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Construction costs have almost doubled (+98%) since 2000, almost twice as fast as inflation (+53%).
https://www.rsmeansonline.com/references/unit/refpdf/hci.pdf
One big reason why do new houses cost so much more than they used to: because they cost *so much more to build*.
https://www.rsmeansonline.com/references/unit/refpdf/hci.pdf
One big reason why do new houses cost so much more than they used to: because they cost *so much more to build*.
People usually understand that gas prices rise when oil prices rise. Why do they refuse to understand that house prices rise when construction prices do?
Guess what else doubled in price since 2000? Houses in the US. https://fred.stlouisfed.org/series/MSPUS
In a growing market, "replacement costs" (marginal cost of production) set a ceiling on prices.
When a cheap new car hit the market in India, used car prices dropped to match its price. https://trak.in/tags/business/2009/02/24/the-nano-effect-used-car-prices-down-by-35/
When a cheap new car hit the market in India, used car prices dropped to match its price. https://trak.in/tags/business/2009/02/24/the-nano-effect-used-car-prices-down-by-35/
(Unluckily for Tata's business, but perhaps luckily for road safety, the Nano flopped, and prices went back up.)
But... why? "There are multiple dimensions to the costs of development, many of which have been rising in recent years"
https://ternercenter.berkeley.edu/construction-costs-series
https://ternercenter.berkeley.edu/construction-costs-series
Previous thread on how difficult it is to get even middle-income new housing to break even given construction costs https://twitter.com/paytonchung/status/1234917886747193345
