It showed up in a lot of ways here - most notably in large land grabs
along our relatively few arterial highways. In some cases square miles
of farmland were bought for prices on the order of $3K/acre and divided
up into 1/2 acre $60K (minimum) building plots. A number of the builders
then claimed the re-sale price of the land as assets and borrowed on
that to buy still more land. It only came to my attention when I went
looking for land to build a new shop.
Yes, people could still shop for land - provided they were willing to
live 7-10 miles from a paved arterial - but that's neither safe nor sane
here if there's a need to commute 15 miles to an office job in the city.
The construction pace appears to have been pushed beyond what could be
managed/supervised and even inspected properly. One (I'm told typical)
example of which I have some personal knowledge is a friend's new home
in which the builder "forgot" to insulate one of the exterior walls, and
no one noticed until my friend and his family spent their first winter
in the house. You build houses - tell me how that happens.
Karl, I don't think you're made that way - and these aren't the kinds of
practices either you or your customers need.
I don't usually pay a lot of attention to what's going on in the
construction business. I probably should, but my time and attention is
fairly well eaten up with trying to improve solar technologies. You
might be able to get a better glimpse of some of this by Googling on
Regency Builders in Des Moines and reading. It's very likely to make
more sense to you than to a guy who's not in the trade.
I'm not maintaining that there was not plenty of greed to go around, nor
trying to rag you ... that said, land, material and labor are the cost
elements factored into determining the initial asking price of a spec
home (marketing to a lesser extent).
But, without sufficient demand, which ultimately establishes the actual
"market value" via the final sales transaction, even the sharpest of
practices above are all for naught in setting an average price of real
estate in a regional sense.
So what we have here are the unprincipled, from builder/speculators,
bankers, real estate agents, to taxing authorities responding to pent up
demand in the good old American way, resulting in the necessary
embracing of the even older, precursor concept of "caveat emptor". :)
As well you already know ... lack of supervision by unprincipled
speculators (not necessarily "builders" in the professional sense of the
term), coupled with a mostly unskilled labor force that requires lots of
My point is/was that demand, generally and IME, has a much higher effect
on the true cost of real estate than greed on the builder/speculator's
part, no matter how unprincipled.
AAMOF, folks would be surprised to find that the margin on the average
spec home in the best of areas is generally less than 10% no matter how
sharp the operator.
Custom homes, with lots and lots of "change orders", are where the
"ching ching" comes into play. :)
On Mon, 08 Mar 2010 14:42:11 -0600, the infamous Swingman
The area is full of $400k homes and the builder decided to build a $1M
home there (or $675k home. It cost him $100k more.) Happens all the
time, and the houses sit vacant for a whole long time until they sell
for just a bit over the normal price for the area.
I take it that you've never done that.(?) I haven't, either. I'm
small potatoes. ;)
Stay centered by accepting whatever you are doing. This is the ultimate.
Government mandates do cost the developer/builder a third (or more) of
the house price. In Vermont it was more like half. A developer had
$100K in a lot before the first shovel saw light of day. Of course
the builder isn't going to put a $100K house on a $100K lot.
Revenue wouldn't need to increase if they didn't spend more. They
wanted to spend more without raising the "mil" rate - another
invisible tax. ...until the market goes down.
Most, perhaps not, but a significant number do. I'd like to live on a
lake too. Maybe someday soon (when I really retire ;-).
Where? California? I've heard this argument everywhere I've lived.
I should have explained better... The "mess" wasn't anything to do
with Des Moines, rather the employer screwed everything up after the
interview trip out there. Of course, if I had taken the job there I
would have been moving out there during the middle of the floods.
Indeed they are. College loans are another government-caused mess.
The whole purpose of loans are to drive the cost of education UP.
Obama wants more.
That's certainly not my position. However, there is no way a new home
can be built today for $100K in many places, mostly because of
government regulations (again, not saying that all are bad).
Discounting places like NYC and SF, where there isn't enough land for
the population (and this isn't totally out of government's hands), a
major reason for high housing costs is because of government
Small houses can still be had for $100K in many areas. There is
nothing that says that a starter house has to be a new one, though
I've seen new ones in the low-middle $100s here.
On 3/8/2010 2:54 PM, email@example.com wrote:
They can here, too, but there aren't enough to come anywhere close to
filling the need.
I've also seen $1 homes in Des Moines, but the number of people who can
afford to buy one to live in is astonishingly small.
Hmm. Something funny amount that. I'd think quite a few could affort $1 homes
if they could find them :-)
I've heard that you can get good deals for $75k in certain parts of Riverside
If they're (still) on the market, they're filling the "need". ;-)
I did a quick search of realtor.com and found a number homes (40), several
newish looking, in the $100K-$135K range, here. Taxes should be in the
$700/yr range, too. I'd say that was fairly affordable housing. They also
show 392 in Des Moines in that range. I was only there for a few days
interviewing so of course I don't know the area well enough to comment on
One example of a newish looking house in Des Moines:
On 3/8/2010 5:27 PM, firstname.lastname@example.org wrote:
That's exactly what Des Moines and surrounding communities need more of.
Des Moines is the largest employment center in the state (probably
followed by Cedar Rapids). Now let's add the graduates of the University
of Iowa (~30,000 students), Iowa State University (~20,000 students) and
the University of Northern Iowa (~10,000 students) and guess that 15,000
of those 60,000 will enter the work force every year. Most will not
return to a family farm. That guess is probably a little high, but the
difference can be more than made up by young people who went into trades
after high school and can now afford a starter home.
Most of those 15,000 will be looking at the ~400 homes you tallied - and
the result will be (has been) that most will relocate out of the state.
Housing is not the only reason, to be sure, but it is a significant factor.
Not just the commission; the jacking up of the prices is mostly driven
by the seller wanting a great price. The agent then runs with that. It
is not in their interest to price themselves out of the market. It's
capitalism at its self-regulating best.
They are, for the most part, parasites on the industry body ... I've
learned to loath the breed.
I can't tell you how many times I've witnessed real estate agents
literally pull a prospective buyer out of a smaller home in favor of a
higher priced, larger one when it was apparent to everyone that it
contrary to the best interest of the buyer.
Find one allied with a builder in a hot neighborhood, and you've got a
big problem with conflict of interest when it comes to pricing to the
detriment of all concerned, and it's a very common collusion.
And, like lawyers, they've managed to convince the sheeple that the
"service" they provide is so essential you can't buy or sell a house
without them ... and I'd prefer to deal with a lawyer to tell the truth.
In East King Co east of Seattle in Wash. State its been interesting to
watch how the govermnet gets in bed with the big developers and fights
the small spec builders. They think they are doing well getting the
develpers to put in the infrastructure and upgrade the roads in front
of their 1500 home developement. Locally the county government was
busted for falsifying traffic studies and instead of stopping the
project they got the state to change the growth manegment act. Then
the outlying suburbs as cities start developing like crazy as they
don't have to show jobs to match houses and all of a sudden the county
and state don't understand why they have to build new roads. In the
midst of all this the small guy down the road who wants to subdivide
30 acres into 6 five acre parcels is told no as the infrastructure
isn't in place. Seems to me it worked pretty well until they let the
big guys start doing mega developements. Now the schools, and water
districts are all trying to keep up.
Sounds all too familiar. Now throw in the Greeniacs and the
subdividing of 30 acres into 6 lots become VERY expensive, My business
puts me in touch with a lot of people who build, reno, design, sell
homes. If you're subdividing, you are pretty much out in the county.
That gives you some options: you run water, sewer and electrical to
each lot (seems fair enough), but you need environmental impact
studies, doubly so if you opt for the more common septic systems. So
even if the land was free, you'll have $50,000 into each lot before
you even start. $ 20K of which is nothing but bullshit lining the
coffers of the local politicians ("it's for the children's health")
who in turn won't use any of that money to develop (roads, bridges,
the stuff of which you speak) the area where the money came from, but
instead put a nice seawall where a few million dollar homes are
I know who's who in this county of 150.000 people, I will see a
builder, county engineer, lawyer, council man and real estate agent
having breakfast, taking combined tropical cruises and their sons and
daughters knocking each other up. That type of animal has always been
in bed together (sometimes literally) but there is NO corruption, just
ask them, after all, this is Canada, that sort of thing never
happens.... *feeling a bit queezee now, thinking I'm going to hurl*
HomeOwnersHub.com is a website for homeowners and building and maintenance pros. It is not affiliated with any of the manufacturers or service providers discussed here.
All logos and trade names are the property of their respective owners.