even a housing crisis. Not everyone can live in NYC, that is a simple fact. Or LA, or SF. It's physically impossible. If you think building more housing lowers rent, then you've never been to a big city before.
- novok 4y agoBut building more housing does lower rent in big cities? It's status quo in tokyo, and it even happened locally where a mini-condo boom caused condo prices to stay flat around that area, while SFH house prices went up. Condos in other regions nearby continued to go up in price, where there wasn't a condo building boom.
- TedShiller 4y agoGo to any big US city with dense housing and tell me rents there are low. For people always referencing Tokyo -- why aren't you living in Tokyo then?
- singron 4y agoYou really aren't talking about the same thing. It's not like you can add 100 housing units to an area one time and achieve affordable housing indefinitely. The housing units have to be added to meet increases in demand. The idea I think you are assuming is that supply causes demand (i.e. demand will always rise to meet supply), and that the supply-demand curve is flat to maintain price regardless of supply.
- imtringued 4y agoThe supply and demand curve of land is so steep and vertical you would think it should be impossible.
- mjmahone17 4y agoManhattan has fewer residents today than it did in 1920. It also has much less building happening, and rents are higher now than they were in 1920 for the same square footage. Some of that is we don’t allow people to live in new boarding houses, some of it is that we downzoned the whole city multiple times, and there are a myriad of other reasons we should tackle as well. It may not be physically possible for the entire world to live in NYC, but we surely could double in population without breaking any real physical constraints. Besides the political constraints that make it absurdly expensive (in time, capital and social power) to build for more growth.
- WalterBright 4y agoI talked to a real estate friend today. He said the high prices are cracking and falling away as: 1. interest rates rise 2. peoples' stock porfolios have tanked
- imtringued 4y agoLow interest rates made housing more affordable though as you have to pay less interest.