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Well obviously i'm not a builder so i don't know how much it costs per sf.
What is reasonable for builders??
I'm thinking starter homes may not be so profitable but if they build a lot of them this should bring decent profits
Hundreds have been built near me, they just happen to cost about 3-4 times what you think they should. The driving factor is the land value. Even the tiniest sub-1000 sq ft lots generally start around $100K, and builders typically shoot for land being 1/5 of the total home value. The result is a whole bunch of 3-5 story homes with only 1-3 rooms on each floor, generally priced between $500K-$850K depending on the square footage. Towards the lower end of that range is about what you'd pay for an older fixer-upper on a regular size lot. These starter homes are significantly cheaper to own being they're brand new and don't require another $100K+ in renovations to be comfortable.
Also there aren't many condos being built now due to construction financing difficulties. Even now, projects that were planned as condos are still being converted to apartments.
1. Cost of develop-able land. Land is much more expensive then it used to be, at least in locations people want (or have to) to live. More land is off limits to development then ever as well. You can rarely develop an entire piece of property now a days as retention ponds, open space and other amenities are requirements and aren't optional anymore.
2. Costs to make that develop-able land buildable. Those costs have skyrocketed in the last couple of decades. Most places no longer allow simple subdivisions anymore. Most places require street-lighting (sometimes not plain ones), concrete curbs, sidewalks, parkway trees, bike trails, a park donation and city water and sewer. Permit fees can be substantial as well.
3. Zoning. Many places have minimum lots sizes, minimum house sizes, "upscale" exterior materials and "impact" fees. Also the permit process is considerable slower in most places then it used to be and you often need permits from more levels of government as well. What used to take months can drag into years. So a property is held longer incurring property taxes and other holding costs . Most communities no longer provide any infrastructure to developers. They have to pay for all streets, sewers, electric, gas etc. Many private utilities (electric, gas, etc.) are prohibited by law and ordinances from providing infrastructure at no cost to developers anymore or are no longer able to because they will not make enough from the new customers they get.
4. NIMBY's. Short for "Not in MY backyard". There is a considerable amount of people opposed to any new construction today. It may be they don't want possible lower income people living nearby, the traffic, think that new construction is bad for the environment, or the new buildings will block their views or make the public schools more crowded. NIMBY's can hold up a development by slowing the permit process, lawsuits etc.
So you end up with expensive lots which will only pencil out with expensive houses......
Most builders would be thrilled to be able to build lower priced homes, since they are far easier to sell. Many people can afford a $130,000 house, few can afford a $500,000 one. Even in an expensive place like California.
Lower priced homes are basically outlawed in many communities in the USA today.
To be honest, I am amazed more places have any new construction going on. The ratio of cost of new builds outruns most area's general income.
Not as profitable. Particularly in places where land prices are high.
Plus the population demographics have changed, with a smaller % in that "starter home" age, and higher demand by older people who tend to have more money.
Just a quarter mile from me is an entire neighberhood of starter homes.....several listed at under 200k. More are being built right at this moment.
we have a small development of starter homes near our house. They list for about $220 but have alot of upscale amenities in them. For a few years the subdivision sat with only about 10 houses built but this past summer they started building in earnest and filled in the subdivision with roughly 75 homes in about 1.5 years. There were multiple builders putting up houses and on any given day you'd see 4 houses in various stages being worked on.
With millenials earning as little money as they do, it's just a matter of time before the baby boomers try to sell their mcmansions, but there will be no buyers. I suspect the bottom will drop out of the housing market causing another real estate bubble to pop.
My house is one of the smaller ones in our neighborhood. We built it to 2400 sq ft knowing that our 3 kids would soon be off to college.
Most of the homes in our subdivision are around 2800-3200 sq ft.
In my area, a starter home is a townhouse. Land is just too expensive. Around 13-1400sqft, single garage. 2br/1-1/2 ba. 2 story, unfinished basement, gas heat and central a/c. New construction. Close to $300K at market rates. Some are targeted "affordable" with income qualifying and will sell for around $269K... but with taxes and HOA fees...you still need to be making decent money to qualify for the monthly payment!
The move-up house from the starter home is $500K+. 3/2+1/2/2. About 2500sqft. New construction. About .40 acre.
We have very little land left to develop. Our existing housing stock is quite elderly.
Except that are no actual houses available at that price.
The cheapest house, not just a drawing, is about $300K.
And, the commute to Denver is not reasonable.
BTW Levit orginal starter homes were built one a day. He built the 750 square foot homes in one day to get frame and roof and windows up. Second team did inside.
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