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"Cost more to build than they are worth" means "we built something in hopes of turning a profit, and in fact, we can't sell it for as much as we planned, so we
by kevinpet 15y ago
"Cost more to build than they are worth" means "we built something in hopes of turning a profit, and in fact, we can't sell it for as much as we planned, so we won't turn a profit."
This isn't a mysterious conspiracy on the part of appraisers. They shouldn't have built those houses that aren't worth enough to cover the cost of building them.
- roel_v 15y agoDid you even read the article? The point is that when people want to have a home build, they get a quote from a builder, agree on a price, then go for a mortgage. To get one, the house (that is yet to be built) needs to be appraised. It's about those appraisals that the article is about - the houses are appraised at less than they can be built for, even when nobody has turned a profit yet (well the builder turns a 0.5 % profit on average, according to the article).
- kevinpet 15y agoYes, I read the article. The bank is telling them "you are stupidly overpaying, our risk is based on the resale value of the collateral, and we think the collateral is only worth $X, so we are not going to loan you more than 80% of $X." Putting this magic voodoo phrase "less than they can be built for" in italics does not make it any more meaningful. Some other things that can't be made for less than they are worth: manual typewriters, augmented reality glasses, 50 foot butter sculptures of Mickey Mouse. It happens that right now in our current housing market, there is a surplus of existing homes which means it is not economical to built houses. Now, it seems unlikely that this is a permanent state of affairs (since houses, unlike manual typewriters, are still in pretty high demand).