Corporate landlords are absolutely driving the prices up, combined with 3 decades of low interest and investors treating real estate like a speculative market. The material cost of housing is miniscule. North American homes are made out of paper and plywood.
They’re not construction prices lol. Construction costs are like 5% of the total value of a home. The other 95% of the value of a home is due to houses being treated as assets in a speculative market.
Landlords want the prices to increase because it increases the value of their asset, which allows them to leverage it for greater loans to buy more assets, etc etc to eventually sell at hilariously inflated prices for massive ROIs. Or alternatively to charge massively inflated rental costs pegged to the value of the home. Higher value, higher rent, more $$$ in the landlord’s pocket.
So far costs of homes have only gone up since the 70’s. A house worth 200k 20 years ago is now worth 1.2 Mil. It is an excellent rate of return. The market shows no signs of slowing down, forget about getting cheaper. If you have the capital to invest, it’s basically free money. Or at least, it has been for the past 5 decades. I don’t see why it would stop now. Maybe climate disasters or war, we’ll see.
I wasn’t exaggerating. Go to any new development site. American homes are literally made of plywood and paper. Materials used for houses now are largely the same as 20 years ago. If the same house that cost 200k 20 years ago now costs 1 Mil, the cost of materials did not increase by 400%.
For background, I work in the construction industry. You’re right that most of the cost increase isn’t because of the bill of materials, but that has never been the biggest cost in homebuilding (or at least not for the last 100 years). It used to be perfectly doable to build a multi-unit for $150k per door, and now it’s difficult to keep it under $300k (note that this is in a midsize city, those costs are obviously much higher in a larger one due to far higher cost of land). By far the bulk of that increase is labour and subcontractor costs. I leave it to you to do the math on the rent required to turn a profit on a $300k apartment.
Corporate landlords are absolutely driving the prices up, combined with 3 decades of low interest and investors treating real estate like a speculative market. The material cost of housing is miniscule. North American homes are made out of paper and plywood.
If that’s the case, can you explain to the rest of us why landlords want high construction prices?
They’re not construction prices lol. Construction costs are like 5% of the total value of a home. The other 95% of the value of a home is due to houses being treated as assets in a speculative market.
Landlords want the prices to increase because it increases the value of their asset, which allows them to leverage it for greater loans to buy more assets, etc etc to eventually sell at hilariously inflated prices for massive ROIs. Or alternatively to charge massively inflated rental costs pegged to the value of the home. Higher value, higher rent, more $$$ in the landlord’s pocket.
So far costs of homes have only gone up since the 70’s. A house worth 200k 20 years ago is now worth 1.2 Mil. It is an excellent rate of return. The market shows no signs of slowing down, forget about getting cheaper. If you have the capital to invest, it’s basically free money. Or at least, it has been for the past 5 decades. I don’t see why it would stop now. Maybe climate disasters or war, we’ll see.
Maybe in Manhattan, but otherwise this is an absolutely pants-on-head ridiculous claim.
I wasn’t exaggerating. Go to any new development site. American homes are literally made of plywood and paper. Materials used for houses now are largely the same as 20 years ago. If the same house that cost 200k 20 years ago now costs 1 Mil, the cost of materials did not increase by 400%.
For background, I work in the construction industry. You’re right that most of the cost increase isn’t because of the bill of materials, but that has never been the biggest cost in homebuilding (or at least not for the last 100 years). It used to be perfectly doable to build a multi-unit for $150k per door, and now it’s difficult to keep it under $300k (note that this is in a midsize city, those costs are obviously much higher in a larger one due to far higher cost of land). By far the bulk of that increase is labour and subcontractor costs. I leave it to you to do the math on the rent required to turn a profit on a $300k apartment.