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What keeps homebuilding from being profitable and more prolific?
Posted on 10/17/23 at 3:32 pm
Posted on 10/17/23 at 3:32 pm
I know next to nothing of the business, so I'm curious why there just aren't hundreds of thousands of homes being built all over the country to meet this demand. Experts say we have a shortage of millions, everyone claims they want to buy a house, prices for houses seem pretty high, so what's stopping more builders from making more of them and selling them at whatever markup they need to?
Is it a lack of labor making project timelines too unreliable? Cost of borrowing money too high to take on debt for long term projects? Cost of goods fluctuating too much so prices are impossible to predict?
Or is it my alternative theory, that there are actually plenty of houses but just not enough room where a lot of people want to live (major cities) so prices are simply higher than people think they should pay and developers can't move houses as efficiently once you get farther outside of town?
In almost every other facet of an economy a supplier comes in to meet a demand, but we've been "behind" on homes for nearly two decades.
Is it a lack of labor making project timelines too unreliable? Cost of borrowing money too high to take on debt for long term projects? Cost of goods fluctuating too much so prices are impossible to predict?
Or is it my alternative theory, that there are actually plenty of houses but just not enough room where a lot of people want to live (major cities) so prices are simply higher than people think they should pay and developers can't move houses as efficiently once you get farther outside of town?
In almost every other facet of an economy a supplier comes in to meet a demand, but we've been "behind" on homes for nearly two decades.
15
Posted on 10/17/23 at 4:13 pm to Thundercles
I’ve posted this a few times now but I definitely believe that the housing supply in a ton of desirable or formerly desirable areas in many major metros has been decimated by STRs.
What do you think happens to pricing when the housing stock of a neighborhood suddenly becomes wayyyy more valuable than ever before due to the “invention” of modern day STRs.
Sure people could have bought places specifically as an investment before, but the profitability calculation (and valuation) changed MASSIVELY when STRs in their current form came about.
In many desirable areas Houses/apartments/condos are being priced as lucrative commercial businesses that can generate 2x+ what a long term lease would bring in and not as long term residential housing.
What do you think happens to pricing when the housing stock of a neighborhood suddenly becomes wayyyy more valuable than ever before due to the “invention” of modern day STRs.
Sure people could have bought places specifically as an investment before, but the profitability calculation (and valuation) changed MASSIVELY when STRs in their current form came about.
In many desirable areas Houses/apartments/condos are being priced as lucrative commercial businesses that can generate 2x+ what a long term lease would bring in and not as long term residential housing.
Posted on 10/17/23 at 4:24 pm to JohnnyKilroy
I agree with you. Just for fun I just checked in Dallas and zoomed in on one small neighborhood and 122 listings popped up. I'm talking in an area of less than 3 square miles. There are 5,500 in Dallas apparently but not sure how much of the metroplex that's counting. City of Dallas says about 2,000 registered, so 5,500 total and not bothering to register makes sense.
I know a couple cities tried to compromise but enforcement is impossible so I assume most cities are going to move to outright bans next.
I know a couple cities tried to compromise but enforcement is impossible so I assume most cities are going to move to outright bans next.
Posted on 10/17/23 at 4:38 pm to Thundercles
quote:
Experts say we have a shortage of millions,
This is bullshite.
In reality, there are plenty of houses. A literal oversupply. But they may not be located in exactly where people want them, with the amenities, in the right condition, in the right school district, with the right crime rate and demographics.
So it's not just a matter of going out and buying a chunk of land and breaking ground. The houses have to be located in the correct spot, and there is generally a shortage of land in those highly sought after places. And what land is available, is very expensive.
Posted on 10/17/23 at 6:15 pm to Bjorn Cyborg
I’ve also said that the shortage is of desirable places to live, not of houses.
Posted on 10/17/23 at 6:34 pm to Bjorn Cyborg
quote:This isn’t accurate. It’s not that they’re not in the precise location, they’re often not even in the same region.
with the amenities, in the right condition, in the right school district, with the right crime rate and demographics.
In fact, this while your talking points are a bit different, it’s essentially based on the same information and drawing the same conclusions as progressives.
I can find a ton of housing in the rust belt, much of it is unlivable, and even if it is livable, there just aren’t the jobs to available to live in it.
To answer the OP’s question. Developers are the ones who are for making building easier, so it’s not that building is unprofitable (although sometimes harmful and/or unnecessary regulations do make it far less profitable even when things can be built), it’s often that it’s extremely difficult to build in the first place (and those regulations then make it less profitable).
Posted on 10/17/23 at 6:38 pm to turkish
quote:This is true, but desirable is often where the jobs are, which means housing may be an entire areas or regions while the jobs are elsewhere.
I’ve also said that the shortage is of desirable places to live, not of houses.
In other words, it’s as Bjorn describes it like its merely in a different, undesirable neighborhood or something. In fact, the whole progressive focus on gentrification is a result of people moving into “undesirable” neighborhoods, making them desirable. But just as progressives fail to understand, Bjorn fails to understand this is a supply problem in those areas (like entire metros or regions).
Posted on 10/17/23 at 8:13 pm to buckeye_vol
quote:
Developers are the ones who are for making building easier, so it’s not that building is unprofitable (although sometimes harmful and/or unnecessary regulations do make it far less profitable even when things can be built), it’s often that it’s extremely difficult to build in the first place
Is this just because there is simply no room in the desirable locations? Like looking at Dallas, you pretty much have to go 40+ minutes north, south, or east to even find clear space. And I think a lot of that is already committed. Assuming that's the case in a lot of big cities, is expensive housing in cities just the norm going forward?
Posted on 10/17/23 at 8:24 pm to Thundercles
- Cost of land in metro areas has increased significantly over the past few years.
- You don’t just need the land and the materials to build a home, you also have to supply roads and utilities. As you go further outside the city, you’ve got to build the road to get there. You also have to run water and sewer lines from the nearest treatment plants to your new neighborhood, unless the whole place is going to be on well water and septic. Millions invested before you start the first home site.
- You don’t just need the land and the materials to build a home, you also have to supply roads and utilities. As you go further outside the city, you’ve got to build the road to get there. You also have to run water and sewer lines from the nearest treatment plants to your new neighborhood, unless the whole place is going to be on well water and septic. Millions invested before you start the first home site.
Posted on 10/17/23 at 8:30 pm to Thundercles
You got any of that land to build all these houses?
Posted on 10/17/23 at 9:23 pm to Thundercles
quote:
Is it a lack of labor making project timelines too unreliable? Cost of borrowing money too high to take on debt for long term projects? Cost of goods fluctuating too much so prices are impossible to predict?
Most of this.
Also, lots of red tape/coordinating with cities, utilities.
Quality land where people want to be.
Posted on 10/18/23 at 11:14 am to buckeye_vol
quote:
This isn’t accurate. It’s not that they’re not in the precise location, they’re often not even in the same region.
But the talking points are that there is a housing shortage, and there isn't.
There are shortages in certain markets, due a lot to geography, crime and other factors.
Rather than trying to cram more houses in already constrained areas by changing zoning and construction regulations, they need to just let the market handle it.
Posted on 10/18/23 at 11:19 am to Thundercles
Land in actual areas people desire to live.
Plenty of land in undesirable places.
Rezoning. Areas still need Ag, commercial and industrial properties. So cannot rezone everything to residential.
Plenty of land in undesirable places.
Rezoning. Areas still need Ag, commercial and industrial properties. So cannot rezone everything to residential.
Posted on 10/18/23 at 12:05 pm to Thundercles
Zoning and regulations.
It’s really that simple.
It’s really that simple.
Posted on 10/18/23 at 12:25 pm to Thundercles
quote:You still need buyers that can afford it and qualify for the mortgage. Interest rate hikes the past 12-18 months have screwed the market up. Lots of would-be buyers have been priced out by the rate hikes and current homeowners are reluctant to give up their sub-3% mortgages to buy a new house with a 7.5% rate.
prices for houses seem pretty high, so what's stopping more builders from making more of them and selling them at whatever markup they need to?
I live in a new-ish development thats still not fully built out. When I moved here 4 years ago, new construction houses were almost always under contract before they were finished. Now most of the new builds end up sitting on the market for months after completion before they get a buyer, so the builders don't have as many new builds going on at the same time now as they did a year or 2 ago.
Posted on 10/18/23 at 1:31 pm to Thundercles
If you really wanted to expand homeownership to families, you'd see either a ban or restriction on large corporations purchasing entire subdivisions.
Raise rates on property taxes owned by corporations vs families and you'll see the black rocks of the world selling property.
Raise rates on property taxes owned by corporations vs families and you'll see the black rocks of the world selling property.
Posted on 10/18/23 at 1:53 pm to Thundercles
Short answer: Gubmint
Long answer: Gubbaminnntt
Long answer: Gubbaminnntt
Posted on 10/18/23 at 1:56 pm to Bjorn Cyborg
quote:
But the talking points are that there is a housing shortage, and there isn't.
But, there really is. The inventory that is available does not align to the budgets of home buyers. There is sufficient housing for the upper middle class, but starter homes seem to be a thing of the past.
Posted on 10/18/23 at 3:34 pm to NYNolaguy1
I despise government, but I also think that governments could find a way to incentivize construction of lower end homes. I've read the trend is to go bigger and higher end as the builder can get more bang for their buck, so it's harder and harder to find simple/more affordable homes.
Posted on 10/18/23 at 11:20 pm to Thundercles
Most people in this country can't afford to miss one paycheck, let alone save up enough cash to afford a house.
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