- Modular home construction is an $11 billion industry, growing at 8.5% per year
- The cost of modular/factory vs. stick built construction is about a 10-20% savings. On a $500k home, that’s going to be less than $25k difference in price. That’s not the problem.
- Banks, which are tied to the Fed, are loathe to provide lot/construction loans. Ironically, this creates supply shortage and makes it necessary to purchase existing homes or from tract home builders that the author is criticizing.
- The size of the cash downpayment can be as much as 50% of the cost of the home.
Bottom line: the cost of housing is a systemic problem, and the Fed along with local government zoning boards are at the root of both the financial and regulatory sides of the problem.
Lot/construction loans is a highly speculative business, especially as lots of builders are blue-collar guys with minimal assets who can simply close shop in a recession. Building homes is constrained by the wider economy and interest rates, and they take a while to build, so in all of the umpteen million housing crashes we've had previously, a large % of homes built will hit in the market in the middle of a crash.
The history of housing busts dates back hundreds of years and is older than the United States. Banks are not wild to extend lot or construction loans because, until we achieve AI singularity, there's always another bust coming around the corner- and banks know they'll take it on the chin. Especially to the average home builder, who will simply walk away from their loans in a recession, close their company, declare bankruptcy, etc. etc.
> The cost of modular/factory vs. stick built construction is about a 10-20% savings. On a $500k home, that’s going to be less than $25k difference in price.
Isn't 10-20% of $500k actually $50k-$100k? (Could buy some really nice appliances...)
I assume the parent was using $500k as the total home price (building + land[1]), so the savings is only off the building cost, which is a fraction of the total price. Should have made that assumption explicit though.
I think the OP's core point is sound -- (total) home prices are like 50% over historically reasonable levels, so it's daft to explain it by even 20% overpricing for construction (which, again, applies to only a portion of the total sale price).
[1] And the typical home does not cost $500k to build.
You mentioned in a few words the biggest problem, which is zoning. The vast majority of land is zoned single family, which is actually a money loser for most municipalities in the USA. Crushing the local nimby zoning boards and forcing a much higher percentage of the land to be zoned for higher density would cause a boom of missing middle (and high rise) construction that could mostly solve this problem for very minimal capital outlay by municipalities vs trying to build enough single family zoned stuff to push prices down.
> But the key monopolies involved in blocking small modular homes are the Department of Housing and Urban Development (HUD) and the National Association of Home Builders (NAHB). They have successfully squashed the emergence of these factory houses.
Is factory-built housing common in other countries?
If not, then it would strongly suggest there are other reasons than federal control.
Wikipedia at https://en.wikipedia.org/wiki/Modular_building#Market_accept... says "In the UK and Australia, modular homes have become accepted in some regional areas; however, they are not commonly built in major cities. Modular homes are becoming increasingly common in Japanese urban areas ...", suggesting it isn't all that common world-wide.
> They also mean the homes are financed as automobiles (with personal loans, or chattell loans) and not real estate loans. ...
> One famous program, the so called “Section 235,” provided mortgages at interest rates as low as one percent for buyers purchasing a home built on-site. Buyers of factory-built homes, in particular, manufactured-homes, were not eligible.
Is there even a shred of evidence that the housing crisis is a result of higher construction costs?
Or is the Fed trying to draw attention away from the catastrophic impact of its zero interest and other policies on the massive increase in asset prices?
The paper essentially argues that construction costs can be lowered significantly using factory production methods, especially for small-modular homes. I have no problem with that part. The title has no basis in the paper, though.
It is unrelated to the massive increase in housing (and other asset) prices in recent years which are the cause of the current housing crisis.
Yeah. Like, anyone who has ever tried to get anything custom out of builders these days has been confronted with the fact that none of these guys want or care to do anything even close to custom work anymore. The diversity has been squeezed out of the market ages ago, cookie cutter houses are the norm everywhere. I only read the abstract, but it doesn't surprise me in the least that this paper just asserts conclusions without justification.
Houses are already as close to factory-built as is possible to do with today's tastes. Everything is pre-engineered and merely assembled on site.
Elsewhere here I asked why factory-built housing doesn't seem to be popular world-wide, which is what you would expect if it's only US Federal policy which prevents it from being popular in the US.
I'll add that I saw no discussion of how local housing policies were designed to prevent "Large numbers of low-income, city residents [from moving] to these areas", in order to keep property values high. Or the classism that caused people to look down on mobile homes.
The author rhetorically asks "But what stops public transportation from expanding upon the arrival of new residents?", when I've heard so many New Urbanist videos answering that question.
I didn't understand how "a uniform building code across the country would be a great benefit to factory producers" is a meaningful goal, given that the needs for Florida, Arizona, and Alaska are quite different, making me question his understanding.
I read "There is a literature that asks why the poor live in cities." and counter with the observation that the poverty rate is higher in rural areas - https://en.wikipedia.org/wiki/Rural_poverty#Rural_versus_Urb... says "rural poverty rates are higher and more persistent than in urban areas, rural workers are disadvantaged by lower wages and less access to better paying labor markets" - note that housing prices aren't part of it.
> Windows, doors, and other parts arrive prefabricated, Rybczynski writes, so labor costs have actually halved since 1949. Levitt and Sons spent $4 to $5 per square foot building Levittowners, and, adjusted for inflation, builders today spend the same amount.
> Instead the problem is almost wholly that land is too expensive. Reduce the size of a new, modern house by 50%, Rybczynski notes, and houses in metropolitan areas will still cost over $200,000.
> That’s the secret to the extreme affordability of a mobile home—take land out of the equation.
We aren't really using "traditional methods" - engineered wood is not traditional and is very common. "As of 2005, approximately half of all wood light framed floors were framed using I-joists" says https://en.wikipedia.org/wiki/Engineered_wood#Beams . These were made in a factory, and not "on-site" as the author describes the house-building process.
Population is flat over the last two years, while housing units are up and the construction rate is all time high. There is no crisis, just rampant speculation that ate through active inventory.
The actual data is very clear on this (FRED), despite the word of mouth "shortage" narrative.
Now that the narrative is turning, inventory is skyrocketing as you would expect, and we will be in a glut within 6 months. Look at the "all time low inventory" of the 2000s as another example. How quickly did the inventory narrative collapse back then? A few months
Prove me wrong. Show me the stat for housing units per capita.
Housing units per working age person is an all time high.
Show me the stats for housing units per household. Hint, it's the same as the year 2000 and in line with historically normal levels. 1.1 housing units per household
Show me the stat for rate of construction relative to population growth. Hint, it's at an all time high.
Show me the demographic trends? Hint, it's towards flat or negative population growth, with most boomers dying over the next 10y, and each successive generation being smaller than the last.
Where are your stats? Inventory, which has nothing to do with actual supply? What happened after the generationally low inventory of the 2000s?
Anyone holding to that peg as confirmation of anything is in for a rude awakening
Sure, by 2035 or so, when baby boomers reach peak die-off age, we're going to have a housing bust. But over the next decade? Most Millennials are screwed, and it doesn't get better until today's middle-schoolers come of age.
The likely explanation for current RE market is households temporarily expanded due to the various stimulus and forbearances giving many higher disposable income, but we'll likely see this contract again as the effect of inflation takes hold.
(Expanding/contracting can be through roommates splitting/joining, kids moving out etc).
Housing is fungible. Rental units draw from buy demand and vice versa. Substitutable goods work this way on a macro scale.
The millenials who buy, move out of rentals, which drives rents down (or less growth), increasing the spread between carrying cost to rent/own. There's a limit to how far this spread can widen nationally. You can't look at these markets independently.
Number of households show the actual number of housing units demanded, everything else is an input to number of households.
If housing is supply bound - which we know it is, because prices are rising - then rate of household growth is going to equal rate of new home construction, because you can't form those households until there's a house for them to move into. Which it does - compare your link with my census.gov link on new residential construction. Everyone who doesn't have a home has to double up with roommates or continue living with their parents
If the question is "Can I maintain the same standard of living as I grew up with?" or "Can I form a family?" or "What are housing prices going to do now?", this isn't an interesting statistic. The number you want to know is "How many people would like to form households but can't because there are no houses to be had?" And that's what I'm citing with the demographic numbers. If there are twice as many people desiring houses as houses available for them, only half the population is going to get a home, and the price that the median home sells for will be what the 75th percentile of the income distribution can support.
"Supply" as in inventory is a totally different concept from the actual structural supply of housing. To say housing is supply bound is simply wrong. Inventory is low now and will be high in 6-12 months.
To extrapolate out permanent conclusions from a point in time inventory metric is completely flawed analysis.
I'll refer you to the generationally low inventory in the 2000s, coupled with similar widespread shortage narratives. It won't end via the same mechanism, but each bubble is unique.
Inventory will continue to rapidly increase as rates stay over 5%
And again, rate of construction relative to population growth is at an all time high. Every narrative around a supply shortage focused on inventory is clearly and obviously flawed/wrong
I think it's sometimes hard for people to accept that the difference between inventory and supply can fluctuate.
The simplistic view is that residences are either rented out or occupied by the owner. In reality a speculative boom creates excessive demand which increases the number of residences that are second homes, Airbnb's, undergoing renovation, on the market, land-banked, etc. Most of this is made possible as capital gains become more significant relative to yields.
It's counterintuitive but a speculative boom can lead to both higher prices and a higher proportion of underutilised residences.
I'm talking about supply as in physical supply of houses, not inventory. Inventory is a less-useful concept for me, because it fluctuates based on who decides to put their house on the market at a given time, which can depend upon home prices, interest rates, migration patterns, speculation, etc.
I still have not seen a convincing response to the demographic argument I put forth. The generation entering the housing market now is the large Millennial generation; the generation dying is the small Silent generation. For everyone who wants a house to get one, we need to be building the delta in size between these, and we're short by several million.
>I still have not seen a convincing response to the demographic argument I put forth. The generation entering the housing market now is the large Millennial generation;
Well, implicit in this argument is that a non-trivial percentage of the Millennial generation is actually able to enter this market. Is that actually true? I'm not really convinced that is it, as there's been a lot of chatter about this generation putting off important life milestones like family formation, which would precipitate home buying. To be fair, and to potentially anticipate the counter argument, when the boomers were at this same stage in their life interest rates were much higher. But ... family formation was a much stronger cultural imperative at that time. It very much is not so today.
>For everyone who wants a house to get one, we need to be building the delta in size between these, and we're short by several million.
I agree with this, but for philosophical reasons and not structural ones. If I'm some jerkoff investor, trying to maximize profits, yeah I'd only build high rise lux condos and squeeeeeze that yield because, let's be honest, building family homes doesn't really do that.
But is there anything else that might have changed over the past two years thay might add some nuance to it? Such as massive shifts in where people want to live, how much space they want, etc.
Looking just at the past two years ignores them past 14 years since the 2008 crisis, from which housing construction is just barely beginning to recover. And houses under construction is not completed house construction rate; each individual build is taking far longer because of supply chain issues, so it looks like there are far more houses in the pipeline, but there isn't actually an oversupply of housing by any means.
If there was an oversupply, we'd see flatter prices, or maybe even declines. Housing prices are quite sticky, but we aren't seeing either massive vacancy rates or falling prices.
Inventory is not the same as structural supply. That's the big mistake many make, and inventory can very quickly accelerate back to a glut when conditions change (few months).
There is an element of changing preferences, but city centers also up greatly in price. Can't be the whole story
This research[1] estimates (15.1/23.8) 64% of the increases over pandemic period to remote work change, sounds like it could be a pretty big part of the story.
You can't tie bay area or NYC price increases to remote work.
You can tie LCOL price increases to them. But if that's the case, you would expect HCOL/central places to decline in price via the flip side of the same effect. Yet instead we see massive price increase in LCOL and smaller yet still big price increases in central/HCOL.
Obviously a many variable system, but stating that remote work should lead to a national 20% increase in prices is nonsensical
People want more space. They want more space in the country. They want more space in the city. A 2 bedroom urban apt doesn't accommodate 2 people WFHing, so roommates split up, adult children move out, established owners upsize, it's a general increase in demand everywhere, and evidently more than compensated for some people going urban-to-rural.
Housing markets are regional. In my overpriced, overpopulated corner of Western MA construction simply isn't happening. The relevant metric isn't units per person, it's units per workplace. No one is interested if housing is plentiful in any deindustrialized rust belt city when people are moving to either coast.
The person posting that graph has a bridge to sell
Do you understand macro scoped problems and the significance of subsets of the population having differing priorities? Seems not.
Aside from the snark, I'll make it clear. If you have 100 people and even just 5 of them prioritize LCOL to their current locale, those 5 moving away will reduce demand for the area, regardless if the other 95 would never move to Gary, IN in a million years. Housing is not a closed system, and building nice developments in Raleigh or Denver will take population from higher COL places in the aggregate. Which is exactly why we see population loss in HCOL areas.
Very small brained thinking in the residential real estate world unfortunately.
The withdrawal from large tracts of the country towards employment centers, mostly on either coast, is still ongoing. WFH may have blunted it a little, however the tendency is the same. For every person that moves from San Francisco to Raleigh there's two that move from Lumberton, NC to Raleigh. So - prices in Raleigh are not falling, and who cares about Lumberton? And prices in the pharma hub Boston are out of control. If you are in pharma, you most likely live in Boston, SF or San Diego, with housing out of control in all three. That's the thing - housing is still most intimately tied to employment.
All of this is true, but...housing markets are extremely regional. In the SF Bay Area, for example, despite much more new construction, there is still not nearly enough housing being built to satisfy demand, and as a result prices are driven extremely high. In other parts of the US, there is much more housing supply and relatively low demand, making housing more affordable.
Nationwide stats hide a lot of regional realities.
I recently joined a real estate group, and the kinds of things I'm seeing there are beyond explanation.
People have basically come to understanding that house prices only go up, they use exotic financing and stupid leverage (BRRR method) to keep buying "assets" and jacking up their rental yield which then re-prices the asset so they can take an even bigger loan to buy more "assets".
Recently someone in the group asked how they could afford a house in Seattle and most answers resonated around buying houses in midwest/lcol areas and jacking up rent/renovating to take out further financing and keep buying properties till you can afford to buy a house in the hcol area.
This has to end, with FED inflicting pain on the stupid leveraged folks.
Homes should be for people to live in, not to purely speculate and grow their money.
The investor's objective is to maximize yield, not minimize homelessness or keep affordability in check. In that, if they don't find a renter for their jacked up rent - they "renovate" the property - get a higher appraisal and sell it to the next schmuck.
Housing can’t both be a good investment and be affordable.
You can't make economic decisions on the basis that real estate will always grow more than income or even real gdp forever. Which is what these group of investors are doing.
> Housing can’t both be a good investment and be affordable
This gets repeated a ton, but isn’t true unless you assume density never increases.
Buying a SFH and replacing it with a 4-plex would be profitable in almost every market — were it allowed, which it almost never is in the US. In that alternate universe, the SFH owner makes money, the developer makes money, and the new units in the new building can be affordable.
American new construction has doubled in size (in terms of sqft/unit) over the past 50 years. If “oppressively small” were the problem, things should have gotten better, not worse?
The demand you’re talking about in the SF Bay Area is not necessarily driven by ‘butts in seats’ (aka actual people needing a roof and willing to pay a concrete price for it), but also by the cheap money narrative the FED has been feeding for a very long time. Which is what they are referring to in their post as having changed.
I don’t think we are talking past each other. There is absolutely a housing supply crisis in the Bay Area that is not reflected in the national stats.
I’m not sure why so many people believe that housing prices in high-demand markets are dominated by things like interest rates — there is certainly an effect, sure — but by far the predmoinant reason a 2br house on a small lot with a small yard costs $2m+ in Palo Alto is that there are thousands if not tens of thousands of well-off workers for nearby tech companies who would like to live there, there is not enough housing to go around, and $2m is the market clearing price.
The idea that the “demand” is being “driven” by some “cheap money narrative” is missing the forest for the trees. Low interest rates might be why that house is $2m and not $1.8m. But the narrative is definitely not the reason the median home price across the Bay Area is many multiples higher than the national average of $350k.
Secondly, the Bay Area is one of the markets subject to some of the more severe headwinds if remote work becomes the new normal, for the reasons you stated.
The concept of being forced to live in a hyper local area for work may be a thing of the past, which doesn't bode well for employment driven locales. NYC being another example.
Bay area is one of the last places in the country I'd want to own a home right now
Density still has huge benefits unrelated to work.
I don't know much about SF as I haven't lived there as an adult, but New York is an incredible place to live for lifestyle reasons too.
It has great food, a very high concentration of smart and highly educated people, great museums, great performance arts, etc. It's also an incredibly walkable city, which is rare in the US.
Hands down it would be my choice of city if I was a remote worker.
Price is defined on the margin. Lack of forced demand from local workers will drive prices down, unless the leisure aspect of the locale outweighs the work aspect.
It's subject to debate which locales would stand to net gain/lose from WFH, but I'd pick NYC as a net loser. You gain some who enjoy the city life and amenities, but you lose more to lower COL locales.
Price will always be a factor weighed alongside amenities, even if one area is objectively nicer from an amenities perspective
> SF only has one thing going for it really - weather.
This is far from an universal view - I live there (well, East Bay) and I think the weather isn't that great: too cold in summer, no nice evenings, never nice to hang out by the water. And I like cold winters as a contrast.
Sure, and I’m not making any claims about the future, either — just pointing out what the causes have been so far: demand/supply mismatch has had a far larger impact than speculation and interest rate policy or “narrative” on Bay Area housing prices.
That doesn’t create real demand on it’s own (as in anything that will impact a market). As any experienced realtor will tell you, every house is always ‘in demand’ by a near infinite amount of people that can’t afford it.
They have to be able to do something about that desire in a concrete way - high salaries count of course, but it’s always modulated by interest rates unless they are buying cash outright. Then it’s usually moderated less directly by other things they can be doing with that cash that are more interesting, and relative rents in the area.
Again, I am not saying those other factors do not matter, obviously they do.
But if it was "interest rates" driving everything -- then every area would be very expensive, not just the areas where there are high salaries and lots of inflow and basically zero new construction.
The Bay Area population grew 7.4% from 2010 to 2020 -- that's 614,901 residents according to census. New construction in that same time period was under 200,000 units.
So: where are all those people living? Many of them are living with roommates, etc., and because of the scarcity of housing, having your own place has become a luxury that costs extra money. If 600k people are complying for 200k units, prices will go up regardless of what interest rates do. Then, salaries rise in response where they can, because tech companies need to pay enough for people to be able to move here (always more expensive, thanks to rent control and Prop. 13, than already living here) -- which then pushes home prices even higher, because there still isn't enough housing to go around, and the 30% of people who can bid the most are the ones who clear the market. (And then, of course, everyone else who isn't pulling in tech salaries is just shut out of the market.)
Interest rates matter on the margin, yes, of course -- but the cost of capital is still low compared with availability. A couple making $400k combined is going to be able to bid more on a house at 3% interest than at 5% interest, but the only reason they're bidding so much at all is that there aren't enough homes to go around and they want one.
We’re talking past each other. Every area has seen an increase in price, yes.
But not every area is very expensive.
The fact that a house in SF that costs $2m would go for $500k elsewhere is not a result of federal monetary policy, and it is not a result of construction costs. It is a result of supply and demand.
If the house in the sticks is $500k and the ‘same’ house is $2m in SF, my point is that without the fed pump, that house in the sticks may be $200k, and the house in SF $800k.
Because of the ‘08 blow up caused massive restrictions in underwriting standards and willingness of lenders to pipe that easy fed cash through mortgages, which restricted the flow of cash in the following years. It caught up a couple years later though.
They had started to raise rates in late ‘06 and ‘07, which ‘pulled the string’ and led to the explosion. (The tide went out, and it turns out a great many people were swimming naked, to abuse a Buffett quote).
Real estate is highly illiquid and often highly leveraged. It often takes years for market changes to be visible in the data, and sometimes pricing signals get hidden entirely in many markets (you’ll see a backlog that can be years long, but no price drops - just no sales).
It’s also market dependent, but influenced by the larger market (so think of each specific market as a ship, floating on the overall tide which is ‘cost of money/debt’).
Agents tend to always be selling, and tend to hide bad numbers. The Economists working for realtors are especially bad for this.
Sellers tend to not want to admit they’re desperate, and can often hold out for years. Buyers always complain that things aren’t cheap enough, but
It makes for noisy data and sudden surprises.
The short sale I bought in ‘09 for instance, closed for 50% less than the initial offer AT THE BANKS INSISTENCE because of steady shifts in underwriting and appraisal standards in the approx. 5 months it took to close. It took another 6 months before that price signal got disclosed publicly.
I appreciate this insight, and there's no doubt that most people buy as much house as they can afford, so prices go up when they can afford more ("money is cheap") all other things being equal.
Still, since we're talking about "solving the housing crisis", it's not clear how raising rates to reduce pricing solves anything, since this argument is somewhat circular: prices drop only because people can afford less, and if people can afford less, that price drop doesn't actually make housing any more affordable?
Again, am I missing something? If not I stand by my original "there's not enough supply to meet demand" observation and that "increase supply" might be an actual solution.
1) building more units/houses does increase capacity, of course. But unless capacity in a location exceeds the population of residents AND everyone who would want to move there (doesn’t happen in a desirable place), ‘empty’ units will be rare. That is assuming price based backpressure doesn’t exist of course.
It’s a bit like the freeway capacity fallacy. Adding more lanes to a freeway, until you exceed the capacity of anyone who would ever want or be able to use it, just makes traffic worse, as it becomes a more and more known artery and additional businesses/people start using it, which increases traffic.
NYC housing prices are still astronomical, for instance, despite them being on a housing building binge for at least a century.
2) since a ‘limited’ (non infinite supply, supply < available demand) housing location will generally have more than 1 person interested in every house for sale, and will always have a point where housing costs money, the gating factor for if someone wins a pricing competition for a house is their ability to pay more than everyone else.
That means more leverage allows people to push prices higher.
It isn’t just interest rates of course - underwriting standards play a part too. Someone who can’t document employment history can’t get a mortgage, for instance.
If you consider the ability to leverage a force multiplier - say 30x for someone who can get a 30 year loan, but It’s actually more, depending on downpayment requirements - then those able to use the leverage will outcompete those who can’t.
those who can’t meet underwriting have a leverage factor of 1x - they can only offer the cash they have on hand. No leverage.
If we wanted to make housing more affordable (but didn’t mind throwing the US and world economy into a black hole), we could for instance make it illegal to issue mortgages. Then as long as you could save money, even if you were a drug dealer with no documented income, you’d be one the same playing field as someone with the high tech salary. You might lose still of course.
When people had to pay cash for a house, the typical house was around 1-3x the typical personal yearly income at the time. The reality is that a ton of people still rented and were homeless though, but that is a different discussion.
As to why this means ‘cheap money’ vs ‘expensive money’ means there is a good/bad affordability impact, even when the funds rate should (in theory) just change some multipliers in a calculation, but not if someone can actually buy or not.
The part you’re missing is speculation, time, and cycles, which hasn’t come up yet.
When money is cheap, underwriting gets looser (but not loose! No one is writing a mortgage for someone homeless, even at the top of the boom without going to jail.). They do this because the loan originators need to compete for buyers.
When prices of an asset go up, and money is cheaper, there is an initial lag - people don’t think of the asset as a ‘sure thing’ because it hasn’t been growing year over year yet. They won’t lever as high. Underwriting standards are often still tight. They’ll be conservative.
This is when things tend to be more affordable/in reach.
If someone is stretching to pay at 15% interest, historically interest is lower than that too. So when rates drop, they can upgrade, and prices go up, so they get money off it too. They can get a bigger and better place. Or move somewhere nicer.
This starts raising prices, but it takes time.
As this starts happening, underwriting standards start loosening. After all, if prices have done nothing but go up the last 10 years, of course they’ll keep going up, right?
As prices show this upward trend, everyone starts speculating too. If money is still cheap and getting cheaper, they can use leverage effectively too. Why buy one house, when you can buy two after all? Especially when prices keep going up. You don’t want to miss out.
> Bay area is one of the last places in the country I'd want to own a home right now
I’d pick the Bay Area over anywhere else in the US, with or without remote. Judging by real estate prices after remote took off (ignoring condos) I’m guessing a lot of others feel the same way.
‘Demand’ includes availability of funds by potential buyers (and what they consider expensive) which is directly influenced by stock prices (which have seen major drops this year), and by interest rates.
The amount that can be loaned/supported by a given income, and hence a lot of underwriting standards, are based indirectly on the cost to service the loan relative to the income the person has.
The lower the interest rate; the bigger the loan someone can get if they shop around for the same income and assets.
This isn’t perfectly linear, as principal payments vs interest payments have different ratios based on interest rates, but it very much applies.
Yes of course demand is influenced by all these things. But it’s driven by people moving to a location and wanting to buy homes.
The market clearing price is also driven by these things.
But let’s be clear: the primary driver of sky-high prices in the Bay Area is (1) people moving here, getting well-paying tech jobs, and wanting to buy housing, and (2) not nearly enough new construction to meet that demand.
I wish -- but I suspect we won't, sadly, because many factors are at play, including the move to remote work for many, many tech companies. If we see both higher interest rates and dramatic drops in demand, then everyone will be able to spin their own story out of it.
That graph doesn’t really prove anything, though, because interest rates and housing prices are already correlated through economic growth: fed raises rates when economies are hot, and lowers them when they’re not. Also house prices go up when economies are hot, and don’t as much when they’re not.
The most recent lull in prices correlated with a lull in rates, which kind of goes against your overall point of higher rates pushing prices down because the cost of capital increases? But maybe I’m misunderstanding your point.
Low interest rates only amplify existing demand letting people borrow more principal for the same monthly payment but people are still competing over who can afford the highest monthly payment.
Not in my area. Where I live, there are about 4 or 5 housing developments, and every time I drive by them, I never see any progress. Occasionally I may see one truck and maybe 3 or 4 people working, but most of the time, I see no one. In the year I've lived here, I have notices zero progress on all new construction that I know of.
I think what is being referred to here in typical mush mouth obtuse language is the "monopolization" that corporations are engaging in buying up massive amounts of real assets with essentially free money the fed it printing at the rate that even the "printing press goes brrrrrr" meme does not do justice.
I don't know that people are really aware of the scale of what is going on here. The big finance houses have essentially been handed over ownership and control to corner the whole housing market ... by the captured and corrupt government.
The monopolization the paper refers to is how industry and government prevent the adoption of factory methods in construction, increasing construction costs.
Eh, it’s a lot more than that. But the paper is specifically pointing out that cost of land seems to be the driving factor, not cost of construction which is relatively flat.
A cheaper manufactured home would of course be nice if looking at costs, but dropping it on a $1.5m acre lot isn’t going to change the math that much.
I get that especially here people would love to think that "factory methods in construction" are wonderful, but the reality is that it is way more "human soul crushing communist block building" and far less utopian wonderland.
In defence of brutalist architecture, at least its functional, spacious, and sensibly planned enough to build communities around those blocks. The concrete monstrosities of the 1960 and 70s built in London are still standing and are worth just as much as the newer builds which typically sport newer materials but come with higher rents and smaller spaces.
In defense of the "human soul crushing communist block buildings", at least they were less soul crushing than living with multiple other families in the same apartment, sharing bathrooms and kitchens.
Post WWII there were an actual housing crisis in the USSR, and those block buildings helped a lot.
It is irrelevant whether land is owned by corporations or private persons for the rent seeking behavior you describe. You’ve reinvented Georgism but with extra unnecessary steps.
> The big finance houses have essentially been handed over ownership and control to corner the whole housing market ... by the captured and corrupt government.
A couple things to try to contextualize this claim:
1. Institutional investors are purchasing single-family homes at a greater rate than they used to, but they account for a minority of all purchases: "During the first three months of this [2021], investors bought nearly 15% of U.S. homes, up from about 10% during the previous three quarters."
2. Their overall share of the market remains small: "Yet of the roughly 15 million single-family rental homes in the U.S., institutional investors own only about 2%, according to real estate consulting firm RCLCO."
Las Vegas is a city mostly surrounded by public lands. New private parcels are no longer made available as lots appropriate for single family homes. They are carved onto neighborhood sized chunks, sold to developers directly, and locked into HOA's for all eternity.
Only the big boys that can tackle multi-million dollar bids can enrich themselves by the sale of our public lands.
I think they’re trying to say that “higher construction costs” is literally the “multi-million dollar bids” to own property without going through a HOA.
For the average person, this makes the land and construction costs unobtainable for the average person, effectively creating a monopoly for the builders and the HOA organizations with deep pockets to bid.
Nah, we call it an oligopoly or a cartel. In my city, we actually have this. There are 3 main real estate developers who own or built approximately 80% of all the land and construction in the city.
Housing prices are sky rocketing and if you want a new one built you practically HAVE to do it through them unless you’re in the upper 10% of wealth.
I call that an unfair advantage at the very least. Based on what they’re saying about Las Vegas, it sounds like a similar arrangement has developed in their zoning and development contracts for their suburbia.
Even if there are 1000 bidding players… that’s 1000 people out of the millions living in Las Vegas. Seems pretty unfair no matter how you spin it. There was a time people just bought land and built a house themselves. That time has largely passed.
Only the big-boys that can tackle multi-million dollar bids and rental building development projects can enrich themselves by the upzoning of our existing neighborhoods, locking residents into a permanent rental class for all eternity.
Past a certain level of density, the only thing you can realistically own is a condominium. The key differences between renting an apartment and buying a condo that I was able to identify seem to be that condos are more expensive, harder to get out of if you want to move, and not covered by the city's tenant bill of rights ordinance.
Rentals must on average cover the debt, taxes, and profit for the owner. The tennant pays monthly rent including all of the above and has nothing to show for it when the lease ends.
Condos at least build some equity that you can recover when you sell. Sure there are some risks and maintenance costs that renters don't "pay" but it's all included in the rent, over time.
That equity is only monthly payment - debt, taxes. So the real difference is that you can invest X in your property or X-owner's profit in the investment of your choice.
If you take loan, it is also leveraged investment with some tax benefits, and lower risk: you can file for foreclosure if underwater without need to pay out of debts.
A duplex or quadplex in a desirable area being upzoned is still going to be well outside the realm of what anyone but the “big boys” can reasonably afford to develop.
They’re going to turn it into rentals, and do their best to maximize rent for each unit.
End result is paying an obscene monthly rent for ever-shrinking square footage, while anyone being paid below a living wage sits in the 20+-year-long queue for employer-subsidizing “affordable” apartments.
It's more than what your typical person can do, maybe, but the cost of the loan to develop a duplex in SF is not as large as you are making it out to be. There could be plenty of entrants to that market.
prices are obviously determined by balance between supply and demand.
Seller is obviously interest to rise his prices if there are many buyers competing for his bid.
Don't assume there is even a housing crisis. Not everyone can live in NYC, that is a simple fact. Or LA, or SF. It's physically impossible. If you think building more housing lowers rent, then you've never been to a big city before.
But building more housing does lower rent in big cities? It's status quo in tokyo, and it even happened locally where a mini-condo boom caused condo prices to stay flat around that area, while SFH house prices went up. Condos in other regions nearby continued to go up in price, where there wasn't a condo building boom.
You really aren't talking about the same thing. It's not like you can add 100 housing units to an area one time and achieve affordable housing indefinitely. The housing units have to be added to meet increases in demand.
The idea I think you are assuming is that supply causes demand (i.e. demand will always rise to meet supply), and that the supply-demand curve is flat to maintain price regardless of supply.
Manhattan has fewer residents today than it did in 1920. It also has much less building happening, and rents are higher now than they were in 1920 for the same square footage. Some of that is we don’t allow people to live in new boarding houses, some of it is that we downzoned the whole city multiple times, and there are a myriad of other reasons we should tackle as well.
It may not be physically possible for the entire world to live in NYC, but we surely could double in population without breaking any real physical constraints. Besides the political constraints that make it absurdly expensive (in time, capital and social power) to build for more growth.
There's not a crisis if you already own your home and are collecting those sweet sweet land rents. And by denying the existence of others' problems, those who own land get to collect ever higher economic rents.
But for everybody else, yes there's a huge housing crisis.
Actually housing IS one of the things I cannot afford -- if you are talking about SF, LA, NYC, etc. But luckily for me and everyone else, those are not the only places one can live.
The cognitive disconnect is pretty insane here. Affordability issues are a widespread phenomen. You may be able to remote work in a low cost of living area, but the type of people who have housing instability can't. They have to be supported by the shit-tier wages in the low cost of living area, which is why it's a low cost of living area. Except now the "low cost" housing there takes up more than half someone's income at a median job in Bumfuck, State.
Did you even read what I wrote? People are experiencing lack of housing even in not typically expensive areas. I’m from the middle of nowhere west virginia, and the rents have doubled and the only local jobs are fast food tier. These people have nowhere to go and no hope to find a place to live. Get your head out of your ass.
HN is a bubble and it’s sad so many people live in it they have no idea what is happening to 50% of the population in this country and needs it drilled into their head repeatedly that they even exist.
Though the parent is being slightly obtuse in his language, I do agree with him to a point.
Here in the UK, if you are willing to accept a commute and downgrade your expectations slightly, you can buy an affordable house or apartment relatively easily. Even commutable to London you could buy say a 1-2 bedroom apartment for £200k, which is achievable for 1 good earner or 2 average earners.
The problem is that people want nice big houses in the best areas of global cities. I understand the aspiration, but that is not a housing crisis. It's just a market.
I acknowledge problems for low earners in low wage areas etc, but maybe I am referring to a different type of person, say young professionals wanting to get on the housing ladder or needing somewhere to live that is commutable to work. I think that too often they just have expectations out of line with their budgets.
"Housing crisis": the first sentence is U.S. government concerns about great disparities in housing conditions are at least 100 years old.
So, a permanent crisis?
Anyhow: the shortage of housing has a lot to do with zoning restrictions, building codes, NIMBY-ism, credit availability, and lots of other factors, and very little to do with HUD and NAHB. Manufactured homes have a low social status, unfortunately, and forcing municipalities to accept them would be a very hard slog.
Unions. One of the major set backs for building more in Bay Area and San Francisco is not NIMBYism or zoning. It’s because construction unions have a big say with the counties and they have a big voice during elections.
Anything that involves mortgages and the govt has to necessarily support unions and work with them. They don’t like modular homes as automation will replace union jobs.
> Many groups were, and still are, opposed to factory production, including building contractors, building craft unions, building code inspectors, architects, materials producers and politicians (who are supported by the traditional industry). While these groups are sometimes at odds with each other, they all join together to fight factory production of homes. They form a mega-monopoly, composed of their individual monopolies.
Looks like he does? There is California building and trade council as well as the separate San Francisco building and trade council..umbrella for multiple building and construction unions from trades like carpenters and plumbers and electricians to construction workers.. all of them wield tremendous clout and can deliver the vote banks to any politician standing for public office.
These are the same people who build roads and bridges and all public utilities. Their power shouldn’t be underestimated.
You specifically singled out "construction unions".
It seems you've presented evidence that construction unions don't have big say, compared with industry and realtors.
If construction unions have a bigger voice than realtors ($2.3M) and building industry ($1M), and that voice is reflected in "where the money comes from" then ... how much did the construction unions contribute?
All of "Building trades" is $84,165.
The biggest groups under "Other unions" are "Opportunity Pac - A Coalition Of Teachers, Health Care Givers, Faculty Members, School Employees, And Public And Private Employee Organizations" and "Nurses And Educators For Reggie Jones-Sawyer For Assembly 2020, Sponsored By Labor And Consumer Attorneys Organizations". Those don't sound like construction unions.
[..]Anti-worker or pro-worker? Why labor unions are fighting over a housing bill
The bill, which has the support of Assembly Speaker Anthony Rendon, would allow housing that is 100% affordable to low-income households to be built “by right” on areas now zoned for offices, retail and parking. That means skipping many city council meetings that tack on costly delays as well as the state’s premier environmental law many blame for its housing woes. Livable California, a local control group, has already dubbed it “the worst bill of 2022.”
The bill would also allow mixed-income housing, with a minimum of 15% of units affordable to low-income households for rent or 30% of units affordable to moderate-income households for sale, along commercial corridors such as strip malls.
[..]
The Carpenters and the Trades are at loggerheads over how much unionized labor developers would have to use to take advantage of the streamlining. The Trades are pushing for language requiring a certain amount of the workforce be graduates of an apprenticeship program, which effectively means union members. That’s common for public works, but unusual for residential construction. [..]
Still think ‘NIMBY’ism and Prop 13 is why we have housing shortage. California is controlled by Unions. We just live in it and pay taxes.
The reasonable clause is responsible for housing shortage and restrictions. NIMBYism and prop 13 is not..we are all being side tracked and gaslit while there are many powerful and potent forces that control and restrict housing supply in California.
For a good laugh, read the conclusion of the paper, which sounds like it was written in the year 1960, when inner cities were crumbing, and imagines that rural areas will get better public transit when the poor escape the cities they are “trapped in”:
There is a literature that asks why the poor live in cities. One answer provided is that transportation options are much better in cities than rural areas and small towns. But what stops public transportation from expanding upon the arrival of new residents?
A more important reason for why the poor live in cities, it seems, is that many low-income households are “trapped” in cities by the high cost of constructing housing in rural areas and small towns.
The entire paper is a joke. Monopoly in the construction market? Dude, there are multiple competing contractors in every field even in smallest towns. In fact, I’d endeavor to say that construction is probably the least centralized major industry in US, certainly less centralized than, say, farming.
In fairness, there isn’t that much competition between large subdivision developers, and an even smaller number of firms that are able to navigate the gauntlet of gatekeepers in major urban areas.
I'm a inactive General Contractor, and union electrician.
I'm not going to read a 49 page pdf today.
There are two things that really affect supply.
1. Government regulations is number one by a huge margin. We all know what that includes; zoning, persnickety council members who literally debate where a window is placed, the wood or stucco you can use, down to hedges, and even the color of your home. Look at what Bill Mahar had to go through in order to build a shack in his backyard.
(Gavin Neusome made some great changes these last few years. They arn't being used though. Why? It's still dam expensive to build anything. I've noticed a a few well off wealthy guys in my county using ADA units to increase the sq. footage of their homes. But most folks don't have the money to build.
2. The cost of constructing is high. Every-time a new code goes into building it just adds up. And I know how most of you love these safety codes.
The problem with over coding is the law is the law.
My father once got a failed final permit on the electrical Service installation. The law states you need 30" of space around the panel. The Service was in a concrete hallway. He was failed because the panel was 29". The inspector was a childhood friend of my father. Yes--it says something about my father too?
I knew a guy whom was failed a final electrical install because he didn't have the right sticker on two of his receptacle. A sticker. He didn't even know buried in the code there was a law over a missing label. The recepticals were standard 15 amp residential recepticals.
This guy said HUD, and NAHB, are not helping the situation. He is probally right. I did look up NAHB lobby monies for 2021, and it was 3.275 million. Which doesn't seem outrageous.
If this guy's thesis is we need to encourage manufactured housing; I'm all for it. Just pay the guys a union wage.
Housing, and the way we treat our Homeless, are my two big hot buttons. If you don't have a place to sleep, and shower, you are fucked. It's not a big problem. Some "Progressive" jack ass running for something in LA wants to not give a homeless person a room. He wants to house them in army barrack style housing, and using the single room as a carrot if the poor slob is a good boy.
If a guy buys some land, let him do whatever (within reason) with it. And yes, that means putting up a tent on it if he wants.
I'm disenfranchised over our lack of homes in the right economic zones, I don't see much ever happening.
One thing Russia did right during their experiment with Communism is they built those huge concrete apartment buildings. Everyone was pretty much guaranteed a room.
We need those big buildings now. We need to have hard building codes (like foundations, roofing, mechanicals, etc. We then need the soft codes. A guy should have to rip out a Service panel over a 1" violation.
If you are ever interested in what it takes to build anything, watch the community station that plays the local town meetings. I guarantee you will want to throw the remote at the tv.
There is plenty of cheap or even virtually free housing available in major cities such as Detroit, Baltimore, St. Louis, and many others, as well as countless trailer parks in any of countless Nowheresvilles, USA. The unspoken dirty little secret is that affordability complaints are really about housing that is around the kind of people the buyer wants to be around and not around the kind of people the buyer doesn't want to be around.
There is a large stock of existing single family houses that cost as much as buying a car - $50,000. In theory, anyone with $5K down and can afford a $200/month mortgage can get a single family house in quite a number of cities.
In practice, the problem with the housing market goes way beyond the economic basics of land, construction, ZIRP.
Wealth concentration also leads to geographic concentration of jobs. So people cannot choose to live in Detroit, global investors decide where your job is going to be and where you are going to live.
Part of the trade off I make personally for affordable housing is not really wanting to go outside from November to March because the weather sucks.
If you live in an area that has perfect weather you are always going to have a demand problem and high prices from people wanting to move to those areas.
Certainly, the last year as been absolutely stupid, but I would argue that we've actually, for the first time since 2005, gotten to unsustainable levels. The headline is sensational, but please review the last graph here: https://realestatedecoded.com/real-monthly-mortgage-payment-...
What really matters to people are monthly payments relative to paycheck. Of course, if people also believe that inflation is underestimated, then the current housing situation is perfectly fine.
> What really matters to people are monthly payments relative to paycheck.
I hear this repeated often, fail to see how it's true. Let's say I'm 50, just starting a 30 year mortgage. Monthly payments relative to paycheck? Sure that's important. So is the fact that I'll have to be paying until I'm 80..?
Well, if you're 50 and agree to a 30 year mortgage, then the bank expects you to pay until you're 80 or sell your house to pay off the remainder. I don't understand how that's confusing? People have income in their retirement. They shouldn't take a big mortgage if their retirement savings are small.
There is a one-to-one relationship between "amount of the loan" and monthly payments. I don't see how that's relevant. Do you mean the length of the loan? Banks don't give mortgages to 100 year olds because they know they won't be able to afford the monthly payment in 20 years (because they are dead), it doesn't matter of the loan amount. Even for a 50 year old, I would expect it would be hard to find any bank give you a loan for longer than 15 years. Each bank is different and a cursory search shows that some banks consider giving you a mortgage if the end date is before you turn 95. The point remains, this has nothing to do with amount.
1. Only if you don't take into account the length of the mortgage. You can have the same monthly payment for two entirely different amounts if you are paying for different lengths of times. Borrowers are not agnostic to this. This is contrary to your suggestion that monthly payment is all that matters.
2. It is largely illegal to discriminate by age when lending, I know plenty of people in their 60s or 70s who have taken out 30 years.
It produces better buildings, but this is all new and expensive. Expand this sort of thing all out to all the other components (electrical, plumbing, foundation, etc) of modern, compliant buildings and you get the idea.
It’s not just the cinateuction lobby, Right now there is deluge of vacant commercial properties. SF alone has around 20Msqft - this translates to 15-20k apartments. Why cannot this be converted? Same glut situation with warehouses, they can be used for housing homeless people.
Probably because of the cost to convert and the building codes. There is another article on HN that discusses this situation in NYC right now. It just can’t be done according to the “experts.”
Solving housing crisis requires making housing not an investment. Make very very very tax inconvenient to buy places for the sole purpose of renting them out. Do this, and most problems are solved. But banks and legislators have no interests in doing so, therefore nothing will ever solve housing crisis. Make peace with it. It will only get worse.
Not saying I agree, but the concept is that 50% more capacity on the market drives down prices so much that renters can afford to own.
Obviously not everyone could afford, and not everyone wants to, and that transition process would be dramatically inefficient. (For example, inspectors could charge a fortune with so many people trying to buy so many homes)
But it's sort of obvious to me that to wouldn't push prices down so much that most renters, some of whom are quite poor and and have poor credit, could own.
Plus, even if you are putting 50% more capacity on the market, you are also putting multiples of that in demand on the market, since renters who don't know each other often live in the same house.
Why would you allow a foreign billionaire that does not live and produce any value in US, buy properties for the sole purpose of speculating and driving price high? There are countries like Denmark where you can’t just buy properties, you have to be authorized.
Drastically reducing rentals would crush job mobility/flexibility. There are a lot of problems with the rental market, but it's existence is not one of them.
Without reading all 47 pages, this (below) seems to be the crux of what it is talking about -- cheap, small factory-built single family detached homes. And I am skeptical because my research suggests we don't need crappier single family detached homes. Instead, we need more missing middle housing and similar.
It’s clear why these homes are a threat to those constructing stick-built homes, especially in
the lower-priced home market, and why monopolies in traditional construction have invested so heavily in blocking these small-modular homes. The homes are of high-quality, built to a strict national building code. They are manufactured at a cost per square foot that is
one-third to one-half less than the cost per square foot to construct homes with traditional
methods.4 Not only can factory production methods produce houses at a fraction of the cost
per square foot of traditional methods, factory methods are also able to “go small.” That is, factory methods are able to economically produce homes of small sizes.5 The average size of these homes (in square feet) is less than one-half that of homes constructed with traditional methods.
To my knowledge (sorry not citing sources, too much, but could be individually looked up and validated/refuted) it is rather the opposite, the construction industry is hopelessly fragmanted. A tree of contractors and subcontractors participate in any sizeable projects (and several even in the smallest one), also the composition change during the project many times. There are research efforts for long time into this topic, how to handle the fragmented and volatile situations as part of construction supply chain management research. Also touches the risk management area.
The industrialized construction (or offsite construction) improvements more like hindered than helped by this fragmantation. Inventing and introducing new techniques (including workforce training, software and hardware) is infinitely harder with fragmanted organization involvement. Having few dominant organizations that could dictate work methods actually helps.
Furthermore the finances of the construction organizations are of project focused. Need to find money and time in long running single construction projects for research and development and somehow connect those accross production projects, in parallel, while trying to keep up prompt and cheap delivery as clients (paying a lot for each one off product, each product different unlike in manufacturing industry using mass production or at least mass customization) demand quick and cheap delivery. They may go to one does not spend on R&D and can work cheaper (eve 1% difference can mean millions on this scale). Need to change the engine while flying kind of thing, cannot stop alone, or even together for a while (clients demands delivery) to reform the practices.
Even with industrialized construction the housing crisis remains. Look at very advanced countries like Sweden where factory based construction is norm but (despite municipality and government backed effort) getting a home is still hard. Not enough supply of the very expensive stock and even the councious and heavy regulations just shift the problem elsewhere (life long waiting lines for affordable rentals).
I believe the housing crisis is almost pure financial problem. Housing is used for investments too. And having affordable (reliably cheap) and high profit yielding (rapid cost increasing) housing at the same time is impossible. Seems like the ball is more like at the economists and regulatory side than construction technology.
Not to mention places where the cost of land and associated taxes are further worsening the situation (e.g. UK), where construction cost is actually lower portion in the overall price.
The construction industry can do quite a bit in improving mass production, but not that much that would solve housing crisis in high value locations where the space is limited, costly, and prices fuelled by investment efforts as well (where else would you invest than in places with high demand?). State bodies could help more.
Just as a question: can someone try do depict what is the "housing crisis"? I mean is simply "there are not much affordable homes" or something else. Because IMVHO that's MUCH something else. Surely monopolies in general are not good, but honestly I suspect the actual crisis haven't much to do about real estate/construction business, not even to mere economics terms (i.e. high prices).
Long story short: how can housing be stable in a changing society in a changing world? If a mass of people want (and/or need) to relocate because of increasing bad climate and extreme events (floods, fires, too-hot-in-too-long-summers, ...), if there is a crossing between some who need to go to cities because can't afford anymore living outside and some who want freedom outside, if properties prices keep floating due to such moves how can a stable housing exists?
197 comments
[ 2.5 ms ] story [ 232 ms ] thread- Modular home construction is an $11 billion industry, growing at 8.5% per year
- The cost of modular/factory vs. stick built construction is about a 10-20% savings. On a $500k home, that’s going to be less than $25k difference in price. That’s not the problem.
Additionally from this source (https://blog.lotnetwork.com/lot-and-land-loans-financing-you...):
- Banks, which are tied to the Fed, are loathe to provide lot/construction loans. Ironically, this creates supply shortage and makes it necessary to purchase existing homes or from tract home builders that the author is criticizing.
- The size of the cash downpayment can be as much as 50% of the cost of the home.
Bottom line: the cost of housing is a systemic problem, and the Fed along with local government zoning boards are at the root of both the financial and regulatory sides of the problem.
The history of housing busts dates back hundreds of years and is older than the United States. Banks are not wild to extend lot or construction loans because, until we achieve AI singularity, there's always another bust coming around the corner- and banks know they'll take it on the chin. Especially to the average home builder, who will simply walk away from their loans in a recession, close their company, declare bankruptcy, etc. etc.
Isn't 10-20% of $500k actually $50k-$100k? (Could buy some really nice appliances...)
I think the OP's core point is sound -- (total) home prices are like 50% over historically reasonable levels, so it's daft to explain it by even 20% overpricing for construction (which, again, applies to only a portion of the total sale price).
[1] And the typical home does not cost $500k to build.
Is factory-built housing common in other countries?
If not, then it would strongly suggest there are other reasons than federal control.
Wikipedia at https://en.wikipedia.org/wiki/Modular_building#Market_accept... says "In the UK and Australia, modular homes have become accepted in some regional areas; however, they are not commonly built in major cities. Modular homes are becoming increasingly common in Japanese urban areas ...", suggesting it isn't all that common world-wide.
In Australia you can't get a loan on a mobile home in a 'manufactured home park'
https://www.homeloanexperts.com.au/forum/viewtopic.php?t=580....
Also building codes often make it hard to build mobile homes on residential land.
> They also mean the homes are financed as automobiles (with personal loans, or chattell loans) and not real estate loans. ...
> One famous program, the so called “Section 235,” provided mortgages at interest rates as low as one percent for buyers purchasing a home built on-site. Buyers of factory-built homes, in particular, manufactured-homes, were not eligible.
Or is the Fed trying to draw attention away from the catastrophic impact of its zero interest and other policies on the massive increase in asset prices?
What about it do you find unconvincing?
The paper essentially argues that construction costs can be lowered significantly using factory production methods, especially for small-modular homes. I have no problem with that part. The title has no basis in the paper, though.
It is unrelated to the massive increase in housing (and other asset) prices in recent years which are the cause of the current housing crisis.
Houses are already as close to factory-built as is possible to do with today's tastes. Everything is pre-engineered and merely assembled on site.
Elsewhere here I asked why factory-built housing doesn't seem to be popular world-wide, which is what you would expect if it's only US Federal policy which prevents it from being popular in the US.
I'll add that I saw no discussion of how local housing policies were designed to prevent "Large numbers of low-income, city residents [from moving] to these areas", in order to keep property values high. Or the classism that caused people to look down on mobile homes.
The author rhetorically asks "But what stops public transportation from expanding upon the arrival of new residents?", when I've heard so many New Urbanist videos answering that question.
I didn't understand how "a uniform building code across the country would be a great benefit to factory producers" is a meaningful goal, given that the needs for Florida, Arizona, and Alaska are quite different, making me question his understanding.
I read "There is a literature that asks why the poor live in cities." and counter with the observation that the poverty rate is higher in rural areas - https://en.wikipedia.org/wiki/Rural_poverty#Rural_versus_Urb... says "rural poverty rates are higher and more persistent than in urban areas, rural workers are disadvantaged by lower wages and less access to better paying labor markets" - note that housing prices aren't part of it.
And I didn't see mention that "stick housing" has moved towards factory methods. As https://priceonomics.com/in-defense-of-mobile-homes/ points out:
> Windows, doors, and other parts arrive prefabricated, Rybczynski writes, so labor costs have actually halved since 1949. Levitt and Sons spent $4 to $5 per square foot building Levittowners, and, adjusted for inflation, builders today spend the same amount.
> Instead the problem is almost wholly that land is too expensive. Reduce the size of a new, modern house by 50%, Rybczynski notes, and houses in metropolitan areas will still cost over $200,000.
> That’s the secret to the extreme affordability of a mobile home—take land out of the equation.
We aren't really using "traditional methods" - engineered wood is not traditional and is very common. "As of 2005, approximately half of all wood light framed floors were framed using I-joists" says https://en.wikipedia.org/wiki/Engineered_wood#Beams . These were made in a factory, and not "on-site" as the author describes the house-building process.
The actual data is very clear on this (FRED), despite the word of mouth "shortage" narrative.
Now that the narrative is turning, inventory is skyrocketing as you would expect, and we will be in a glut within 6 months. Look at the "all time low inventory" of the 2000s as another example. How quickly did the inventory narrative collapse back then? A few months
Show me the stats for housing units per household. Hint, it's the same as the year 2000 and in line with historically normal levels. 1.1 housing units per household
Show me the stat for rate of construction relative to population growth. Hint, it's at an all time high.
Show me the demographic trends? Hint, it's towards flat or negative population growth, with most boomers dying over the next 10y, and each successive generation being smaller than the last.
Where are your stats? Inventory, which has nothing to do with actual supply? What happened after the generationally low inventory of the 2000s?
Anyone holding to that peg as confirmation of anything is in for a rude awakening
The relevant stats are people reaching FTHB age (roughly 25-35), minus deaths, plus new construction. And that picture looks pretty bleak:
https://countryeconomy.com/demography/population-structure/u...
There are about 45M Americans ages 25-35. There are about 21-22M Americans in peak die-off age (75+). There are about 1.2M annual housing starts:
https://www.census.gov/construction/nrc/pdf/newresconst.pdf
Sure, by 2035 or so, when baby boomers reach peak die-off age, we're going to have a housing bust. But over the next decade? Most Millennials are screwed, and it doesn't get better until today's middle-schoolers come of age.
Household growth was flat prepandemic https://fred.stlouisfed.org/series/TTLHH
The likely explanation for current RE market is households temporarily expanded due to the various stimulus and forbearances giving many higher disposable income, but we'll likely see this contract again as the effect of inflation takes hold.
(Expanding/contracting can be through roommates splitting/joining, kids moving out etc).
Housing is fungible. Rental units draw from buy demand and vice versa. Substitutable goods work this way on a macro scale.
The millenials who buy, move out of rentals, which drives rents down (or less growth), increasing the spread between carrying cost to rent/own. There's a limit to how far this spread can widen nationally. You can't look at these markets independently.
Number of households show the actual number of housing units demanded, everything else is an input to number of households.
If the question is "Can I maintain the same standard of living as I grew up with?" or "Can I form a family?" or "What are housing prices going to do now?", this isn't an interesting statistic. The number you want to know is "How many people would like to form households but can't because there are no houses to be had?" And that's what I'm citing with the demographic numbers. If there are twice as many people desiring houses as houses available for them, only half the population is going to get a home, and the price that the median home sells for will be what the 75th percentile of the income distribution can support.
To extrapolate out permanent conclusions from a point in time inventory metric is completely flawed analysis.
I'll refer you to the generationally low inventory in the 2000s, coupled with similar widespread shortage narratives. It won't end via the same mechanism, but each bubble is unique.
Inventory will continue to rapidly increase as rates stay over 5%
And again, rate of construction relative to population growth is at an all time high. Every narrative around a supply shortage focused on inventory is clearly and obviously flawed/wrong
The simplistic view is that residences are either rented out or occupied by the owner. In reality a speculative boom creates excessive demand which increases the number of residences that are second homes, Airbnb's, undergoing renovation, on the market, land-banked, etc. Most of this is made possible as capital gains become more significant relative to yields.
It's counterintuitive but a speculative boom can lead to both higher prices and a higher proportion of underutilised residences.
I still have not seen a convincing response to the demographic argument I put forth. The generation entering the housing market now is the large Millennial generation; the generation dying is the small Silent generation. For everyone who wants a house to get one, we need to be building the delta in size between these, and we're short by several million.
Well, implicit in this argument is that a non-trivial percentage of the Millennial generation is actually able to enter this market. Is that actually true? I'm not really convinced that is it, as there's been a lot of chatter about this generation putting off important life milestones like family formation, which would precipitate home buying. To be fair, and to potentially anticipate the counter argument, when the boomers were at this same stage in their life interest rates were much higher. But ... family formation was a much stronger cultural imperative at that time. It very much is not so today.
>For everyone who wants a house to get one, we need to be building the delta in size between these, and we're short by several million.
I agree with this, but for philosophical reasons and not structural ones. If I'm some jerkoff investor, trying to maximize profits, yeah I'd only build high rise lux condos and squeeeeeze that yield because, let's be honest, building family homes doesn't really do that.
The number of households is significantly constrained by the supply of housing units, so that seems like a less relevant number.
Looking just at the past two years ignores them past 14 years since the 2008 crisis, from which housing construction is just barely beginning to recover. And houses under construction is not completed house construction rate; each individual build is taking far longer because of supply chain issues, so it looks like there are far more houses in the pipeline, but there isn't actually an oversupply of housing by any means.
If there was an oversupply, we'd see flatter prices, or maybe even declines. Housing prices are quite sticky, but we aren't seeing either massive vacancy rates or falling prices.
There is an element of changing preferences, but city centers also up greatly in price. Can't be the whole story
[1] https://www.nber.org/papers/w30041
You can tie LCOL price increases to them. But if that's the case, you would expect HCOL/central places to decline in price via the flip side of the same effect. Yet instead we see massive price increase in LCOL and smaller yet still big price increases in central/HCOL.
Obviously a many variable system, but stating that remote work should lead to a national 20% increase in prices is nonsensical
In 2008 we found out there was a massive housing bubble.
https://static.seekingalpha.com/uploads/2022/3/29/50377332-1...
On mobile now, but you can confirm the stats on FRED
The person posting that graph has a bridge to sell
Ergo building in FL or TX can reduce prices in CA. Why do you think the northeast and CA are losing population?
Aside from the snark, I'll make it clear. If you have 100 people and even just 5 of them prioritize LCOL to their current locale, those 5 moving away will reduce demand for the area, regardless if the other 95 would never move to Gary, IN in a million years. Housing is not a closed system, and building nice developments in Raleigh or Denver will take population from higher COL places in the aggregate. Which is exactly why we see population loss in HCOL areas.
Very small brained thinking in the residential real estate world unfortunately.
Nationwide stats hide a lot of regional realities.
People have basically come to understanding that house prices only go up, they use exotic financing and stupid leverage (BRRR method) to keep buying "assets" and jacking up their rental yield which then re-prices the asset so they can take an even bigger loan to buy more "assets".
Recently someone in the group asked how they could afford a house in Seattle and most answers resonated around buying houses in midwest/lcol areas and jacking up rent/renovating to take out further financing and keep buying properties till you can afford to buy a house in the hcol area.
This has to end, with FED inflicting pain on the stupid leveraged folks.
Homes should be for people to live in, not to purely speculate and grow their money.
Wait, if those speculating investors have “rental yield” then doesn’t that imply people are living in those homes?
Housing can’t both be a good investment and be affordable.
You can't make economic decisions on the basis that real estate will always grow more than income or even real gdp forever. Which is what these group of investors are doing.
This gets repeated a ton, but isn’t true unless you assume density never increases.
Buying a SFH and replacing it with a 4-plex would be profitable in almost every market — were it allowed, which it almost never is in the US. In that alternate universe, the SFH owner makes money, the developer makes money, and the new units in the new building can be affordable.
American new construction has doubled in size (in terms of sqft/unit) over the past 50 years. If “oppressively small” were the problem, things should have gotten better, not worse?
The demand you’re talking about in the SF Bay Area is not necessarily driven by ‘butts in seats’ (aka actual people needing a roof and willing to pay a concrete price for it), but also by the cheap money narrative the FED has been feeding for a very long time. Which is what they are referring to in their post as having changed.
I’m not sure why so many people believe that housing prices in high-demand markets are dominated by things like interest rates — there is certainly an effect, sure — but by far the predmoinant reason a 2br house on a small lot with a small yard costs $2m+ in Palo Alto is that there are thousands if not tens of thousands of well-off workers for nearby tech companies who would like to live there, there is not enough housing to go around, and $2m is the market clearing price.
The idea that the “demand” is being “driven” by some “cheap money narrative” is missing the forest for the trees. Low interest rates might be why that house is $2m and not $1.8m. But the narrative is definitely not the reason the median home price across the Bay Area is many multiples higher than the national average of $350k.
That’s pure supply and demand.
Secondly, the Bay Area is one of the markets subject to some of the more severe headwinds if remote work becomes the new normal, for the reasons you stated.
SF population declined ~7% over the past two years. https://www.sfgate.com/bayarea/article/San-Francisco-populat...
The concept of being forced to live in a hyper local area for work may be a thing of the past, which doesn't bode well for employment driven locales. NYC being another example.
Bay area is one of the last places in the country I'd want to own a home right now
I don't know much about SF as I haven't lived there as an adult, but New York is an incredible place to live for lifestyle reasons too.
It has great food, a very high concentration of smart and highly educated people, great museums, great performance arts, etc. It's also an incredibly walkable city, which is rare in the US.
Hands down it would be my choice of city if I was a remote worker.
It's subject to debate which locales would stand to net gain/lose from WFH, but I'd pick NYC as a net loser. You gain some who enjoy the city life and amenities, but you lose more to lower COL locales.
Price will always be a factor weighed alongside amenities, even if one area is objectively nicer from an amenities perspective
Everything else pales compared to NYC.
This is far from an universal view - I live there (well, East Bay) and I think the weather isn't that great: too cold in summer, no nice evenings, never nice to hang out by the water. And I like cold winters as a contrast.
October to December are nicer though.
If demand plummets, of course prices will follow.
That’s the point folks are trying to make.
It doesn’t just magically appear.
It’s not driven by Fed policies around interest rates. It’s not driven by speculation.
It’s driven by people wanting to own homes. Period. The other factors are small.
That doesn’t create real demand on it’s own (as in anything that will impact a market). As any experienced realtor will tell you, every house is always ‘in demand’ by a near infinite amount of people that can’t afford it.
They have to be able to do something about that desire in a concrete way - high salaries count of course, but it’s always modulated by interest rates unless they are buying cash outright. Then it’s usually moderated less directly by other things they can be doing with that cash that are more interesting, and relative rents in the area.
But if it was "interest rates" driving everything -- then every area would be very expensive, not just the areas where there are high salaries and lots of inflow and basically zero new construction.
The Bay Area population grew 7.4% from 2010 to 2020 -- that's 614,901 residents according to census. New construction in that same time period was under 200,000 units.
So: where are all those people living? Many of them are living with roommates, etc., and because of the scarcity of housing, having your own place has become a luxury that costs extra money. If 600k people are complying for 200k units, prices will go up regardless of what interest rates do. Then, salaries rise in response where they can, because tech companies need to pay enough for people to be able to move here (always more expensive, thanks to rent control and Prop. 13, than already living here) -- which then pushes home prices even higher, because there still isn't enough housing to go around, and the 30% of people who can bid the most are the ones who clear the market. (And then, of course, everyone else who isn't pulling in tech salaries is just shut out of the market.)
Interest rates matter on the margin, yes, of course -- but the cost of capital is still low compared with availability. A couple making $400k combined is going to be able to bid more on a house at 3% interest than at 5% interest, but the only reason they're bidding so much at all is that there aren't enough homes to go around and they want one.
This tracks prices nationwide [https://fred.stlouisfed.org/series/CSUSHPINSA]
Everything else you’re talking about is from side effects.
But not every area is very expensive.
The fact that a house in SF that costs $2m would go for $500k elsewhere is not a result of federal monetary policy, and it is not a result of construction costs. It is a result of supply and demand.
If the house in the sticks is $500k and the ‘same’ house is $2m in SF, my point is that without the fed pump, that house in the sticks may be $200k, and the house in SF $800k.
Mortgage rates have been dropping pretty consistently since the late 80s but price growth isn’t super consistent: https://fred.stlouisfed.org/series/MORTGAGE30US
Money was super cheap 2008-2013 too but prices were down on that period.
They had started to raise rates in late ‘06 and ‘07, which ‘pulled the string’ and led to the explosion. (The tide went out, and it turns out a great many people were swimming naked, to abuse a Buffett quote).
[https://images.app.goo.gl/RXGY22drR2pfCXX68]
Real estate is highly illiquid and often highly leveraged. It often takes years for market changes to be visible in the data, and sometimes pricing signals get hidden entirely in many markets (you’ll see a backlog that can be years long, but no price drops - just no sales).
It’s also market dependent, but influenced by the larger market (so think of each specific market as a ship, floating on the overall tide which is ‘cost of money/debt’).
Agents tend to always be selling, and tend to hide bad numbers. The Economists working for realtors are especially bad for this.
Sellers tend to not want to admit they’re desperate, and can often hold out for years. Buyers always complain that things aren’t cheap enough, but
It makes for noisy data and sudden surprises.
The short sale I bought in ‘09 for instance, closed for 50% less than the initial offer AT THE BANKS INSISTENCE because of steady shifts in underwriting and appraisal standards in the approx. 5 months it took to close. It took another 6 months before that price signal got disclosed publicly.
Still, since we're talking about "solving the housing crisis", it's not clear how raising rates to reduce pricing solves anything, since this argument is somewhat circular: prices drop only because people can afford less, and if people can afford less, that price drop doesn't actually make housing any more affordable?
Again, am I missing something? If not I stand by my original "there's not enough supply to meet demand" observation and that "increase supply" might be an actual solution.
1) building more units/houses does increase capacity, of course. But unless capacity in a location exceeds the population of residents AND everyone who would want to move there (doesn’t happen in a desirable place), ‘empty’ units will be rare. That is assuming price based backpressure doesn’t exist of course.
It’s a bit like the freeway capacity fallacy. Adding more lanes to a freeway, until you exceed the capacity of anyone who would ever want or be able to use it, just makes traffic worse, as it becomes a more and more known artery and additional businesses/people start using it, which increases traffic.
NYC housing prices are still astronomical, for instance, despite them being on a housing building binge for at least a century.
2) since a ‘limited’ (non infinite supply, supply < available demand) housing location will generally have more than 1 person interested in every house for sale, and will always have a point where housing costs money, the gating factor for if someone wins a pricing competition for a house is their ability to pay more than everyone else.
That means more leverage allows people to push prices higher.
It isn’t just interest rates of course - underwriting standards play a part too. Someone who can’t document employment history can’t get a mortgage, for instance.
If you consider the ability to leverage a force multiplier - say 30x for someone who can get a 30 year loan, but It’s actually more, depending on downpayment requirements - then those able to use the leverage will outcompete those who can’t.
those who can’t meet underwriting have a leverage factor of 1x - they can only offer the cash they have on hand. No leverage.
If we wanted to make housing more affordable (but didn’t mind throwing the US and world economy into a black hole), we could for instance make it illegal to issue mortgages. Then as long as you could save money, even if you were a drug dealer with no documented income, you’d be one the same playing field as someone with the high tech salary. You might lose still of course.
When people had to pay cash for a house, the typical house was around 1-3x the typical personal yearly income at the time. The reality is that a ton of people still rented and were homeless though, but that is a different discussion.
As to why this means ‘cheap money’ vs ‘expensive money’ means there is a good/bad affordability impact, even when the funds rate should (in theory) just change some multipliers in a calculation, but not if someone can actually buy or not.
The part you’re missing is speculation, time, and cycles, which hasn’t come up yet.
When money is cheap, underwriting gets looser (but not loose! No one is writing a mortgage for someone homeless, even at the top of the boom without going to jail.). They do this because the loan originators need to compete for buyers.
When prices of an asset go up, and money is cheaper, there is an initial lag - people don’t think of the asset as a ‘sure thing’ because it hasn’t been growing year over year yet. They won’t lever as high. Underwriting standards are often still tight. They’ll be conservative.
This is when things tend to be more affordable/in reach.
If someone is stretching to pay at 15% interest, historically interest is lower than that too. So when rates drop, they can upgrade, and prices go up, so they get money off it too. They can get a bigger and better place. Or move somewhere nicer.
This starts raising prices, but it takes time.
As this starts happening, underwriting standards start loosening. After all, if prices have done nothing but go up the last 10 years, of course they’ll keep going up, right?
As prices show this upward trend, everyone starts speculating too. If money is still cheap and getting cheaper, they can use leverage effectively too. Why buy one house, when you can buy two after all? Especially when prices keep going up. You don’t want to miss out.
Some folks also start doing thin...
I’d pick the Bay Area over anywhere else in the US, with or without remote. Judging by real estate prices after remote took off (ignoring condos) I’m guessing a lot of others feel the same way.
And if resale value then where will you live when you sell?
The amount that can be loaned/supported by a given income, and hence a lot of underwriting standards, are based indirectly on the cost to service the loan relative to the income the person has.
The lower the interest rate; the bigger the loan someone can get if they shop around for the same income and assets.
This isn’t perfectly linear, as principal payments vs interest payments have different ratios based on interest rates, but it very much applies.
The market clearing price is also driven by these things.
But let’s be clear: the primary driver of sky-high prices in the Bay Area is (1) people moving here, getting well-paying tech jobs, and wanting to buy housing, and (2) not nearly enough new construction to meet that demand.
See the Case-Schiller index [https://fred.stlouisfed.org/series/CSUSHPINSA]
Changes in interest rates will be quite visible there, unless millions of people get ‘snapped’ and their houses remain intact anyway.
The most recent lull in prices correlated with a lull in rates, which kind of goes against your overall point of higher rates pushing prices down because the cost of capital increases? But maybe I’m misunderstanding your point.
Or more specifically, whether it's a shortage of reasonably available units vs. a shortage of existing units.
Not in my area. Where I live, there are about 4 or 5 housing developments, and every time I drive by them, I never see any progress. Occasionally I may see one truck and maybe 3 or 4 people working, but most of the time, I see no one. In the year I've lived here, I have notices zero progress on all new construction that I know of.
I don't know that people are really aware of the scale of what is going on here. The big finance houses have essentially been handed over ownership and control to corner the whole housing market ... by the captured and corrupt government.
A cheaper manufactured home would of course be nice if looking at costs, but dropping it on a $1.5m acre lot isn’t going to change the math that much.
Post WWII there were an actual housing crisis in the USSR, and those block buildings helped a lot.
https://en.wikipedia.org/wiki/Khrushchyovka
A couple things to try to contextualize this claim:
1. Institutional investors are purchasing single-family homes at a greater rate than they used to, but they account for a minority of all purchases: "During the first three months of this [2021], investors bought nearly 15% of U.S. homes, up from about 10% during the previous three quarters."
2. Their overall share of the market remains small: "Yet of the roughly 15 million single-family rental homes in the U.S., institutional investors own only about 2%, according to real estate consulting firm RCLCO."
Source: https://www.realtrends.com/articles/institutional-ownership-...
Las Vegas is a city mostly surrounded by public lands. New private parcels are no longer made available as lots appropriate for single family homes. They are carved onto neighborhood sized chunks, sold to developers directly, and locked into HOA's for all eternity.
Only the big boys that can tackle multi-million dollar bids can enrich themselves by the sale of our public lands.
Question was for a shred of evidence for any cause other than FED policies.
There it is an evidence, at least for Las Vegas.
Most interesting is it shows this is not a single variable issue.
There are lots of factors involved and they probably change across geographies.
For the average person, this makes the land and construction costs unobtainable for the average person, effectively creating a monopoly for the builders and the HOA organizations with deep pockets to bid.
The construction industry might be considered a cartel though if they coordinate behind the scenes.
In some areas, maybe more like ‘collection of competing cartels that hate each other’.
Housing prices are sky rocketing and if you want a new one built you practically HAVE to do it through them unless you’re in the upper 10% of wealth.
I call that an unfair advantage at the very least. Based on what they’re saying about Las Vegas, it sounds like a similar arrangement has developed in their zoning and development contracts for their suburbia.
Even if there are 1000 bidding players… that’s 1000 people out of the millions living in Las Vegas. Seems pretty unfair no matter how you spin it. There was a time people just bought land and built a house themselves. That time has largely passed.
Only the big-boys that can tackle multi-million dollar bids and rental building development projects can enrich themselves by the upzoning of our existing neighborhoods, locking residents into a permanent rental class for all eternity.
Condos at least build some equity that you can recover when you sell. Sure there are some risks and maintenance costs that renters don't "pay" but it's all included in the rent, over time.
That equity is only monthly payment - debt, taxes. So the real difference is that you can invest X in your property or X-owner's profit in the investment of your choice.
With a condo, several entities are jointly responsible. If you don't like it, you can sue.
I would rather deal with a landlord than a Surfside Tower like incident.
They’re going to turn it into rentals, and do their best to maximize rent for each unit.
End result is paying an obscene monthly rent for ever-shrinking square footage, while anyone being paid below a living wage sits in the 20+-year-long queue for employer-subsidizing “affordable” apartments.
Interest rate policy is not singularly to blame for the housing crisis, just as it wasn't in 2008.
The issue in 2008 was lack of internal enforcement at banks or by federal regulators of interest rate products.
In the case facing us today it is less to do with Fed policy, more to do with land use policies that have made housing construction literally illegal.
How did you quantify "less"? Low Fed rate made mortgage body 60-70% cheaper, hence prices are higher.
For people always referencing Tokyo -- why aren't you living in Tokyo then?
The idea I think you are assuming is that supply causes demand (i.e. demand will always rise to meet supply), and that the supply-demand curve is flat to maintain price regardless of supply.
It may not be physically possible for the entire world to live in NYC, but we surely could double in population without breaking any real physical constraints. Besides the political constraints that make it absurdly expensive (in time, capital and social power) to build for more growth.
I'm sure you could also house a few extra people in need in your living room!
1. interest rates rise
2. peoples' stock porfolios have tanked
But for everybody else, yes there's a huge housing crisis.
If someone cannot afford to live in the most desirable locations in the world, but they can live almost anywhere else, that is not a crisis.
What you see on this forum is people complaining that housing in SF/LA/NYC is not cheap. However, in your case, I think you have a point.
Here in the UK, if you are willing to accept a commute and downgrade your expectations slightly, you can buy an affordable house or apartment relatively easily. Even commutable to London you could buy say a 1-2 bedroom apartment for £200k, which is achievable for 1 good earner or 2 average earners.
The problem is that people want nice big houses in the best areas of global cities. I understand the aspiration, but that is not a housing crisis. It's just a market.
I acknowledge problems for low earners in low wage areas etc, but maybe I am referring to a different type of person, say young professionals wanting to get on the housing ladder or needing somewhere to live that is commutable to work. I think that too often they just have expectations out of line with their budgets.
The unaffordability of monthly payments is the housing crisis, and that stems from inadequate supply.
So, a permanent crisis?
Anyhow: the shortage of housing has a lot to do with zoning restrictions, building codes, NIMBY-ism, credit availability, and lots of other factors, and very little to do with HUD and NAHB. Manufactured homes have a low social status, unfortunately, and forcing municipalities to accept them would be a very hard slog.
Anything that involves mortgages and the govt has to necessarily support unions and work with them. They don’t like modular homes as automation will replace union jobs.
> Many groups were, and still are, opposed to factory production, including building contractors, building craft unions, building code inspectors, architects, materials producers and politicians (who are supported by the traditional industry). While these groups are sometimes at odds with each other, they all join together to fight factory production of homes. They form a mega-monopoly, composed of their individual monopolies.
These are the same people who build roads and bridges and all public utilities. Their power shouldn’t be underestimated.
Teachers and realtors(not developers) each had contributed over 2.5 million each. Prison guard union 3.7 million. Other unions: about 3.5 million
Building industry is about a million but that’s pre 2020 numbers. It has since gone up.
The article explains who gives how much and what they want in return. There are also overlaps.
NIMBY and zoning complaints are smokescreens. Look at campaign donations. It’s all public record.
It seems you've presented evidence that construction unions don't have big say, compared with industry and realtors.
If construction unions have a bigger voice than realtors ($2.3M) and building industry ($1M), and that voice is reflected in "where the money comes from" then ... how much did the construction unions contribute?
All of "Building trades" is $84,165.
The biggest groups under "Other unions" are "Opportunity Pac - A Coalition Of Teachers, Health Care Givers, Faculty Members, School Employees, And Public And Private Employee Organizations" and "Nurses And Educators For Reggie Jones-Sawyer For Assembly 2020, Sponsored By Labor And Consumer Attorneys Organizations". Those don't sound like construction unions.
[..]Anti-worker or pro-worker? Why labor unions are fighting over a housing bill
The bill, which has the support of Assembly Speaker Anthony Rendon, would allow housing that is 100% affordable to low-income households to be built “by right” on areas now zoned for offices, retail and parking. That means skipping many city council meetings that tack on costly delays as well as the state’s premier environmental law many blame for its housing woes. Livable California, a local control group, has already dubbed it “the worst bill of 2022.”
The bill would also allow mixed-income housing, with a minimum of 15% of units affordable to low-income households for rent or 30% of units affordable to moderate-income households for sale, along commercial corridors such as strip malls. [..] The Carpenters and the Trades are at loggerheads over how much unionized labor developers would have to use to take advantage of the streamlining. The Trades are pushing for language requiring a certain amount of the workforce be graduates of an apprenticeship program, which effectively means union members. That’s common for public works, but unusual for residential construction. [..]
Still think ‘NIMBY’ism and Prop 13 is why we have housing shortage. California is controlled by Unions. We just live in it and pay taxes.
That seems like a reasonable clause to me. It sounds like what anyone would want their union to do.
The Bay might be the worst major metro in the US for both NIMBYism AND current zoning in terms of building affordable housing...
There is a literature that asks why the poor live in cities. One answer provided is that transportation options are much better in cities than rural areas and small towns. But what stops public transportation from expanding upon the arrival of new residents?
A more important reason for why the poor live in cities, it seems, is that many low-income households are “trapped” in cities by the high cost of constructing housing in rural areas and small towns.
Farmers in most industries are basically price-takers.
I'm not going to read a 49 page pdf today.
There are two things that really affect supply.
1. Government regulations is number one by a huge margin. We all know what that includes; zoning, persnickety council members who literally debate where a window is placed, the wood or stucco you can use, down to hedges, and even the color of your home. Look at what Bill Mahar had to go through in order to build a shack in his backyard.
(Gavin Neusome made some great changes these last few years. They arn't being used though. Why? It's still dam expensive to build anything. I've noticed a a few well off wealthy guys in my county using ADA units to increase the sq. footage of their homes. But most folks don't have the money to build.
2. The cost of constructing is high. Every-time a new code goes into building it just adds up. And I know how most of you love these safety codes.
The problem with over coding is the law is the law.
My father once got a failed final permit on the electrical Service installation. The law states you need 30" of space around the panel. The Service was in a concrete hallway. He was failed because the panel was 29". The inspector was a childhood friend of my father. Yes--it says something about my father too?
I knew a guy whom was failed a final electrical install because he didn't have the right sticker on two of his receptacle. A sticker. He didn't even know buried in the code there was a law over a missing label. The recepticals were standard 15 amp residential recepticals.
This guy said HUD, and NAHB, are not helping the situation. He is probally right. I did look up NAHB lobby monies for 2021, and it was 3.275 million. Which doesn't seem outrageous.
If this guy's thesis is we need to encourage manufactured housing; I'm all for it. Just pay the guys a union wage.
Housing, and the way we treat our Homeless, are my two big hot buttons. If you don't have a place to sleep, and shower, you are fucked. It's not a big problem. Some "Progressive" jack ass running for something in LA wants to not give a homeless person a room. He wants to house them in army barrack style housing, and using the single room as a carrot if the poor slob is a good boy.
If a guy buys some land, let him do whatever (within reason) with it. And yes, that means putting up a tent on it if he wants.
I'm disenfranchised over our lack of homes in the right economic zones, I don't see much ever happening.
One thing Russia did right during their experiment with Communism is they built those huge concrete apartment buildings. Everyone was pretty much guaranteed a room.
We need those big buildings now. We need to have hard building codes (like foundations, roofing, mechanicals, etc. We then need the soft codes. A guy should have to rip out a Service panel over a 1" violation.
If you are ever interested in what it takes to build anything, watch the community station that plays the local town meetings. I guarantee you will want to throw the remote at the tv.
https://foxbaltimore.com/amp/news/local/national-guard-naacp...
There is a large stock of existing single family houses that cost as much as buying a car - $50,000. In theory, anyone with $5K down and can afford a $200/month mortgage can get a single family house in quite a number of cities.
In practice, the problem with the housing market goes way beyond the economic basics of land, construction, ZIRP.
Part of the trade off I make personally for affordable housing is not really wanting to go outside from November to March because the weather sucks.
If you live in an area that has perfect weather you are always going to have a demand problem and high prices from people wanting to move to those areas.
What really matters to people are monthly payments relative to paycheck. Of course, if people also believe that inflation is underestimated, then the current housing situation is perfectly fine.
I hear this repeated often, fail to see how it's true. Let's say I'm 50, just starting a 30 year mortgage. Monthly payments relative to paycheck? Sure that's important. So is the fact that I'll have to be paying until I'm 80..?
2. It is largely illegal to discriminate by age when lending, I know plenty of people in their 60s or 70s who have taken out 30 years.
Take a look at something like the BC Energy Step Code https://energystepcode.ca/ and its guidelines on thermal bridging: https://www.bchousing.org/research-centre/library/residentia...
It produces better buildings, but this is all new and expensive. Expand this sort of thing all out to all the other components (electrical, plumbing, foundation, etc) of modern, compliant buildings and you get the idea.
source: four years in construction trades, my own two eyes
Obviously not everyone could afford, and not everyone wants to, and that transition process would be dramatically inefficient. (For example, inspectors could charge a fortune with so many people trying to buy so many homes)
It's ridiculous to suggest outlawing 50% of a state's living arrangement.
Good solutions consider the current state, they don't skip past it entirely
Plus, even if you are putting 50% more capacity on the market, you are also putting multiples of that in demand on the market, since renters who don't know each other often live in the same house.
That would be a good start.
It’s clear why these homes are a threat to those constructing stick-built homes, especially in the lower-priced home market, and why monopolies in traditional construction have invested so heavily in blocking these small-modular homes. The homes are of high-quality, built to a strict national building code. They are manufactured at a cost per square foot that is one-third to one-half less than the cost per square foot to construct homes with traditional methods.4 Not only can factory production methods produce houses at a fraction of the cost per square foot of traditional methods, factory methods are also able to “go small.” That is, factory methods are able to economically produce homes of small sizes.5 The average size of these homes (in square feet) is less than one-half that of homes constructed with traditional methods.
The industrialized construction (or offsite construction) improvements more like hindered than helped by this fragmantation. Inventing and introducing new techniques (including workforce training, software and hardware) is infinitely harder with fragmanted organization involvement. Having few dominant organizations that could dictate work methods actually helps.
Furthermore the finances of the construction organizations are of project focused. Need to find money and time in long running single construction projects for research and development and somehow connect those accross production projects, in parallel, while trying to keep up prompt and cheap delivery as clients (paying a lot for each one off product, each product different unlike in manufacturing industry using mass production or at least mass customization) demand quick and cheap delivery. They may go to one does not spend on R&D and can work cheaper (eve 1% difference can mean millions on this scale). Need to change the engine while flying kind of thing, cannot stop alone, or even together for a while (clients demands delivery) to reform the practices.
Even with industrialized construction the housing crisis remains. Look at very advanced countries like Sweden where factory based construction is norm but (despite municipality and government backed effort) getting a home is still hard. Not enough supply of the very expensive stock and even the councious and heavy regulations just shift the problem elsewhere (life long waiting lines for affordable rentals).
I believe the housing crisis is almost pure financial problem. Housing is used for investments too. And having affordable (reliably cheap) and high profit yielding (rapid cost increasing) housing at the same time is impossible. Seems like the ball is more like at the economists and regulatory side than construction technology.
Not to mention places where the cost of land and associated taxes are further worsening the situation (e.g. UK), where construction cost is actually lower portion in the overall price.
The construction industry can do quite a bit in improving mass production, but not that much that would solve housing crisis in high value locations where the space is limited, costly, and prices fuelled by investment efforts as well (where else would you invest than in places with high demand?). State bodies could help more.
Long story short: how can housing be stable in a changing society in a changing world? If a mass of people want (and/or need) to relocate because of increasing bad climate and extreme events (floods, fires, too-hot-in-too-long-summers, ...), if there is a crossing between some who need to go to cities because can't afford anymore living outside and some who want freedom outside, if properties prices keep floating due to such moves how can a stable housing exists?