The problem with multi-family is that we don't have the roads and infrastructure to support that density.It really is all about lack of supply. Not enough homes were built in the last 20 years to support the demand without escalating prices. One of the root causes was that existing owners are incentivized to prevent construction as that raises the value of their investment. The other is not wanting to densify existing neighborhoods. Basically boomers doing boomer things to benefit their cohort over others.
20 years ago, society and government should have incentivized building more multifamily units instead of loosening mortgage lending guidelines and bringing a subprime mortgage induced crash.
As a side note, my son works for a builder in the entry level market and they are into each lot for $80,000 in a developer friendly area.
The builders are the quiet part no one is talking about right now.
I get it, capitalism and all, make what you can. But these guys are literally bathing in money. Crappier versions of the same houses built with crappier materials and crappier QC are 10x the price of what they were 10 years ago. You'll commonly hear builders talk about how costs like lumber and labor are up, which is technically true, but when those costs are up 1.5x and sale prices are up 5x, 10x, even 20x in some markets it's not a good faith discussion. The reality is these things CAN be built for A LOT cheaper, but everyone is just paying extra margins to make builders etc super duper extra mega massive rich instead of just super rich.
I live out near Park City and manage properties there. On the east side of the city 5-7 years ago there was nothing but open land. Now that land is filled as far as you can see with massive mega mansions. Rolling all the way out of site. Thousands, at least. They are almost all owned by builders and farmers.
We took on management of one recently. A sweet $5M mansion paid for in cash. The owner is a builder who 5 years ago was a regular guy living an upper middle class lifestyle. Now he's buying a $5M mega mansion with cash as his 4th home and covering the 6000sqft of walls with Peter Lik photos at $50k a pop so he can visit for 2 weeks a year. And he's the POOR guy on the block.
I'm talking $20M+ houses just lining the hills. Like this: https://www.zillow.com/homedetails/4209-N-Two-Creeks-Ln-Park-City-UT-84098/111974357_zpid/
But duplicated over and over again. I've talked to dozens of these owners. The percentage that were either a builder or a farmer that I talked to? ONE HUNDRED PERCENT.
It's the quiet rich no one is talking about. They've done a good job keeping their head down (they're not going around social media showing off how rich they are like athletes or whomever) and no one has bothered to look. People keep talking home shortages and labor shortages and material shortages causing higher prices but the reality is it's mostly just greed.
What can be done about it? Probably nothing. It's a free market, no reason to step in. But a little notice and public pressure at least might help it correct itself at least a bit. Because the reality is there is plenty of labor and materials to affordably house everyone with everyone involved in doing so making good money. There's just no motivating factor to do so because if you can sell premium housing at a huge mark-up instead and people will line up to pay it, why waste time on that other crap or price it so you only make a ton of money instead of a metric ****-ton of money?
Excellent post, but I think you underestimate material cost. Suppliers have to price in the annual pheasant hunt, deep sea fishing, and golf trips for the builders. Contractors routinely leave 5 Benjamins behind after meetings.The problem with multi-family is that we don't have the roads and infrastructure to support that density.It really is all about lack of supply. Not enough homes were built in the last 20 years to support the demand without escalating prices. One of the root causes was that existing owners are incentivized to prevent construction as that raises the value of their investment. The other is not wanting to densify existing neighborhoods. Basically boomers doing boomer things to benefit their cohort over others.
20 years ago, society and government should have incentivized building more multifamily units instead of loosening mortgage lending guidelines and bringing a subprime mortgage induced crash.
As a side note, my son works for a builder in the entry level market and they are into each lot for $80,000 in a developer friendly area.
The builders are the quiet part no one is talking about right now.
I get it, capitalism and all, make what you can. But these guys are literally bathing in money. Crappier versions of the same houses built with crappier materials and crappier QC are 10x the price of what they were 10 years ago. You'll commonly hear builders talk about how costs like lumber and labor are up, which is technically true, but when those costs are up 1.5x and sale prices are up 5x, 10x, even 20x in some markets it's not a good faith discussion. The reality is these things CAN be built for A LOT cheaper, but everyone is just paying extra margins to make builders etc super duper extra mega massive rich instead of just super rich.
I live out near Park City and manage properties there. On the east side of the city 5-7 years ago there was nothing but open land. Now that land is filled as far as you can see with massive mega mansions. Rolling all the way out of site. Thousands, at least. They are almost all owned by builders and farmers.
We took on management of one recently. A sweet $5M mansion paid for in cash. The owner is a builder who 5 years ago was a regular guy living an upper middle class lifestyle. Now he's buying a $5M mega mansion with cash as his 4th home and covering the 6000sqft of walls with Peter Lik photos at $50k a pop so he can visit for 2 weeks a year. And he's the POOR guy on the block.
I'm talking $20M+ houses just lining the hills. Like this: https://www.zillow.com/homedetails/4209-N-Two-Creeks-Ln-Park-City-UT-84098/111974357_zpid/
But duplicated over and over again. I've talked to dozens of these owners. The percentage that were either a builder or a farmer that I talked to? ONE HUNDRED PERCENT.
It's the quiet rich no one is talking about. They've done a good job keeping their head down (they're not going around social media showing off how rich they are like athletes or whomever) and no one has bothered to look. People keep talking home shortages and labor shortages and material shortages causing higher prices but the reality is it's mostly just greed.
What can be done about it? Probably nothing. It's a free market, no reason to step in. But a little notice and public pressure at least might help it correct itself at least a bit. Because the reality is there is plenty of labor and materials to affordably house everyone with everyone involved in doing so making good money. There's just no motivating factor to do so because if you can sell premium housing at a huge mark-up instead and people will line up to pay it, why waste time on that other crap or price it so you only make a ton of money instead of a metric ****-ton of money?
The answer is consumers saying no.
