4 ms·

Somewhat related: there was a discussion on NPR about how new builds will likely be much more popular because of rising interest rates. The cause is that there

Somewhat related: there was a discussion on NPR about how new builds will likely be much more popular because of rising interest rates. The cause is that there will be a much smaller supply of previously owned homes because owners won’t want to refinance at the much higher rates at the moment.

scarface74 4y ago
According to Slate Money, the reason that new builds are in more demand is that builders have programs that will reduce the interest rate by around 2% making the mortgage lower than a similar price existing home.
paxys 4y ago
The cost of raw materials and labor has gone up a lot more than interest rates in the last couple years.
- ivalm 4y ago
  But at least in hcol areas the cost of the house is in land value, so if that goes down you can pay more for labor and materials while charge less for the finished product. That $2M 1800sqft house is not priced on labor and materials.
  - loandbehold 4y ago
    Cost of labor is a large part of why housing is expensive in hcol areas. Workers that make $15/hour in Dallas are making $45/hour in Los Angeles.
    - ivalm 4y ago
      I originally didn’t think it’s a big effect but apparently per sqft new construction sfh in CA is $500 and in TX is $100. That’s insnane (so 2000sqft new construction costing $1M vs $200k).
      - s1artibartfast 4y ago
        Some portion of that is the California codes as well. You can't build the same house California that you could in Texas. As an example, I read that California will be moving our requirements for roofs to withstand a once per 700 years wind event. They're also more mundane requirements like you have to install Outlets every 4 ft along walls whether you want them or not. Why that's any of the state's business, I'm not sure.
        zbrozek 4y ago
        There are some codes that have a big impact, but I don't think that's one of them. In practice insane permitting and impact fees, high labor costs, and onerous requirements for professional services drive up housing costs. My town in California charges more in permit fees to build a house ($140-180k) than it costs to buy a house in many parts of the country. And on top of that they demand about $200-250k in professional services (excessive architectural drawings, geotechnical surveys, hydrology analysis, blah blah blah). San Francisco managed to expend a million dollars on a toilet that was donated to the city and installed for free. We suck.
        ejb999 4y ago
        Am I reading that right (and are you sure)? The cost of permitting alone in your are can add $180K +/- to the cost of a house? If true, that is truly shocking. Where I live the building permit fee is $8 per $1000 of estimated building cost. A one million dollar house would pay a fee of $8000 total (and most houses near me cost a lot less than that).
        s1artibartfast 4y ago
        It seems a little steep to me, but within the range of possibilities if additional fees and inspections are tacked on. I'm working on a project now and the permit is 5 to 10% of the building cost. Here is an example for SF: permit fees start at 5% of the project, but environmental review and other assessments can easily tack on another 100k flat rate. https://sfplanning.org/sites/default/files/forms/Fee_Schedule.pdf https://sfplanning.org/sites/default/files/forms/Fee_Schedul...
    - deleted 4y ago
      [deleted]

scarface74 4y ago

According to Slate Money, the reason that new builds are in more demand is that builders have programs that will reduce the interest rate by around 2% making the mortgage lower than a similar price existing home.

paxys 4y ago

The cost of raw materials and labor has gone up a lot more than interest rates in the last couple years.

ivalm 4y ago
But at least in hcol areas the cost of the house is in land value, so if that goes down you can pay more for labor and materials while charge less for the finished product. That $2M 1800sqft house is not priced on labor and materials.
- loandbehold 4y ago
  Cost of labor is a large part of why housing is expensive in hcol areas. Workers that make $15/hour in Dallas are making $45/hour in Los Angeles.
  - ivalm 4y ago
    I originally didn’t think it’s a big effect but apparently per sqft new construction sfh in CA is $500 and in TX is $100. That’s insnane (so 2000sqft new construction costing $1M vs $200k).
    - s1artibartfast 4y ago
      Some portion of that is the California codes as well. You can't build the same house California that you could in Texas. As an example, I read that California will be moving our requirements for roofs to withstand a once per 700 years wind event. They're also more mundane requirements like you have to install Outlets every 4 ft along walls whether you want them or not. Why that's any of the state's business, I'm not sure.
      - zbrozek 4y ago
        There are some codes that have a big impact, but I don't think that's one of them. In practice insane permitting and impact fees, high labor costs, and onerous requirements for professional services drive up housing costs. My town in California charges more in permit fees to build a house ($140-180k) than it costs to buy a house in many parts of the country. And on top of that they demand about $200-250k in professional services (excessive architectural drawings, geotechnical surveys, hydrology analysis, blah blah blah). San Francisco managed to expend a million dollars on a toilet that was donated to the city and installed for free. We suck.
        ejb999 4y ago
        Am I reading that right (and are you sure)? The cost of permitting alone in your are can add $180K +/- to the cost of a house? If true, that is truly shocking. Where I live the building permit fee is $8 per $1000 of estimated building cost. A one million dollar house would pay a fee of $8000 total (and most houses near me cost a lot less than that).
        s1artibartfast 4y ago
        It seems a little steep to me, but within the range of possibilities if additional fees and inspections are tacked on. I'm working on a project now and the permit is 5 to 10% of the building cost. Here is an example for SF: permit fees start at 5% of the project, but environmental review and other assessments can easily tack on another 100k flat rate. https://sfplanning.org/sites/default/files/forms/Fee_Schedule.pdf https://sfplanning.org/sites/default/files/forms/Fee_Schedul...
  - deleted 4y ago
    [deleted]