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It's a bad analogy. The car manufacturer's costs go down with scale, making low-margin, high-volume production an achievable business model. Real estate develop
by timr 12y ago
It's a bad analogy. The car manufacturer's costs go down with scale, making low-margin, high-volume production an achievable business model. Real estate development costs don't really have economies of scale -- it costs a lot more to build skyscrapers, both in terms of construction costs, and in terms of land (rezone a parcel to increase height limits, and the cost of the land goes up to match the new use).
Said another way: unlike cars, the fixed costs of real estate dominate the cost of the final product at all scales of "production".
- mahyarm 12y agoIt's not about that, it's about manufacturers going for the low hanging fruit first if they are restricted to selling a small limited amount. These manufactures in my example have already gotten the economies of scale by developing for their local market, so on a marginal basis, it doesn't apply in this metaphor. On a cost basis, those unit construction costs are around $200k for a 3 bedroom 'family' condo vs. the $1 million that a condo would currently cost today in the SF bay area. Big difference and actually affordable for a $70k/yr annual income vs the $335k/yr income required for a $1million dollar condo.