4 ms·

I don't know much about this field, but I'm not sold on the arguments... one thing that seems like a problem is that they are equating a buildings "cost to buil

I don't know much about this field, but I'm not sold on the arguments... one thing that seems like a problem is that they are equating a buildings "cost to build" with "price sold". I'm not sure that its a good comparison. For example, even if someone could build a house for $1, it would still be sold based on the costs of the houses near it in the neighborhood. That's part of the way people determine house prices.

readthenotes1 4y ago
Plus, sq ft is a very rude way to compare buildings.
- nemo44x 4y ago
  Agreed - kitchens and bathrooms cost much more than an empty room. Homes with lots of windows cost more as well. And then you need to consider other aspects like the quality of existing materials, how far away from replacement they are, etc. Where I live no one really uses square feet because the land is so expensive as well and the homes are old and 1 may be recently renovated and another may need $400k+ in renovation work.
88840-8855 4y ago
Yup, my observation confirms your hypothesis. The new houses in my neighborhood were all built 2017. There are 120 units in 2 styles: houses and semi detached houses. They all look identical and they were all built with a lot of economies of scale. The price 2015 was: 500.000 Euro for the semi detached units. The price 2022 is: 1.3 million. The neighborhood did not change, the infrastructure did not improve. Nobody can explain you a logical reason (except of EcOnOmiNCs) why the house price exploded. Fine, some construction risk was prices in, let's be it 10%, also risk of default and other factors 10%. That explains 650k. My boomer parents came, watched and complained: terrible houses, all look same, no garden, no basement, tiny garage, too close to the neighbors. They bought their house back than for 230k! And there was this amazing time in Germany where prices for houses did not increase. They stagnated and even slightly dropped - which is intuitive as the house is getting older and less attractive! The American crisis 2008 destroyed everything and it's incredible that until today we are not pointing towards those who's fault it was. tldr: houses can be build with economies of scale, prices are up because of American politics 2008+
- 88840-8855 4y ago
  LOL! i just love it! the post received many upvotes before the Americans woke up. They go up and the negative votes started. You people are seriously the worst! The Europeans must get distance to you as much as possible. We have nothing in common.
- inglor_cz 4y ago
  "until today we are not pointing towards those who's fault it was." Is the rest of the world, including the EU, so helpless and agency-less that it can't recover after a 15 year old event that originated on a different continent? Unfortunately at least in the EU we seem to be (I am your neighbour from CZ). One of the reasons why so much money flows into houses is that they promise better returns than normal stock (shares of corporations). And that is because our corporations have become sclerotic. Another reason is the artificially low interest of the Eurozone, designed so that Italy and others do not go bankrupt when servicing their own debt. This fuels a mortgage bubble, but it has zilch to do with America. The Czech central bank raised interest rates (we do not use EUR yet) and the prices of houses stopped climbing very abruptly. They stabilized on a high level, but they don't grow anymore. Given that there are no buyers anymore, the prices will have to go down.
  - DubiousPusher 4y ago
    > Is the rest of the world, including the EU, so helpless and agency-less that it can't recover after a 15 year old event that originated on a different continent? The evidence seems to point to yes. The bottom line is that in many construction rates and employment have simply never recovered in many countries. As to why the politicians do nothing, I can think of only two reasons. Neo-liberalism has so broken the back of socialism that governments do not have the will. Or legislatures are now so stocked with bourgeoisie property owners that they don't see the problem or in fact they like that they benefit from it. In the U.S. we have now a panick over crime. The media and the politicians love to point at drug addled homeless people with implications of their criminality. And even the Democratic party has begun to bang the drum for the police "to do something" yet they say nothing about housing. There is something very wrong in our time.
starwatch 4y ago
That's definitely true in the short term. Now, imagine the secret of the $1 build is available to at least one other commercial builder. The "your margin is my opportunity" aspect of a free market kicks in. There's a high demand for housing, so competing builders compete for the same buyers. Over time it'd drive down the price. If this doesn't happen it's probably a combination of: 1. limited land available to build on 2. the money chasing uniqueness e.g. unique builds, pretty views, access to schools, etc. 3. price fixing 4. other..?
- ben_w 4y ago
  I'd suggest that #1 is already a strong part of house prices, at least in the UK (despite moving to Germany a few years ago, I've only looked at the end price here not the causes). If you can reduce the cost of making new infrastructure to a pittance, I'd expect house prices to fall even in the absence of any change to the manufacturing costs.
xnx 4y ago
Don't mix up the cost of a house with the cost of the land.
- steveBK123 4y ago
  Exactly. In most HCOL states, the land under the house is anywhere from 50% to the majority of the cost. So if you somehow got the cost of build down say, 50% (unlikely given materials costs too), then your overall cost would still only go down 25% or less. In most localities, you can get an idea of how the government values your land vs your home from your property tax statement (improved vs unimproved).
deleted 4y ago
[deleted]
eloff 4y ago
It's definately not true. In Vancouver, Canada where there's been a bull market in housing for over thirty years straight, builders make a pretty good living. I've met some earning 250-400k a year. As a software engineer, I felt I was in the wrong business. That profit is part of the cost to build, yes. But it also doesn't have to be that high, that's really enabled by market conditions.
- SECProto 4y ago
  > I've met some earning 250-400k a year. As a software engineer, I felt I was in the wrong business. That's definitely "grass is always greener" thinking, of the same sort that makes others hear about Google project manager salaries and think they should be working as a programmer. For every one person making 250k+ at a construction company, there are probably a hundred making <100k. Salaries don't go much beyond 120k unless you're in the owner sort of category. And the industry comes along with working 10+ hour days (630am to 5pm is a pretty regular schedule, 4pm on Fridays tho!), outdoors, regardless of weather. And it's physically demanding work
  - eloff 4y ago
    These are owners, not employees. Basically contractors that manage all the subcontracting in a construction project. It can be physically exhausting work, and long hours for sure. Still, it's impressive that they can pull in those kinds of figures.
    - reportingsjr 4y ago
      Spot on. Even in the midwest US (e.g. Ohio) high end contractors can pull in close to the numbers you mentioned. Definitely requires 50-60+ hours a week for decades to get there though.
- patrick451 4y ago
  Home builders carry a lot more risk than your average software dev. You read all the time about devs making 250-400k. I'm in that range myself. There is basically no way I can screw up my job that results in anything worse than getting fired. If you are a home builder, you have on-going liability for everything you build. It's not unheard of to hear about somebody getting sued for something they built a decade ago. Imagine if your career could be ruined because code you wrote 10 years ago had a use after free bug? Fluctuations in interest rates, material costs and the housing market in general means they also have a lot of risk on the business side. This is especially true for those building spec houses. Honestly, compared to the software world, that profit range sounds too small.

readthenotes1 4y ago

Plus, sq ft is a very rude way to compare buildings.

nemo44x 4y ago
Agreed - kitchens and bathrooms cost much more than an empty room. Homes with lots of windows cost more as well. And then you need to consider other aspects like the quality of existing materials, how far away from replacement they are, etc. Where I live no one really uses square feet because the land is so expensive as well and the homes are old and 1 may be recently renovated and another may need $400k+ in renovation work.

88840-8855 4y ago

Yup, my observation confirms your hypothesis. The new houses in my neighborhood were all built 2017. There are 120 units in 2 styles: houses and semi detached houses. They all look identical and they were all built with a lot of economies of scale. The price 2015 was: 500.000 Euro for the semi detached units. The price 2022 is: 1.3 million. The neighborhood did not change, the infrastructure did not improve. Nobody can explain you a logical reason (except of EcOnOmiNCs) why the house price exploded. Fine, some construction risk was prices in, let's be it 10%, also risk of default and other factors 10%. That explains 650k. My boomer parents came, watched and complained: terrible houses, all look same, no garden, no basement, tiny garage, too close to the neighbors. They bought their house back than for 230k! And there was this amazing time in Germany where prices for houses did not increase. They stagnated and even slightly dropped - which is intuitive as the house is getting older and less attractive! The American crisis 2008 destroyed everything and it's incredible that until today we are not pointing towards those who's fault it was. tldr: houses can be build with economies of scale, prices are up because of American politics 2008+

88840-8855 4y ago
LOL! i just love it! the post received many upvotes before the Americans woke up. They go up and the negative votes started. You people are seriously the worst! The Europeans must get distance to you as much as possible. We have nothing in common.
inglor_cz 4y ago
"until today we are not pointing towards those who's fault it was." Is the rest of the world, including the EU, so helpless and agency-less that it can't recover after a 15 year old event that originated on a different continent? Unfortunately at least in the EU we seem to be (I am your neighbour from CZ). One of the reasons why so much money flows into houses is that they promise better returns than normal stock (shares of corporations). And that is because our corporations have become sclerotic. Another reason is the artificially low interest of the Eurozone, designed so that Italy and others do not go bankrupt when servicing their own debt. This fuels a mortgage bubble, but it has zilch to do with America. The Czech central bank raised interest rates (we do not use EUR yet) and the prices of houses stopped climbing very abruptly. They stabilized on a high level, but they don't grow anymore. Given that there are no buyers anymore, the prices will have to go down.
- DubiousPusher 4y ago
  > Is the rest of the world, including the EU, so helpless and agency-less that it can't recover after a 15 year old event that originated on a different continent? The evidence seems to point to yes. The bottom line is that in many construction rates and employment have simply never recovered in many countries. As to why the politicians do nothing, I can think of only two reasons. Neo-liberalism has so broken the back of socialism that governments do not have the will. Or legislatures are now so stocked with bourgeoisie property owners that they don't see the problem or in fact they like that they benefit from it. In the U.S. we have now a panick over crime. The media and the politicians love to point at drug addled homeless people with implications of their criminality. And even the Democratic party has begun to bang the drum for the police "to do something" yet they say nothing about housing. There is something very wrong in our time.

starwatch 4y ago

That's definitely true in the short term. Now, imagine the secret of the $1 build is available to at least one other commercial builder. The "your margin is my opportunity" aspect of a free market kicks in. There's a high demand for housing, so competing builders compete for the same buyers. Over time it'd drive down the price. If this doesn't happen it's probably a combination of: 1. limited land available to build on 2. the money chasing uniqueness e.g. unique builds, pretty views, access to schools, etc. 3. price fixing 4. other..?

ben_w 4y ago
I'd suggest that #1 is already a strong part of house prices, at least in the UK (despite moving to Germany a few years ago, I've only looked at the end price here not the causes). If you can reduce the cost of making new infrastructure to a pittance, I'd expect house prices to fall even in the absence of any change to the manufacturing costs.

xnx 4y ago

Don't mix up the cost of a house with the cost of the land.

steveBK123 4y ago
Exactly. In most HCOL states, the land under the house is anywhere from 50% to the majority of the cost. So if you somehow got the cost of build down say, 50% (unlikely given materials costs too), then your overall cost would still only go down 25% or less. In most localities, you can get an idea of how the government values your land vs your home from your property tax statement (improved vs unimproved).

deleted 4y ago

[deleted]

eloff 4y ago

It's definately not true. In Vancouver, Canada where there's been a bull market in housing for over thirty years straight, builders make a pretty good living. I've met some earning 250-400k a year. As a software engineer, I felt I was in the wrong business. That profit is part of the cost to build, yes. But it also doesn't have to be that high, that's really enabled by market conditions.

SECProto 4y ago
> I've met some earning 250-400k a year. As a software engineer, I felt I was in the wrong business. That's definitely "grass is always greener" thinking, of the same sort that makes others hear about Google project manager salaries and think they should be working as a programmer. For every one person making 250k+ at a construction company, there are probably a hundred making <100k. Salaries don't go much beyond 120k unless you're in the owner sort of category. And the industry comes along with working 10+ hour days (630am to 5pm is a pretty regular schedule, 4pm on Fridays tho!), outdoors, regardless of weather. And it's physically demanding work
- eloff 4y ago
  These are owners, not employees. Basically contractors that manage all the subcontracting in a construction project. It can be physically exhausting work, and long hours for sure. Still, it's impressive that they can pull in those kinds of figures.
  - reportingsjr 4y ago
    Spot on. Even in the midwest US (e.g. Ohio) high end contractors can pull in close to the numbers you mentioned. Definitely requires 50-60+ hours a week for decades to get there though.
patrick451 4y ago
Home builders carry a lot more risk than your average software dev. You read all the time about devs making 250-400k. I'm in that range myself. There is basically no way I can screw up my job that results in anything worse than getting fired. If you are a home builder, you have on-going liability for everything you build. It's not unheard of to hear about somebody getting sued for something they built a decade ago. Imagine if your career could be ruined because code you wrote 10 years ago had a use after free bug? Fluctuations in interest rates, material costs and the housing market in general means they also have a lot of risk on the business side. This is especially true for those building spec houses. Honestly, compared to the software world, that profit range sounds too small.