Source: NY Times

Category: Economy, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

5 Responses to “Tale of Entire RE Market via 6 Houses”

  1. rd says:

    House prices have three basic components:

    1. Cost of unimproved lot
    2. Cost of improvements to the lot (roads, utilities etc.) and
    3. Price to build structure and landscaping

    The last two are hard dollar costs that generally don’t vary too much between different locales for a given house. It is usually more expensive to build in a major metropolitan area as prices of materials and labor are usually higher, but that cost differential is generally not close to being double.

    So the biggest variable is what the cost of an unimproved lot is. Anything above its value for farming or timber is basically a perception valuation based primarily on its location and attributes (commuting distance, view, crime rate etc.). For a while in the housing boom, peope were willing to pay large premiums for those perceived attributes but those premiums vanished quickly in the bust in many areas as sanity began to settle in.

    So with the exception of DC, most of the house prices seemed to settle back into a reasonable unimproved lot valuation as well as the hard structure costs. DC is the major place where we are sending all of our money to, so they have more money to play with and their house values have rebounded more. The $250k to $300k range is about 5-6x median household income, so is a reasonable value that a significant percentage of the population can afford at 4% mortgage rates. However, the DC rebound to $381k is simply proof that some animals are more equal than others.

    • BuildingCom says:

      LOL.

      There are no “exceptions”. It’s not “different” in DC or anywhere. Materials and labor don’t vary more than 5% regardless of location and there is a globe full of land out there and 95% of it goes undeveloped.

      • WickedGreen says:

        95% undeveloped ? You need to get out more. With your eyes open.

        btw, you should hope that a lot of it remains “undeveloped”. Especially if you like things like water and air.

    • pmorrisonfl says:

      I think you’re accurately describing house costs. House prices incorporate house costs, but also include the availability of credit and the terms that a given buyer can obtain. One of the things that bugs me about the ‘six houses’ infographic here is that it only goes back to the height of an absurd bubble of credit that influenced house prices way out of their historical relationship to buyer income. If they showed how house prices have changed since, say 1998, then you’d have something.

  2. BuildingCom says:

    That’s right. Theres a globe full of land and 95% of it goes undeveloped.