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0 pointspc864d ago0 comments

The answer is still build more (which you basically admit yourself in your first sentence).

Homes skew larger and more expensive precisely because it's so hard to build them so developers need to make more money from each one. The fixed costs per unit are too high, so the ones that need to be lowered or eliminated should be. That will incentive building more units not just more expensive units. You'd see a lot more 1200sqft new builds if it was more economically viable and developers could make a profit on a $125k home instead of needing $400k.

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6 comments · 2 top-level

ryandrake4d ago· 4 in thread

Build Moar seems to be too simplistic. There's just too much demand and too much investment capital seeking profit. No matter how much you build, most of the housing supply is going to get sponged up by investors, landlords, and private equity, and the price isn't going to go down. You'd probably have to 4X to 5X the current housing supply to make a dent in prices.

madars4d ago

>You'd probably have to 4X to 5X the current housing supply to make a dent in prices.

Not at all. The important thing here is that price is set on the margin. Relatively modest supply increases can have outsized price effects. As an example, consider rents in Austin - something like 30% housing stock increase led to 16% drop in median rent, all while Austin simultaneously had massive in-migration, i.e., rents fell despite demand surging.

As another example of margin behavior: vacancy rates matter a lot, a modest vacancy rate increase can crater rents, which we see in the CRE market.

pc86OP4d ago

It's interesting to say something sounds simplistic when your argument is basically "I feel like __________" and in fact the evidence shows exactly the opposite.

triceratops4d ago

> most of the housing supply is going to get sponged up by investors, landlords, and private equity

To earn a return through renting or appreciation. If there are more houses than buyers returns drop.

> You'd probably have to 4X to 5X the current housing supply to make a dent in prices.

So do that.

javanissen4d ago

When investors buy housing they almost always rent it out, increasing the supply of rentals and decreasing rent prices relative to the alternative universe in which no new housing is built.

jermaustin14d ago

> You'd see a lot more 1200sqft new builds if it was more economically viable and developers could make a profit on a $125k home instead of needing $400k.

You do see them, but they are factory built. I could have a $75k manufactured home dropped onto a $20k slab, with $15k utility hookup, and have 3 beds and 2 baths and 1200sqft. It is viable outside of HOAs and "master planned communities" but it is hard to find places in the US that allow this in a "desirable" area.

I agree we need more, but we need smaller too. My parents right now have a 3600 sqft house they will die in, and can't maintain because they are in/approaching their 70s. They built it in 2008 for around $190k when there were still 2 kids at home, my grandmother still lived there, and my sister had a baby on the way.

Now their home is valued at $750k according to the county (after fighting and revising it down from $800k), and if it weren't for all the homestead exemptions and senior rates and whatever other tax breaks they were given, their property taxes would be over $25k/yr.

They've actually tried to sell it a number of times, but 0 bites even discounting it down to $500k, because the town they are in has no comps (single level 4 bed, 4bath on 3 acres).

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