New Homes Today

[Superman]

This deserves its own thread. I suggested that the additional cost of building large homes instead of small ones is very small compared to the increase in selling price, despite inflation in building materials. Someone disagreed, but did not offer any explanation other than "business degree." I have a masters degree in business and I just retired from a career as a wage statistician in the construction industry.

In the housing development next door, 49 lots are planned on less than 10 acres. That alone should tell us something. The land is expensive and they are building as many homes as they can. The homes barely fit onto their lots, and the homes are only a few feet apart. It took them a year to do the earthwork and site utilities. They only started building homes about 8 months ago. In other words, there was quite a substantial investment in land acquisition, planning, permitting and site work before any foundations were laid. So great are the sunk costs that the marginal cost of investing more money in labor and materials to make the homes large is minuscule by comparison.

In the eight months of actual construction, they have mostly completed twelve homes. There are rarely more than about 20 workers on site. 20 hispanic workers, probably getting about $30 per hour for eight months (about 1200 hours) means that the labor cost for building these houses is about $720,000, or about $60K per home. These homes will sell for about $600K each.

My point is that it makes sense to do what they are doing, which is building the most SF on the available land. It would not make sense to build 1500-SF homes selling for $400K each when you can spend an additional $50K per home, make them twice as big, and sell them for an additional $200K. Here is what they look like. You are seeing four homes here. The one on the left is the only single-story structure which will be built on this 49-parcel site.

[javadog]

Well, “someone” did send Jim a private message pointing out a couple things he might want to think about in more detail, but that seems to have fallen on deaf ears.

Maybe wage statisticians know more than third generation general contractors. Actually, soon to be fourth, as one of my rugrats has gone into the business, somewhere up in the Pacific Northwest.

But who knows? I’ve heard pigs can fly, too, if they have sufficient thrust.

[Evan Fullerton]

Maybe this is news where you live but SoCal has pretty well perfected the ROI model on new housing tracts over the last 20 years.

Build big, build dense. Look fancy but with the cheapest materials that you can convince people are “premium”.

[Captain Ahab Jr]

[Superman]

Upon further reflection, I wonder if any of that detailed analytical verbiage is needed. I think the image speaks for itself. If labor and materials were the expensive part of home-building, then they'd be building 1500-SF ranchers on 1/4-acre lots. This is not what they are doing.

[Rusty Heap]

while I could never live like that, being on 5 acres the last 30 years, they wouldn't build zero lot line buildings if people wouldn't buy the lego playdough fun factory generic block shaped homes.

[masraum]

Originally Posted by Superman

This deserves its own thread. I suggested that the additional cost of building large homes instead of small ones is very small compared to the increase in selling price, despite inflation in building materials. Someone disagreed, but did not offer any explanation other than "business degree." I have a masters degree in business and I just retired from a career as a wage statistician in the construction industry.

In the housing development next door, 49 lots are planned on less than 10 acres. That alone should tell us something. The land is expensive and they are building as many homes as they can. The homes barely fit onto their lots, and the homes are only a few feet apart. It took them a year to do the earthwork and site utilities. They only started building homes about 8 months ago. In other words, there was quite a substantial investment in land acquisition, planning, permitting and site work before any foundations were laid. So great are the sunk costs that the marginal cost of investing more money in labor and materials to make the homes large is minuscule by comparison.

In the eight months of actual construction, they have mostly completed twelve homes. There are rarely more than about 20 workers on site. 20 hispanic workers, probably getting about $30 per hour for eight months (about 1200 hours) means that the labor cost for building these houses is about $720,000, or about $60K per home. These homes will sell for about $600K each.

My point is that it makes sense to do what they are doing, which is building the most SF on the available land. It would not make sense to build 1500-SF homes selling for $400K each when you can spend an additional $50K per home, make them twice as big, and sell them for an additional $200K. Here is what they look like. You are seeing four homes here. The one on the left is the only single-story structure which will be built on this 49-parcel site.

The norm in the neighborhood where we lived near downtown Houston before moving to our current rural home was mostly small homes built in the 20s on ~5000sqft lots. Those old homes are mostly being sold at "lot value" (advertised seems to be ~$500k). Once those homes are torn down, that 5000sf lot is usually used to build two homes that are 2-4 stories tall. Some of the new homes are attached, but some are separated by 18-24". The new homes are (well, were, not sure today, but 2 years ago) $600-700k for 2 story, $750-850k for 3 story, and $850k-1.25m for 4 story.

I would not want to own or live in most of the new homes.

[masraum]

Originally Posted by captain ahab jr

roflmao!

[Superman]

Originally Posted by masraum

I would not want to own or live in most of the new homes.

No kidding! Those families will be looking down into my back yard, which has a patio, fire pit, several garden areas for both food and decoration, fruit trees, doggy racetrack/obstacle course, etc. Things they cannot have.

[rcooled]

Originally Posted by Rusty Heap

... if people wouldn't buy the lego playdough fun factory generic block shaped homes.

There's a surprising number of home buyers who really don't care all that much about where they live, or what they live in...all they're looking for is a big box to cram all their stuff into. Living a stones throw from a freeway; along a river/stream/creek prone to flooding; directly under an airport flyway; on an impossibly steep slope; having high-tension power lines cross their property; or so closely packed together, that they can reach out a window and touch the house next door...isn't a problem for many of these folks.

Originally Posted by Superman

Those families will be looking down into my back yard...

So much for your privacy

[zakthor]

Quality of the materials burns my eyes, but at least they didn't go overboard with awful fake ornament...

Guy near me built a 7500sf house, cheap trim, cheap windows, cheap roof, an eyesore but admittedly not as bad as those! Then he got divorced and wife 'got the house'. She said they all slept in the enormous master bedroom, this giant stupid house they didn't want or need, big dramatic entryway and stairway to the front door. Sorta like that final scene in scarface but no marble or fountain. She sold it back to him and moved away. House is as ugly today as it was when it was fresh.

I wonder whats going to happen with these things in 20 years. Who could conceivably want a crappy house that is so big? Won't these houses just fall apart and rot?

[island911]

Originally Posted by Superman

Upon further reflection, I wonder if any of that detailed analytical verbiage is needed. I think the image speaks for itself. If labor and materials were the expensive part of home-building, then they'd be building 1500-SF ranchers on 1/4-acre lots. This is not what they are doing.

It's what the zoning allows.

Big daddy bureaucrats get incentivized to change allowable lot usage and you have what you see there.

This one metric is why I chose to buy live where I live - relatively large lots for house size. This is to the detriment to tax revenue as the taxable density is lower than the surrounding areas, even though the house value is higher. - Say, the average house is 2mil/per qtr acre. The same house in say Seattle is 1.5mil on 1/8th acre. (3mil taxable on 1/4 acre)

So really, municipalities are looking for the maximum taxable base. Few care about quality for those who live there.

[oldE]

It seems housing has gone the way of the Big Gulp and "Supersize me". People spending (borrowing) far more than they need to in order to live in a house which is larger than they need.
I've seen it first hand. A young professional lady we know and her guy bought a multi bedroom house (with 5 bathrooms). Now they are separated. He is underemployed (oil patch) and she is tied to the mortgage.
Bigger is not always better.

Best
Les

[herr_oberst]

[Superman]

Originally Posted by rcooled

So much for your privacy

Yeah, I'm not happy. There will be a wall of arborvitae soon.

Originally Posted by island911

It's what the zoning allows.

Big daddy bureaucrats ... tax revenue .... taxable density ....municipalities ..... maximum taxable base. Few care about quality for those who live there.

Yes, some folks look at various market forces, and then conclude it's all gubmit's fault. Ignoring the fact these developers could build less dense developments. Gubmit didn't make that decision. Developers and consumers did.

[Superman]

Originally Posted by oldE

.....live in a house which is larger than they need.....

Yeah, this is sort of my point. Consumer might prefer the 1500 SF home for $400K. However, for just a few dollars more in construction expense, the home becomes 3500 SF and $600K. Developer makes more money building them bigger because the extra cost of that last 1000 SF improves selling price bigly. Invest another $50K, and get an additional $200K return. Return is far greater than marginal cost. No brainer.

[hbueno]

There were obviously no architects involved in designing those houses. I think of them as.Packemin Estates contractor specials.

[herr_oberst]

Originally Posted by hbueno

There were obviously no architects involved in designing those houses. I think of them as.Packemin Estates contractor specials.

It's like someone developed and is selling generic building plans that can be relatively easily adapted to a site. If Sears and Roebuck (now K-Mart) were still selling homes, this is what they would be selling.

[Captain Ahab Jr]

New homes in the UK are tiny in comparison, we're a tiny island so have very little land to build on, a 3 bedroom house is usually less than half the size of the light grey house in the picture.

All new builds built by developers have too much house for the plot, some even include a garage not big enough for the majority of todays cars

The grander/larger newly built houses on an estate are referred to as Mc Mansions as they all look the same or just a mirrored and devoid of any character

[Bill Douglas]

Around here the new normal are small homes crammed onto a section that used to have two house occupying it.

But they are built to a very high standard as the people buying them tend to be boomers with plenty of cash and wanting something with location, bars, cafes and no lawns to mow.

This is something I'm looking into. Six or eight townhouse on my 1,000 square meter bit of land. So I've been driving around looking at what others have done. They sell for about 1.8 to 2.3 mil' but our building costs are higher than you guys. Take off 35% for the exchange rate for comparison purposes.