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Doesn't seem like this production method was particularly advantageous: > But even at its early-50s heyday, while Levitt was an efficient builder, he wasn’t un

Doesn't seem like this production method was particularly advantageous: > But even at its early-50s heyday, while Levitt was an efficient builder, he wasn’t unrivaled. Levitt and Sons sold its early Levittown homes for around $10 per square foot, but many other builders (none of whom operated at Levitt’s scale) sold their homes at similar prices. As property prices have increased, I doubt that the cost of building the house is even the major cost factor - it's probably mostly property value for the lot. Edit: It also strikes me that we have something even better today - pre-fab or "mobile" homes that can be delivered by truck to a suitable plot of land. These haven't solved the housing crisis either.

nimbius 2y ago
home prices also dont scale linearly across their subcomponents. the most expensive part of a home is often the kitchen and bathroom. once youre on the hook for those costs, the tendency is to increase square footage overall in order to justify the price at all to the market. the nadier of homebuilding during the bush era was the McMansion at around 5000-6000 sqft, with a triple garage. not that you had three cars, just that the Hummer H2 took most of that real estate. most of these either got demolished after 2008 or sit in a capital management firms investment portfolio, about as attractive as a barrel of radioactive waste. the other issue is a lot of municipalities (United States in particular) mandate and encourage large single family homes with outmoded energy and environmental requirements. suburbs work by siphoning resources from larger cities, sort of like a parasite. in turn they produce and encourage among the worst trends in US homes. acres of irrigated lawns and uninsulated attics and windows arent a concern but a feature of their housing code malaise as the cities subsidize this largesse.
- bluGill 2y ago
  > suburbs work by siphoning resources from larger cities, sort of like a parasite. in turn they produce and encourage among the worst trends in US homes. acres of irrigated lawns and uninsulated attics and windows arent a concern but a feature of their housing code malaise as the cities subsidize this largesse. That is the narrative, but it doesn't stand up. Suburbs have existed for over 100 years now, and those older ones have managed to tear out the streetcars (on hindsight a mistake), put in sewer, water, phone, electric, cable tv - most of the above list has been replaced several times. They seem like they must be siphoning from the larger city until you realize that they are not replacing all of that every 20 years and so depreciation is not a clue as to the real long term costs. There are exurbs where you get acres of land, those are generally surrounded by farms (at least for the first 30 years until the suburbs expand out that far - but then a developer will buy those acres and divide it for more houses) In the suburbs you are looking at more like 10 houses per acre - which is not very dense, but still much denser. The US has good building codes. There is no place where you can get by with an uninsulated attic - except in the bad parts of big cities where houses from 1880 are still around and not upgraded. edit: uninsulated attic
  - telotortium 2y ago
    > There is no place where you can get by with an insulated attic Surely you mean “uninsulated attic” here?
    - jandrese 2y ago
      I admittedly don't tour a lot of homes, but I'm pretty sure insulating between the attic space and the living space is close to universal in my area. Maybe if you live in Southern California or Hawaii and your home doesn't have A/C you could get away without it. Especially if you have a whole house fan that vents into the attic. But even then it is so cheap to blow in insulation that it seems foolish to not do it.
      - robohoe 2y ago
        Yep, it's pretty universal in the US. You insulate the attic floor (ceiling of your rooms). This also means that you need to keep your attic cold. You do that by letting air in from your soffit vents to either ridge or gable vent. Ridge vent is arguably better because it runs along the right of your roof allowing the air to travel between the trusses that holds your roof up.
      - rconti 2y ago
        why would you be able to "get away with it" specifically without A/C? Seems to me having A/C would make a house with an uninsulated attic at least somewhat less miserable.
        jandrese 2y ago
        It's more because you'll have your windows open all the time because you live in paradise.
        rconti 2y ago
        Oh. But I mean, you'd still be much better off with insulation. FWIW I wouldn't want to live in SoCal (hot) or Hawaii (hot and humid) without A/C. We don't have A/C here in the bay area, and I wouldn't want to live anywhere warmer without it.
- ben_w 2y ago
  > the most expensive part of a home is often the kitchen and bathroom Absolutely this. Back in 2018, mum got dementia and her old home was not one the rest of us could really move back into due to commutes, so we sold it and bought a new one in a better location. The new one wasn't quite big enough, so we converted the existing garage into a granny annex with its own mini-kitchen and shower. That took about 6 months. - I've also recently had one kitchen installed (4m^2 for an apartment I let out), and ordered a second (6 m^2, for a house I'm about to move into), and despite both being tiny and already having the water and electrical connections, they were both in the £€ 10k range.
  - whycome 2y ago
    What about it makes it so expensive? Appliances? Storage?
    - jandrese 2y ago
      Plumbing, cabinets, countertops, appliances, and even the flooring. Everything adds up, and quickly. To be fair there are lots of ways to save money when doing a kitchen or bath remodel, but if you're doing the remodel in the first place you aren't opting for the linoleum floors, plastic countertops, and "builder grade" appliances.
      - danans 2y ago
        > you aren't opting for the linoleum floors Linoleum floors are amazingly durable and water resistant (some were recovered intact from the Titanic), made from a renewable source (linseed oil), and quite attractive these days. Perhaps you are thinking of vinyl flooring, which is petroleum derived, and the among cheapest types of flooring.
        jandrese 2y ago
        > and quite attractive these days. [citation needed] Kitchen remodels that I've seen pretty much always opt for some form of tile, which adds considerably to the cost.
- telotortium 2y ago
  > suburbs work by siphoning resources from larger cities, sort of like a parasite. in turn they produce and encourage among the worst trends in US homes. acres of irrigated lawns and uninsulated attics and windows arent a concern but a feature of their housing code malaise as the cities subsidize this largesse. There’s a reason that this narrative, the Strong Towns narrative, comes from an organization with “Towns” in the name. It was originally noticed in small rural American cities (county seats in the rural US and the like), and applies fairly well there, since the trend is to build suburbs in unincorporated land surrounding the main city to avoid city taxes. Suburbs surrounding large American cities tend to be incorporated cities of their own, so they raise their own taxes and don’t steal from the main city. One major advantage cities used to have in the US but no longer do is that it used to be necessary to be annexed to a city to get access to things like their water system. That was a major driver of cities growing pre-WWII. However, as the US got richer and governmental structures became more sophisticated, things like water districts not coterminous with a city became common. Now there was little reason to become annexed to the city in most cases, unless your city or county ran into budget troubles, in which case the central city probably doesn’t want to pay for you either. Lots of suburbs remain separate specifically to avoid being subject to the city school system as well.
  - kiliantics 2y ago
    While this might be true on the technical level you mention, I don't know the details, I think the general pattern holds true even for larger cities. Think of NYC, where many suburbanite "bridge and tunnel folks" choose to live in Jersey, Long Island, etc. to avoid the higher city taxes but have no problem availing of all the city-funded infrastructure. They even caused the state governor to backtrack on congestion pricing so they could keep driving their vehicles in at the expense of NYC residents.
    - telotortium 2y ago
      Ah, but NYC benefits from suburbanites and other outsiders visiting the city for work, deliveries, government services, culture and everything else. Sure, they have to build infrastructure (very much including trains) to service them, but the return is that NYC gets to accrue a larger metro area and the associated wealth. Also, it’s easy to forget that much of NYC’s infrastructure needs to live in suburban areas due to NYC’s density. All the warehouses needed to keep NYC fed and supplied can’t fit inside the city, to name one prominent example. Even to bring all the residential housing in the metro area into the city itself would make the city have to spend an ungodly amount on infrastructure to support them inside the city limits. The city actually benefits by having other jurisdictions be responsible for housing much of the metro area population.
- philwelch 2y ago
  > with a triple garage. not that you had three cars There are so many things you can do with garage space other than park cars in it though.
  - rootusrootus 2y ago
    Ain’t that the truth! I have 4.5 spots in my garage (not a big house, just 3000sf, but it’s very common in my area to oversize the garages) but only two ever have cars in them. The rest is my home gym, craft area, and a workshop.
- adolph 2y ago
  > home prices also dont scale linearly across their subcomponents See also why small cars aren't proportionately less expensive.
tzs 2y ago
> As property prices have increased, I doubt that the cost of building the house is even the major cost factor - it's probably mostly property value for the lot. I'm not so sure. Looking at my property tax assessment my 1/5th my 1400 sq ft house + 400 sq ft detached garage has an accessed value of about 3.5 times that of my 1/5th acre lot. Accessed values here are based on market values and are reasonably close to what I see when I compare to recent sales on Redfin or Zillow, so it looks like the total is close. And the accessed value of the building is reasonably close to what my insurance company says it would cost to rebuild them. Checking Zillow for lots for sale, it looks like my assessed value is reasonable. I'm in a relatively low density area though. As a check I looked at a nearby significant city, Seattle. Comparing lots for sale there to nearby similar lots that have houses on them it looks like it is similar to where I am in some places and very different in others. It looks like if the lot is zoned for commercial use or for tall buildings the price if very high. I saw one that was something like 0.38 acres for nearly $7 million. But for lots in single family house areas it looked pretty similar to what I'm seeing at my place. The lot is around 1/4th or 1/5th the value of the property.
- asielen 2y ago
  Counter example in coastal California (in basically the West Coast version of levitt Town),my tax and insurance assessment has my physical house only representing a third of the total value. So the lot is with double the structure. But I'm guessing that is not a common situation across the country.
  - tzs 2y ago
    Is there anything especially attractive about your location? Lots with a good view for example can go for a lot more than similar lots in the same general area that lack a view.
    - asielen 2y ago
      Nope, just generic Bay Area suburbs. And in one of the "cheaper" areas to boot.
treis 2y ago
>As property prices have increased, I doubt that the cost of building the house is even the major cost factor - it's probably mostly property value for the lot. More like 10-20% depending on a lot of different factors like location, cost of house, and size of lot.
SoftTalker 2y ago
Yeah home prices are mainly based on location and sqare footage. Condition, age, and amenities factor in but pretty much all the houses in a neighborhood sell for similar prices. It's definitely possible to over-improve a house and find yourself upside down in it at least for a while, which is OK if you want to live there and enjoy it but can backfire if you're planning to sell soon.
- KevinGlass 2y ago
  Keep in mind this is not true in the Northeast. It’s very common to have multi million dollar homes within spitting distance of dilapidated buildings worth only land value. My parent’s house, while nothing special, sold for a couple hundred thousand when they sold in 2019. A few months before hand our neighbor sold theirs for over 2 million.
  - neutronicus 2y ago
    Not sure whether the original contention is untrue in the Northeast or just much more rapidly-varying in space. Where I live (Baltimore) your second sentence is certainly true. There are boundaries across which the vacancy rate is basically discontinuous. In connected regions surrounded by such boundaries I think the original contention pretty much holds, though. There are a couple variables (nbeds, nbaths, sqft, parking space) that pretty much determine the value of the home and going HAM on any improvements they don't capture is probably negative ROI.
michaelt 2y ago
> I doubt that the cost of building the house is even the major cost factor - it's probably mostly property value for the lot. This is certainly the case here in the UK - but I suspect it depends on your local laws. I looked into building my own house and essentially when you found a plot of land where you could legally construct a house - if a high quality house in that location would be worth £400k and cost £150k to construct, then the landowner would want £250k. I do sometimes wonder if it could be politically advantageous to separate out the business of physically constructing houses from the business of capital management, land investment, risk management and house price speculation. If a council knew they could construct 20 families worth of good quality social housing for £100k per house, with no risk of cost over-runs or late delivery, and they just had to provide the land? That could give them the motivation to find the land.
- bluGill 2y ago
  > separate out the business of physically constructing houses from the business of capital management, land investment, risk management and house price speculation. That is how it mostly works in the US. The developer buys a large plot of land and puts in roads, utilities then sells the lots to several home builders who build houses on it. The home builders contract out the foundation, framing, plumbing... to separate companies. while it is common to be in more than one part of this, only the smallest developments are all one builder (and even then plumbing is contracted out).
- deleted 2y ago
  [deleted]
- nayuki 2y ago
  I wouldn't discourage speculation on the price of the physical dwelling (i.e. the house). But land speculation is corrosive to society, and the way to fix that is with a land value tax.
- saalweachter 2y ago
  > ... if a high quality house in that location would be worth £400k and cost £150k to construct, then the landowner would want £250k. Is that wrong? If the house+location is worth 400, and the house alone is 150, why isn't the location worth 250?
deleted 2y ago
[deleted]
yojo 2y ago
In my market (Portland, OR), the cost for new construction seems to be in the range of $250-350/square foot. A buildable lot in a decent neighborhood costs $300k-ish (if you can find one). Assuming you’re building a family sized building of 2k+ square feet, building costs definitely exceed land costs. Anecdotally, all the new construction in my neighborhood is top of market - builders are selling large houses at $1.3M+ when a typical existing house sells for more like $700k. Smaller homes would sell faster, but the economics seem to only pencil out for larger/higher end.
whycome 2y ago
Pre fab and mobile could solve the crisis but they are mired in all kinds of stupid rules. A living space for a human being doesn't need to cost hundreds of thousands of dollars.
nostrademons 2y ago
The author previously did a great blog post breaking down the overall costs of building new homes: https://www.construction-physics.com/p/what-makes-housing-so-expensive https://www.construction-physics.com/p/what-makes-housing-so... tl;dr: For new developments, land is only about 20% of the total sale price of the home, and this share has been dropping since 2005. However, he also notes an important selection bias to this stat: new homes do not get constructed in areas where land is expensive, unless it's a custom build for a specific wealthy buyer, because developers cannot make a profit building SFHs if they spend a majority of the purchase price just buying the land. He notes that in wealthy areas like eg. Silicon Valley, 80% of the purchase price is land value, but developers are not building homes there, which is part of why the purchase price is so high. And sure enough, if you go out to Mountain House or Discovery Bay, prices are like 25% of what they are in Silicon Valley. But then you have to commute from Mountain House. America's housing problem is as much a commuting or job distribution problem as housing, but those problems are even harder to fix than housing.
philwelch 2y ago
> Edit: It also strikes me that we have something even better today - pre-fab or "mobile" homes that can be delivered by truck to a suitable plot of land. This author did a series about that as well: https://www.construction-physics.com/p/the-rise-and-fall-of-the-mobile-home https://www.construction-physics.com/p/the-rise-and-fall-of-...
jeffreyrogers 2y ago
Why would you sell for less than the market price? If I can sell something at $10/sq ft and my costs to produce it are $5 and my competitors are $9 then there is no reason to cut prices. We will both profit, I will just make larger profits.
- golergka 2y ago
  Because if you cut prices, you'll get a larger share of the market. So even if you make less profit per unit, you make a larger profit overall. Also, as you scale, some costs stay fixed, so your costs per unit might go down as well.
  - m463 2y ago
    I kind of wonder if you cut prices, will land prices go up to normalize?
  - buck746 2y ago
    The catch is that if you charge less than a small difference to your next closest competitor people will think something is wrong with it. Saw it happen many times working at an antique store for years. It was amazing how often raising prices made things sell that had been sitting there for months, or longer. You rarely want to make something too inexpensive, along with never using the word "cheap". There's also issues with trying to give something away for free. Generally people value something more depending on what they paid for it. Upscale brands like Coach and Channel exploit that aspect of consumer psychology.

nimbius 2y ago

home prices also dont scale linearly across their subcomponents. the most expensive part of a home is often the kitchen and bathroom. once youre on the hook for those costs, the tendency is to increase square footage overall in order to justify the price at all to the market. the nadier of homebuilding during the bush era was the McMansion at around 5000-6000 sqft, with a triple garage. not that you had three cars, just that the Hummer H2 took most of that real estate. most of these either got demolished after 2008 or sit in a capital management firms investment portfolio, about as attractive as a barrel of radioactive waste. the other issue is a lot of municipalities (United States in particular) mandate and encourage large single family homes with outmoded energy and environmental requirements. suburbs work by siphoning resources from larger cities, sort of like a parasite. in turn they produce and encourage among the worst trends in US homes. acres of irrigated lawns and uninsulated attics and windows arent a concern but a feature of their housing code malaise as the cities subsidize this largesse.

bluGill 2y ago
> suburbs work by siphoning resources from larger cities, sort of like a parasite. in turn they produce and encourage among the worst trends in US homes. acres of irrigated lawns and uninsulated attics and windows arent a concern but a feature of their housing code malaise as the cities subsidize this largesse. That is the narrative, but it doesn't stand up. Suburbs have existed for over 100 years now, and those older ones have managed to tear out the streetcars (on hindsight a mistake), put in sewer, water, phone, electric, cable tv - most of the above list has been replaced several times. They seem like they must be siphoning from the larger city until you realize that they are not replacing all of that every 20 years and so depreciation is not a clue as to the real long term costs. There are exurbs where you get acres of land, those are generally surrounded by farms (at least for the first 30 years until the suburbs expand out that far - but then a developer will buy those acres and divide it for more houses) In the suburbs you are looking at more like 10 houses per acre - which is not very dense, but still much denser. The US has good building codes. There is no place where you can get by with an uninsulated attic - except in the bad parts of big cities where houses from 1880 are still around and not upgraded. edit: uninsulated attic
- telotortium 2y ago
  > There is no place where you can get by with an insulated attic Surely you mean “uninsulated attic” here?
  - jandrese 2y ago
    I admittedly don't tour a lot of homes, but I'm pretty sure insulating between the attic space and the living space is close to universal in my area. Maybe if you live in Southern California or Hawaii and your home doesn't have A/C you could get away without it. Especially if you have a whole house fan that vents into the attic. But even then it is so cheap to blow in insulation that it seems foolish to not do it.
    - robohoe 2y ago
      Yep, it's pretty universal in the US. You insulate the attic floor (ceiling of your rooms). This also means that you need to keep your attic cold. You do that by letting air in from your soffit vents to either ridge or gable vent. Ridge vent is arguably better because it runs along the right of your roof allowing the air to travel between the trusses that holds your roof up.
    - rconti 2y ago
      why would you be able to "get away with it" specifically without A/C? Seems to me having A/C would make a house with an uninsulated attic at least somewhat less miserable.
      - jandrese 2y ago
        It's more because you'll have your windows open all the time because you live in paradise.
        rconti 2y ago
        Oh. But I mean, you'd still be much better off with insulation. FWIW I wouldn't want to live in SoCal (hot) or Hawaii (hot and humid) without A/C. We don't have A/C here in the bay area, and I wouldn't want to live anywhere warmer without it.
ben_w 2y ago
> the most expensive part of a home is often the kitchen and bathroom Absolutely this. Back in 2018, mum got dementia and her old home was not one the rest of us could really move back into due to commutes, so we sold it and bought a new one in a better location. The new one wasn't quite big enough, so we converted the existing garage into a granny annex with its own mini-kitchen and shower. That took about 6 months. - I've also recently had one kitchen installed (4m^2 for an apartment I let out), and ordered a second (6 m^2, for a house I'm about to move into), and despite both being tiny and already having the water and electrical connections, they were both in the £€ 10k range.
- whycome 2y ago
  What about it makes it so expensive? Appliances? Storage?
  - jandrese 2y ago
    Plumbing, cabinets, countertops, appliances, and even the flooring. Everything adds up, and quickly. To be fair there are lots of ways to save money when doing a kitchen or bath remodel, but if you're doing the remodel in the first place you aren't opting for the linoleum floors, plastic countertops, and "builder grade" appliances.
    - danans 2y ago
      > you aren't opting for the linoleum floors Linoleum floors are amazingly durable and water resistant (some were recovered intact from the Titanic), made from a renewable source (linseed oil), and quite attractive these days. Perhaps you are thinking of vinyl flooring, which is petroleum derived, and the among cheapest types of flooring.
      - jandrese 2y ago
        > and quite attractive these days. [citation needed] Kitchen remodels that I've seen pretty much always opt for some form of tile, which adds considerably to the cost.
telotortium 2y ago
> suburbs work by siphoning resources from larger cities, sort of like a parasite. in turn they produce and encourage among the worst trends in US homes. acres of irrigated lawns and uninsulated attics and windows arent a concern but a feature of their housing code malaise as the cities subsidize this largesse. There’s a reason that this narrative, the Strong Towns narrative, comes from an organization with “Towns” in the name. It was originally noticed in small rural American cities (county seats in the rural US and the like), and applies fairly well there, since the trend is to build suburbs in unincorporated land surrounding the main city to avoid city taxes. Suburbs surrounding large American cities tend to be incorporated cities of their own, so they raise their own taxes and don’t steal from the main city. One major advantage cities used to have in the US but no longer do is that it used to be necessary to be annexed to a city to get access to things like their water system. That was a major driver of cities growing pre-WWII. However, as the US got richer and governmental structures became more sophisticated, things like water districts not coterminous with a city became common. Now there was little reason to become annexed to the city in most cases, unless your city or county ran into budget troubles, in which case the central city probably doesn’t want to pay for you either. Lots of suburbs remain separate specifically to avoid being subject to the city school system as well.
- kiliantics 2y ago
  While this might be true on the technical level you mention, I don't know the details, I think the general pattern holds true even for larger cities. Think of NYC, where many suburbanite "bridge and tunnel folks" choose to live in Jersey, Long Island, etc. to avoid the higher city taxes but have no problem availing of all the city-funded infrastructure. They even caused the state governor to backtrack on congestion pricing so they could keep driving their vehicles in at the expense of NYC residents.
  - telotortium 2y ago
    Ah, but NYC benefits from suburbanites and other outsiders visiting the city for work, deliveries, government services, culture and everything else. Sure, they have to build infrastructure (very much including trains) to service them, but the return is that NYC gets to accrue a larger metro area and the associated wealth. Also, it’s easy to forget that much of NYC’s infrastructure needs to live in suburban areas due to NYC’s density. All the warehouses needed to keep NYC fed and supplied can’t fit inside the city, to name one prominent example. Even to bring all the residential housing in the metro area into the city itself would make the city have to spend an ungodly amount on infrastructure to support them inside the city limits. The city actually benefits by having other jurisdictions be responsible for housing much of the metro area population.
philwelch 2y ago
> with a triple garage. not that you had three cars There are so many things you can do with garage space other than park cars in it though.
- rootusrootus 2y ago
  Ain’t that the truth! I have 4.5 spots in my garage (not a big house, just 3000sf, but it’s very common in my area to oversize the garages) but only two ever have cars in them. The rest is my home gym, craft area, and a workshop.
adolph 2y ago
> home prices also dont scale linearly across their subcomponents See also why small cars aren't proportionately less expensive.

tzs 2y ago

> As property prices have increased, I doubt that the cost of building the house is even the major cost factor - it's probably mostly property value for the lot. I'm not so sure. Looking at my property tax assessment my 1/5th my 1400 sq ft house + 400 sq ft detached garage has an accessed value of about 3.5 times that of my 1/5th acre lot. Accessed values here are based on market values and are reasonably close to what I see when I compare to recent sales on Redfin or Zillow, so it looks like the total is close. And the accessed value of the building is reasonably close to what my insurance company says it would cost to rebuild them. Checking Zillow for lots for sale, it looks like my assessed value is reasonable. I'm in a relatively low density area though. As a check I looked at a nearby significant city, Seattle. Comparing lots for sale there to nearby similar lots that have houses on them it looks like it is similar to where I am in some places and very different in others. It looks like if the lot is zoned for commercial use or for tall buildings the price if very high. I saw one that was something like 0.38 acres for nearly $7 million. But for lots in single family house areas it looked pretty similar to what I'm seeing at my place. The lot is around 1/4th or 1/5th the value of the property.

asielen 2y ago
Counter example in coastal California (in basically the West Coast version of levitt Town),my tax and insurance assessment has my physical house only representing a third of the total value. So the lot is with double the structure. But I'm guessing that is not a common situation across the country.
- tzs 2y ago
  Is there anything especially attractive about your location? Lots with a good view for example can go for a lot more than similar lots in the same general area that lack a view.
  - asielen 2y ago
    Nope, just generic Bay Area suburbs. And in one of the "cheaper" areas to boot.

treis 2y ago

>As property prices have increased, I doubt that the cost of building the house is even the major cost factor - it's probably mostly property value for the lot. More like 10-20% depending on a lot of different factors like location, cost of house, and size of lot.

SoftTalker 2y ago

Yeah home prices are mainly based on location and sqare footage. Condition, age, and amenities factor in but pretty much all the houses in a neighborhood sell for similar prices. It's definitely possible to over-improve a house and find yourself upside down in it at least for a while, which is OK if you want to live there and enjoy it but can backfire if you're planning to sell soon.

KevinGlass 2y ago
Keep in mind this is not true in the Northeast. It’s very common to have multi million dollar homes within spitting distance of dilapidated buildings worth only land value. My parent’s house, while nothing special, sold for a couple hundred thousand when they sold in 2019. A few months before hand our neighbor sold theirs for over 2 million.
- neutronicus 2y ago
  Not sure whether the original contention is untrue in the Northeast or just much more rapidly-varying in space. Where I live (Baltimore) your second sentence is certainly true. There are boundaries across which the vacancy rate is basically discontinuous. In connected regions surrounded by such boundaries I think the original contention pretty much holds, though. There are a couple variables (nbeds, nbaths, sqft, parking space) that pretty much determine the value of the home and going HAM on any improvements they don't capture is probably negative ROI.

michaelt 2y ago

> I doubt that the cost of building the house is even the major cost factor - it's probably mostly property value for the lot. This is certainly the case here in the UK - but I suspect it depends on your local laws. I looked into building my own house and essentially when you found a plot of land where you could legally construct a house - if a high quality house in that location would be worth £400k and cost £150k to construct, then the landowner would want £250k. I do sometimes wonder if it could be politically advantageous to separate out the business of physically constructing houses from the business of capital management, land investment, risk management and house price speculation. If a council knew they could construct 20 families worth of good quality social housing for £100k per house, with no risk of cost over-runs or late delivery, and they just had to provide the land? That could give them the motivation to find the land.

bluGill 2y ago
> separate out the business of physically constructing houses from the business of capital management, land investment, risk management and house price speculation. That is how it mostly works in the US. The developer buys a large plot of land and puts in roads, utilities then sells the lots to several home builders who build houses on it. The home builders contract out the foundation, framing, plumbing... to separate companies. while it is common to be in more than one part of this, only the smallest developments are all one builder (and even then plumbing is contracted out).
deleted 2y ago
[deleted]
nayuki 2y ago
I wouldn't discourage speculation on the price of the physical dwelling (i.e. the house). But land speculation is corrosive to society, and the way to fix that is with a land value tax.
saalweachter 2y ago
> ... if a high quality house in that location would be worth £400k and cost £150k to construct, then the landowner would want £250k. Is that wrong? If the house+location is worth 400, and the house alone is 150, why isn't the location worth 250?

deleted 2y ago

[deleted]

yojo 2y ago

In my market (Portland, OR), the cost for new construction seems to be in the range of $250-350/square foot. A buildable lot in a decent neighborhood costs $300k-ish (if you can find one). Assuming you’re building a family sized building of 2k+ square feet, building costs definitely exceed land costs. Anecdotally, all the new construction in my neighborhood is top of market - builders are selling large houses at $1.3M+ when a typical existing house sells for more like $700k. Smaller homes would sell faster, but the economics seem to only pencil out for larger/higher end.

whycome 2y ago

Pre fab and mobile could solve the crisis but they are mired in all kinds of stupid rules. A living space for a human being doesn't need to cost hundreds of thousands of dollars.

nostrademons 2y ago

The author previously did a great blog post breaking down the overall costs of building new homes: https://www.construction-physics.com/p/what-makes-housing-so-expensive https://www.construction-physics.com/p/what-makes-housing-so... tl;dr: For new developments, land is only about 20% of the total sale price of the home, and this share has been dropping since 2005. However, he also notes an important selection bias to this stat: new homes do not get constructed in areas where land is expensive, unless it's a custom build for a specific wealthy buyer, because developers cannot make a profit building SFHs if they spend a majority of the purchase price just buying the land. He notes that in wealthy areas like eg. Silicon Valley, 80% of the purchase price is land value, but developers are not building homes there, which is part of why the purchase price is so high. And sure enough, if you go out to Mountain House or Discovery Bay, prices are like 25% of what they are in Silicon Valley. But then you have to commute from Mountain House. America's housing problem is as much a commuting or job distribution problem as housing, but those problems are even harder to fix than housing.

philwelch 2y ago

> Edit: It also strikes me that we have something even better today - pre-fab or "mobile" homes that can be delivered by truck to a suitable plot of land. This author did a series about that as well: https://www.construction-physics.com/p/the-rise-and-fall-of-the-mobile-home https://www.construction-physics.com/p/the-rise-and-fall-of-...

jeffreyrogers 2y ago

Why would you sell for less than the market price? If I can sell something at $10/sq ft and my costs to produce it are $5 and my competitors are $9 then there is no reason to cut prices. We will both profit, I will just make larger profits.

golergka 2y ago
Because if you cut prices, you'll get a larger share of the market. So even if you make less profit per unit, you make a larger profit overall. Also, as you scale, some costs stay fixed, so your costs per unit might go down as well.
- m463 2y ago
  I kind of wonder if you cut prices, will land prices go up to normalize?
- buck746 2y ago
  The catch is that if you charge less than a small difference to your next closest competitor people will think something is wrong with it. Saw it happen many times working at an antique store for years. It was amazing how often raising prices made things sell that had been sitting there for months, or longer. You rarely want to make something too inexpensive, along with never using the word "cheap". There's also issues with trying to give something away for free. Generally people value something more depending on what they paid for it. Upscale brands like Coach and Channel exploit that aspect of consumer psychology.