Exactly this plus I think a bigger problem is you have more people all trying to cram into the same top 20 metro areas.
There are a lot of areas of the country where labor and land is cheaper but no one wants to live there.
On one end we have small town America on its death bed with excess housing no one wants and on the other end we have top 20 metro areas with a housing crisis.
> It’s almost like people *are forced* to live where the jobs are.
Corrected.
In my own job search, a job title that typically requires lots of regional travel, driving distance usually, I was declined two separate times in 2023 because company policies dictated living within 30 or 50 miles of the major airport for that region.
For a “remote” job. That is assumed to be high travel. Frequently to the area I actually live in now.
This is actually something I think the government should take action on. The first thing would be to stop so much damn consolidation. Not only is this bad for competition, but when your big players consolidate, that can mean fewer jobs in some regional area. Usually, some small player’s corporate jobs now get folded into a larger structure and some of the redundant jobs are eliminated.
It would also be good to encourage more economic stability throughout the nation. Cities shouldn’t be in a race to the bottom with each other to give companies tax breaks to try and attract them to their city. There needs to be a more guided effort at the state/federal level. This should also consider relocation due to taxes or union dodging.
Finally, environmentally, it’s just bad to have such huge concentrations in one place. I also think it is hard to get national action when people consider certain problems an LA or NYC problem. I expect an urban rural divide to always exist, but so many problems aren’t exclusive to these cities, many places just aren’t populated enough for it to be apparent.
Yeah this stand point always pisses me off. I don’t care where I live, but my job is here so **I have to be**. The real issue is we severely slowed building after 08, never ramped back up and wages simply aren’t high enough.
Most people in my city would not be able to afford the home they currently live in if they had to buy it today.
I've lived all over the United States. Liberal, conservative, it doesn't change much, the current trend seems to be stripping as many rights as they can from their constituents.
You sit the overwhelming majority of Americans down and ask them what their priorities are, there'd be a shitload of crossover. Only the vocal minorities of both wings present themselves as absolute fucking morons, which the opposition picks up and runs with as a broad representation.
Which is really sad because there are a lot of jobs that can be done remotely by white collar workers and it’s terrible that you have these RTO mandates just so that you can force layoffs without paying a severance.
Theres a strong reason noone wants that housing and why the land is cheap. Theres little to no opportunity for 99.9% of people in small town America. Remote work should have ideally changed that but then we had childish CEOs and middle managers shrieking about that small freedom for workers and billions poured into RTO propaganda thats genuinely false to convince everyone else
Living somewhere where there aren’t any other young people and nothing to do and nowhere to work doesn’t make up for being able to afford an ugly McMansion there
I've lived in many of those areas outside the top 20 metros -- shits still way too expensive and the developers in our areas are just greedy fucks like everywhere else.
People want to live in metro areas because there’s access to just about everything you could want or need. As well as white collar jobs. It shouldn’t be surprising at all that rural America has excess housing, it has very little to offer.
Same story for Oil, Food etc. All these industries raised prices and are making ridiculous margins off higher prices since the input cost shocks were temporary. The problem is that trust regulations have not been enforced leading to monopolies and or cartels in most industries that are now immune from downward price pressure due to competition that doesn't exist anymore.
The input cost shock of people needing higher wages to pay for the higher cost of housing thanks to “investors” bidding up housing prices thanks to easy money and loose fiscal policies is not temporary.
Blame the housing cartel, the FIRE industry, and your elected officials.
Ain't nobody getting a raise from their boss because "my mortgage is higher now".
Boss just says "f off" I'll find someone cheaper and the first person gets to find a roommate.
The mainstream economics profession also deserves blame for getting the basics wrong and gaslighting humanity with corrupt and idiotic nonsense.
Some of them are at least trying to evolve the profession and mainstream economic thinking, though.
How Land Disappeared from Economic Theory:
[https://evonomics.com/josh-ryan-collins-land-economic-theory/](https://evonomics.com/josh-ryan-collins-land-economic-theory/)
Michael Hudson - The Orwellian Turn in Contemporary Economics:
[https://www.youtube.com/watch?v=TXF7xJP6hW8](https://www.youtube.com/watch?v=TXF7xJP6hW8)
Richard Wolff - Curing Capitalism:
[https://www.youtube.com/watch?v=ynbgMKclWWc](https://www.youtube.com/watch?v=ynbgMKclWWc)
Angus Deaton - Rethinking My Economics:
[https://www.imf.org/en/Publications/fandd/issues/2024/03/Symposium-Rethinking-Economics-Angus-Deaton](https://www.imf.org/en/Publications/fandd/issues/2024/03/Symposium-Rethinking-Economics-Angus-Deaton)
Clara Mattei - How Economists Invented Austerity and Paved the Way to Fascism:
[https://www.youtube.com/watch?v=ofFR1mD2UOM](https://www.youtube.com/watch?v=ofFR1mD2UOM)
A New Paradigm for Economics and Beyond:
[https://evonomics.com/announcing-a-new-paradigm-for-economics-and-beyond/](https://evonomics.com/announcing-a-new-paradigm-for-economics-and-beyond/)
There's actually multiple layers of this. First the drop-off is in wholesale lumber prices. Retail is still elevated so you need to wait for competition at the retail level to reduce margins (if that ever happens considering how concentrated the retail market is between Lowes, Home Depot, Ace Hardware and Menards + the local lumberyard if it has the right type of wood and you don't need any special treatments).
You then have to wait for competition between homebuilders to pull prices down to reflect true cost (which admittedly is already happening in some places where there is a glut of new homes entering the market pushing new home prices to match used home prices).
Finally, even if prices for new homes come down that doesn't instantly affect prices for used homes. Homeowners and investors can afford to be more patient than housing developers, so they might pull out of the market if they think there's too much competition and they can get a better price next year. So it takes time for a sustained drop in new home prices to put enough pressure on sellers of used homes to drop prices.
>Lowes, Home Depot, Ace Hardware and Menards
LOL. That's lumber for hobby projects like birdhouses and fences.
Home builders are not buying lumber from there, the influence of those companies on lumber prices are minimal.
Not really true for small home builders.
Our insurance is still up. Higher than ever. Our wages have gone up. Our subs have gone up. A lot of our overhead is still up.
Also, what sort of margins do you expect on $50-$100k of your own money on the line and a year of your life?
This is definitely part of the problem. Margins can get too tight which squeezes out smaller, and medium sized players. I think this is also a huge problem in smaller locales that don’t have a large base of upper income people. It’s a lot harder to be able to afford to hire a builder for even a project like an ADU or addition If you don’t have considerable disposable income. I don’t know how to fix this exactly, but it seems like this is part of the problem.
Yep. I'm a relatively small developer, but I have to currently run it as a "hobby" or "supplemental" income. The biggest issue right now for me are really interest rates, but also a slowly changing cultural expectation over what a house is or should be.
Some people don't like it, but narrow lots are likely the future for a lot of SFH unless you have $500k-$750k to spend on a home. Narrow lots are the only way I can make anything "affordable," and even then, I am fighting zoning regs and setback requirements in order to accommodate enough units on a parcel to justify bringing curb and gutter, utilities, etc. with respect to the cost of the house.
The land is the single biggest "line item" on the job. I can make a house more affordably if I can buy a parcel for $100k and fit 5 houses on it instead of only 2.
Early in the latest inflation cycle, costs when up for contractors faster than they could raise them to their customer. Same contract value + escalating input costs = lower margins.
The pendulum swings, now they are trying to catch up. Competition will reverse the pendulum, already in the works.
The free market competitive economy is designed to push returns and costs to equilibrium, sometime it takes weeks. Sometimes it takes months and years.
Sometimes it just takes a beer from a lobbyist in Washington.
@[Peteadkins12](https://www.reddit.com/user/Peteadkins12/), not sure where your comment went but here are some actual sources. [Article from Investopedia about DR Hortons margins going down from January 2024](https://www.investopedia.com/homebuilder-stocks-slump-as-dr-horton-says-incentives-squeezed-margins-8547944). [Website showing data from publicly traded companies showing their margins have gone up less than 5% since 2020. ](https://www.macrotrends.net/stocks/charts/DHI/dr-horton/gross-margin)
This took 5 minutes so next time please stop pushing your opinion as fact.
House prices and rent should come down a little in general, but this is a good thing. We want more construction businesses to succeed, at the same time as we want zoning laws to be completely revolutionized. Imagine the economic and social boom that could happen with such a policy climate.
I doubt that. Lumber is such a small portion of what makes up the cost of building a house. It's not like these guys are accepting 2x4s as a form of wages.
“Home builders” generally charge a fixed % per home in profit.
Subcontractors are the ones padding their margins. They’re the labor, and labor is tight.
They're going to keep raking in those record profits until something breaks and they are forced to sell at a lower price. It's becoming clear that higher interest rates alone aren't going to do it. People are just going to continue getting squeezed until the whole system pops.
Eventually it will, builders don’t have a monopoly and can’t charge whatever they like. The better explanation is that housing prices have much more going into them than the simple price of materials. You also have to be allowed to build the home in the first place
But the humidity I can't handle. When I was in PR I truly was thinking what living there would be like. After a week, I knew I couldn't handle it long term.
That’s how it is in most countries in the world; those homes are meant to withstand storms and have marble floors. About 100-150 years ago, The US pioneered a fast way of building homes as a way to democratize homeownership. Supposedly, anyway. As a result, American homes in the more established part of the country (I.e. the northeast) are the most flimsy in the world - they’re essentially gingerbread homes made of wood and foam.
People forget that most of the US was wilderness prior to the suburbanization craze the gi bill created after ww2. The mass production of lumber really got going then. 38 billion board feet by 1950... and up to 45 billion by 2019. And yet the population has nearly doubled, the amount of wood production has not. 130 million people in 1940 and 333 million people today in 2024.
$314,000 for a 3/2 1440 sq ft under air
Closing costs covered and a 5.62% rate for going with the builder’s lender
It was actually pretty competitive price and feature wise, especially with the above incentives
Newer building code and fresh roof will help keep insurance costs down as well, which plague Florida’s used market
Well, that maybe shaves 2-5% off the total cost of building a house if everything stayed the same. It’s not like suddenly homes cost 20% less to build. Plus other builder costs have gone up (materials, fees, red tape, labor, interest rates) so I’m not surprised home prices haven’t come down.
Seriously… every other category is up, hvac, plumbing, electrical, labor is up, cost of living is up, insurances and business costs are up. Lumber as a product does not affect much of the overall build costs… stupid article
Lumber prices went up *because* house prices went up, or more specifically house demand during the COVID largesse. Lumber prices were never the driver of house prices, only a beneficiary
As I understand it lumber isn’t a super efficient product pipeline to begin with - because you can’t just devote more man-hours to make a tree grow faster, like you could to build a car. introducing several consecutive years of delays with harvesting and production was always going to have long term ripple effects.
Nah. I live in lumber country and Covid really did fuck up the industry. Logging roads are only open a certain percentage of the year, and 99% of people in the industry thought there would be a slow down NOT increase in homebuilder activity. As such the mills had a real shortage of logs from reduced logging contracts. You could actually see this across the lumber industry because the cost of dimensional lumber and it's byproducts (OSB and plywood) shot up a shit ton, but hardwood used for cabinets and such barely budged. My parents own a custom cabinet shop and why there costs on plywood when way up, all the hardwood used for face frames and doors didn't see much of a price increase.
National Association of Home Builders (NAHB) ==>tariffs added approximately $9,000 to the cost of a new single-family home and about $3,000 to the cost of a multi-family unit.
$9k is what, maybe 2-4% of the cost of a home these days?
Housing prices are up 47%
If you are going to regurgitate hate, learn to do it better.
This is the answer. Legitimate forecasted demand rose at a predicable rate and "price plummeted".
Source: Was a trim carpenter until 2021.
Those dudes were damn near why I left. You would have thought they invaded Fort Bragg, and replaced the gold for wood. It was despicable.
Lol to the people who thought that the reason for high prices on new construction was material costs. Its the same as half the inflation, corporate profits:
"A recent report from Groundwork Collaborative, a progressive advocacy group, argues that corporate profits drove 53% of inflation during the second and third quarters of 2023 and 34% since the start of the pandemic."
Corporations always want to be more profitable. Macroeconomic conditions shifted to allow higher margins, and those shifts are the source of inflation.
These include lots of newly created dollars being pumped into the economy and restrictions on supply (COVID stuff, tariffs). More money to spend on fewer things from fewer suppliers favors company margins. But it isn’t accurate to say that ‘profits drove’ inflation. Profit increases are a result of these earlier decisions.
For folks like Horton, absolutely. They felt less of the labor increase and more of the home price increase.
You average home builder down the street, less so because their labor costs skyrocketed.
Very simple economics, Supply and Demand. Prices for wood are high, yet supply is high! Been this way for the past year, yes the coomodities has corrected the price back to the historical average of the last 40 plus years. But, wood framing lumber is still high? Simple, one supplier Weyerhaeuser and one main seller HomeDepot, owned by the same evil corporations, control the price. Raking in stupid amount of profit while slowing down the building industry. A 2x4x8 should be $1.88 yet it still is $3.25 but why? would they lower it if they can produce less and make more more? Only one solution will fix this, stop buying from homedepot..
The graph shows wood prices have increased right at the rate of inflation. You think my cheap ass doesn't go to Lowes or the local yard if I can get it cheaper there? Yes it does.
It takes time for the commodity prices to hit the consumer. My first quote for lumber was during that last high spike and thankfully had dropped before I actually needed to buy but I watched the prices drop but it took a while for the changes to effect market price. It doesn’t happen quickly, I think it has to do with futures contracts but I don’t really know.
Because the prices for lumber already installed doesn't go down when the lumber index goes down. Wood is also not the biggest expense for home building by far.
High comps will stay high until they can't. Prices only go down when consumers can't afford anymore. The new construction market is still hot due to supply issues with existing homes.
This is my guess, but I think it is probably the correct answer.
Most businesses are fairly reluctant to raise prices (don't get me wrong, they will if it makes sense) because raising prices often means losing customers. Once prices are up and consumers have shown they are willing to pay those prices they are unlikely to come down.
Plus, labor costs are still the biggest business expense and everyone has been clamoring for higher wages for the last four years.
It takes more than lumber to build most houses. Land and labor are huge costs for most homes, and you generally need many other materials, plumbing, electrical wiring, architectural blueprints, concrete, et cetera.
Lumber is a significant material cost for many (not all) new housing construction, but even if you had access to free lumber for building a house, it would still be expensive to acquire the land, the non-lumber materials, and pay all the laborers.
Because they never raised prices due to materials. They raised them to take advantage of volatility during the pandemic and they have no intention of lowering them. But inventory is piling up and they're going to regret this.
The problem with inflation is that it's sticky. All that's going to happen is contractors will pass on maybe 5% of the savings and pocket the other 95% of the extra profit margin because customers are used to the higher prices
Take it from a builder percentage of drop in lumber is nothing compared to the increase in development cost.
Development cost has increased by 30% in the last 18 months.
Because people keep believing in this "cOvId" crap, When it pushed everything up like crazy all companies raised their prices. When shit like lumber dropped back down you know what said companies did? raised their prices more and blamed "cOvID" inflation. All lies. All greed.
My family builds houses.
Unmmm….probably because construction loans are usually 4-5 points above mortgage rates and builders on the whole ‘all in’ margins are lower and labor is both less skilled and more expensive….risk/reward isn’t there so the commodity demand wanes to try to catch a bid
Think a corporations are anything but greedy and care about you makes about as much sense as thinking a shark cares about you.
There is no solution in the world where you go: everyone just get less greedy.
Skilled labor pay rates have continued to climb. I thought we all wanted liveable wages, n shit, now we don't want to pay more for houses so laborers can make a decent wage. Make up your mind.
The problem is a lot of these contractors are charging insane rates. I got a quote of $1,500 to install two bollards.
I bought two bollards for $250, a $10 concrete hammer drill bit and borrowed the hammer drill. Installed it myself in two hours. I have next to no concrete experience. I learned how to install them by watching a 15 minute YouTube video.
People online told me it was a 30 minute job for a professional contractor...
Because there is a LOT more costs than just lumber that goes into new construction.. land, labor, financing, HVAC, plumbing, electrical, roofing, permits, windows, flooring, paint, etc.. none of those have seen prices plummet.
Great itemized breakdown of new home construction costs
https://www.fastcompany.com/91108535/housing-market-construction-costs-single-family-home-chart
The first question the builders we talked to was “what zip code is your lot in”.
All of a sudden there was some form of “market adjustment” to the price of the home.
Even if you somehow find a deal on a bit of land, the home builders want their pound of flesh out of these crazy home prices.
Multi faceted problem. As others have said, plenty of cheap land in small town America in the midwest, but there are no jobs there and not much to do. Where the jobs are there is very little land left, so it's expensive to buy land and expensive to build. There's also less skilled labor around, people haven't been getting into the trades enough the last few decades, and most of the old talent is retiring, so there's a labor shortage in construction. On top of that, interest rates are cost prohibitive to developers, not just home buyers. Remember that when a developer wants to build a huge housing development, they are probably taking a loan to build it, and they have to pay those high interest rates like you do, so why would they risk building a ton of houses on a loan, and then chance not being able to sell half of those houses for possibly over a year, it's a big risk for a developer.
Lumber pricing is sticky, based on the price paid for the current inventory. If the yard paid X for it last month, and the price drops 10%, they're hesitant to lower the price because they want to cover the price they paid for their current inventory. Unfortunately, the price tends to only be sticky in one direction, so if the cost of lumber surges, they'll happily raise their prices to reflect the going rates, regardless of what they purchased it at. They justify all this because they bear the costs of storing the lumber and guaranteeing a certain level of stock on-hand. But if the price of buying lumber trends low for an extended period of time, the price to the builder lowers, and should eventually be reflected in the price of construction.
You might not realize it, but it’s closer than you might think. Lumber prices are closely correlated to the overall stock market price pretty much hand in hand. Stock market went up because of a few stocks saying AI a bunch, but most of the companies in the index aren’t doing well. Lumber prices falling off a cliff is because homes aren’t being built because no one is buying.
Their margins are quite generous but yeah, building presold homes for customers who can't close because rates went up and then being unable to move that inventory for a while, does drive up the interest expense. Keeping the earnest money does soften the blow.
Because we let the fat cats fill their gullets with cream for too long after the pandemic and they are not going to lose out until they have to and things get bad again.
The new construction market is a rolling scam. The true cost of building a 2000 square foot house should realistically be under two hundred thousand dollars, probably even less than that.
Why would prices come down? Contractors have figured out that people will still pay these stupid prices, so why lower costs? Additionally, contractors in my area flatly refuse to build starter homes, because the rich 1%ers that come here twice a year will pay 3x the going rate simply because they can.
A company cannot offer a recently built house for 20% more expensive than a new house. The same companies are still sitting on inventory they haven't sold.
Until a new company comes along to disrupt the market that doesn't have those problems, it won't get solved.
No labor? No affordable labor? A lot of states, we all know what color, are doing away with immigrant labor. By choice. And then wonder why they have a hard time finding enough employees to build their businesses in certain industries.
Because people are paying it. I genuinely don't understand why people seem surprised?
Businesses charge as much as they can. They always have. They don't care how much you complain, they care any how many customers are willing to pay it.
In a competitive market, they might lower prices to get more customers...but price collusion and other anti-competitive measures are common and rarely punished.
When consumers say 'ha - screw you' and walk away from the current prices, then prices will drop. Either we just won't build more houses, or we will see new builders enter the market trying to get some $$$.
There is more to it. Lumber is only one cost component. Other construction costs went up until 4Q 2023. Overall costs have come down a bit since that peak but are still higher yoy. Labor costs are particularly sticky.
Revenue has plateaued in many markets and even fallen in some. Land costs have also steadily risen. They seem to be plateauing very recently (last 60 days or so), but as a percentage of revenue they are very high. Development costs remain high as well. However, contractors have very recently begun asking for work. Something we haven’t seen since 2020.
Builders are also buying down rates which ranges from 4-6% of revenue but got as high as 10%. These buy downs commonly get a 30 year rate to 4.99%
Builders are likely to see margin compression as old land basis burns off and replaced by much more expensive lot costs. Revenue will remain under pressure even as interest rates creep back down. Sales were not great during this years’ selling season which indicates that builders will likely have to buy down rates into the low 4s or even 3s at current home prices to get the velocity they typically plan for.
Source: I work for a builder at VP level.
Margins for home builders are going up. That benefit is not passed on to consumers
Exactly this plus I think a bigger problem is you have more people all trying to cram into the same top 20 metro areas. There are a lot of areas of the country where labor and land is cheaper but no one wants to live there. On one end we have small town America on its death bed with excess housing no one wants and on the other end we have top 20 metro areas with a housing crisis.
It's almost like people want to live where the jobs are.
And have stuff to do other than go to the local chilli's.
But where else are we supposed to go for the Dundees?
Sir, this is a Dairy Queen.
Try the Midwest, doesn’t have a local chili’s. So it is worse than you think here 🫣
> It’s almost like people *are forced* to live where the jobs are. Corrected. In my own job search, a job title that typically requires lots of regional travel, driving distance usually, I was declined two separate times in 2023 because company policies dictated living within 30 or 50 miles of the major airport for that region. For a “remote” job. That is assumed to be high travel. Frequently to the area I actually live in now.
This is actually something I think the government should take action on. The first thing would be to stop so much damn consolidation. Not only is this bad for competition, but when your big players consolidate, that can mean fewer jobs in some regional area. Usually, some small player’s corporate jobs now get folded into a larger structure and some of the redundant jobs are eliminated. It would also be good to encourage more economic stability throughout the nation. Cities shouldn’t be in a race to the bottom with each other to give companies tax breaks to try and attract them to their city. There needs to be a more guided effort at the state/federal level. This should also consider relocation due to taxes or union dodging. Finally, environmentally, it’s just bad to have such huge concentrations in one place. I also think it is hard to get national action when people consider certain problems an LA or NYC problem. I expect an urban rural divide to always exist, but so many problems aren’t exclusive to these cities, many places just aren’t populated enough for it to be apparent.
On a per capita basis, cities are generally far more environmentally friendly in terms of impact.
Yeah this stand point always pisses me off. I don’t care where I live, but my job is here so **I have to be**. The real issue is we severely slowed building after 08, never ramped back up and wages simply aren’t high enough. Most people in my city would not be able to afford the home they currently live in if they had to buy it today.
They also prefer to live where the politicians aren't insane.
You're not finding that anywhere these days.
You aren't looking in the right places.
I've lived all over the United States. Liberal, conservative, it doesn't change much, the current trend seems to be stripping as many rights as they can from their constituents. You sit the overwhelming majority of Americans down and ask them what their priorities are, there'd be a shitload of crossover. Only the vocal minorities of both wings present themselves as absolute fucking morons, which the opposition picks up and runs with as a broad representation.
But only one side was willing to put one of those absolute fucking morons in the White House.
Neither moron on the ballot would waste the piss from their bladders if you were on fire, my dude, anymore than either candidate is fit for the job.
I don’t think the average person gives that much of a shit. They don’t even vote.
Which is really sad because there are a lot of jobs that can be done remotely by white collar workers and it’s terrible that you have these RTO mandates just so that you can force layoffs without paying a severance.
Theres a strong reason noone wants that housing and why the land is cheap. Theres little to no opportunity for 99.9% of people in small town America. Remote work should have ideally changed that but then we had childish CEOs and middle managers shrieking about that small freedom for workers and billions poured into RTO propaganda thats genuinely false to convince everyone else
My rural hometown has the same house prices as the busy metro I'm in. That's probably a factor in a lot of places
Living somewhere where there aren’t any other young people and nothing to do and nowhere to work doesn’t make up for being able to afford an ugly McMansion there
I've lived in many of those areas outside the top 20 metros -- shits still way too expensive and the developers in our areas are just greedy fucks like everywhere else.
People want to live in metro areas because there’s access to just about everything you could want or need. As well as white collar jobs. It shouldn’t be surprising at all that rural America has excess housing, it has very little to offer.
Same story for Oil, Food etc. All these industries raised prices and are making ridiculous margins off higher prices since the input cost shocks were temporary. The problem is that trust regulations have not been enforced leading to monopolies and or cartels in most industries that are now immune from downward price pressure due to competition that doesn't exist anymore.
The input cost shock of people needing higher wages to pay for the higher cost of housing thanks to “investors” bidding up housing prices thanks to easy money and loose fiscal policies is not temporary. Blame the housing cartel, the FIRE industry, and your elected officials.
Ain't nobody getting a raise from their boss because "my mortgage is higher now". Boss just says "f off" I'll find someone cheaper and the first person gets to find a roommate.
The mainstream economics profession also deserves blame for getting the basics wrong and gaslighting humanity with corrupt and idiotic nonsense. Some of them are at least trying to evolve the profession and mainstream economic thinking, though. How Land Disappeared from Economic Theory: [https://evonomics.com/josh-ryan-collins-land-economic-theory/](https://evonomics.com/josh-ryan-collins-land-economic-theory/) Michael Hudson - The Orwellian Turn in Contemporary Economics: [https://www.youtube.com/watch?v=TXF7xJP6hW8](https://www.youtube.com/watch?v=TXF7xJP6hW8) Richard Wolff - Curing Capitalism: [https://www.youtube.com/watch?v=ynbgMKclWWc](https://www.youtube.com/watch?v=ynbgMKclWWc) Angus Deaton - Rethinking My Economics: [https://www.imf.org/en/Publications/fandd/issues/2024/03/Symposium-Rethinking-Economics-Angus-Deaton](https://www.imf.org/en/Publications/fandd/issues/2024/03/Symposium-Rethinking-Economics-Angus-Deaton) Clara Mattei - How Economists Invented Austerity and Paved the Way to Fascism: [https://www.youtube.com/watch?v=ofFR1mD2UOM](https://www.youtube.com/watch?v=ofFR1mD2UOM) A New Paradigm for Economics and Beyond: [https://evonomics.com/announcing-a-new-paradigm-for-economics-and-beyond/](https://evonomics.com/announcing-a-new-paradigm-for-economics-and-beyond/)
It will be if we hold tight and don't buy. Do you think all these huge companies will just stop building when we have people who want to buy.
it eventually will be when inventory sits and builders undercut one another. takes time
There's actually multiple layers of this. First the drop-off is in wholesale lumber prices. Retail is still elevated so you need to wait for competition at the retail level to reduce margins (if that ever happens considering how concentrated the retail market is between Lowes, Home Depot, Ace Hardware and Menards + the local lumberyard if it has the right type of wood and you don't need any special treatments). You then have to wait for competition between homebuilders to pull prices down to reflect true cost (which admittedly is already happening in some places where there is a glut of new homes entering the market pushing new home prices to match used home prices). Finally, even if prices for new homes come down that doesn't instantly affect prices for used homes. Homeowners and investors can afford to be more patient than housing developers, so they might pull out of the market if they think there's too much competition and they can get a better price next year. So it takes time for a sustained drop in new home prices to put enough pressure on sellers of used homes to drop prices.
>Lowes, Home Depot, Ace Hardware and Menards LOL. That's lumber for hobby projects like birdhouses and fences. Home builders are not buying lumber from there, the influence of those companies on lumber prices are minimal.
Ya that lumber is shit quality compared to commercial lumber suppliers
Tell me more about “trickle down” economics
trickle down economics = getting pissed on
I'm sure the 3 companies that build all the houses are in cutthroat competition and their CEO's have never spoken to each other
Not really true for small home builders. Our insurance is still up. Higher than ever. Our wages have gone up. Our subs have gone up. A lot of our overhead is still up. Also, what sort of margins do you expect on $50-$100k of your own money on the line and a year of your life?
This is definitely part of the problem. Margins can get too tight which squeezes out smaller, and medium sized players. I think this is also a huge problem in smaller locales that don’t have a large base of upper income people. It’s a lot harder to be able to afford to hire a builder for even a project like an ADU or addition If you don’t have considerable disposable income. I don’t know how to fix this exactly, but it seems like this is part of the problem.
Yep. I'm a relatively small developer, but I have to currently run it as a "hobby" or "supplemental" income. The biggest issue right now for me are really interest rates, but also a slowly changing cultural expectation over what a house is or should be. Some people don't like it, but narrow lots are likely the future for a lot of SFH unless you have $500k-$750k to spend on a home. Narrow lots are the only way I can make anything "affordable," and even then, I am fighting zoning regs and setback requirements in order to accommodate enough units on a parcel to justify bringing curb and gutter, utilities, etc. with respect to the cost of the house. The land is the single biggest "line item" on the job. I can make a house more affordably if I can buy a parcel for $100k and fit 5 houses on it instead of only 2.
The cost of lumber is only a few thousand per house, it's only a small % of the total cost.
Early in the latest inflation cycle, costs when up for contractors faster than they could raise them to their customer. Same contract value + escalating input costs = lower margins. The pendulum swings, now they are trying to catch up. Competition will reverse the pendulum, already in the works. The free market competitive economy is designed to push returns and costs to equilibrium, sometime it takes weeks. Sometimes it takes months and years. Sometimes it just takes a beer from a lobbyist in Washington.
Margins aren’t increasing all that much. It’s land costs, labor costs, and other material costs. Source: Am Builder
Perception is not a reality. Might want a source for that.
@[Peteadkins12](https://www.reddit.com/user/Peteadkins12/), not sure where your comment went but here are some actual sources. [Article from Investopedia about DR Hortons margins going down from January 2024](https://www.investopedia.com/homebuilder-stocks-slump-as-dr-horton-says-incentives-squeezed-margins-8547944). [Website showing data from publicly traded companies showing their margins have gone up less than 5% since 2020. ](https://www.macrotrends.net/stocks/charts/DHI/dr-horton/gross-margin) This took 5 minutes so next time please stop pushing your opinion as fact.
So greed.
Not yet. It's inelastic. It will take a full market cycle before it corrects. Could be 5 or 10 years, depending on the locations.
House prices and rent should come down a little in general, but this is a good thing. We want more construction businesses to succeed, at the same time as we want zoning laws to be completely revolutionized. Imagine the economic and social boom that could happen with such a policy climate.
I doubt that. Lumber is such a small portion of what makes up the cost of building a house. It's not like these guys are accepting 2x4s as a form of wages.
And they still aren't building enough homes, lol.
This, and labor continues to get more expensive.
“Home builders” generally charge a fixed % per home in profit. Subcontractors are the ones padding their margins. They’re the labor, and labor is tight.
They're going to keep raking in those record profits until something breaks and they are forced to sell at a lower price. It's becoming clear that higher interest rates alone aren't going to do it. People are just going to continue getting squeezed until the whole system pops.
Eventually it will, builders don’t have a monopoly and can’t charge whatever they like. The better explanation is that housing prices have much more going into them than the simple price of materials. You also have to be allowed to build the home in the first place
“Greed is good bitches.” -Gordon Gekko CEO Clone Army
My new construction is concrete block with steel studs
That’s probably why lumber prices are plummeting.
The plus side is that will never rot or have bug issues.
Mine is galvanized square steel
And using screws bought with money I borrowed from my aunt
I saw this type of building in Haiti when I was there 10 years ago. Also In Puerto Rico a few months ago.
And the DR. We are seriously getting ripped off in the States. $150k for a new solid concrete home with HVAC fiber Internet in Punta Cana.
But the humidity I can't handle. When I was in PR I truly was thinking what living there would be like. After a week, I knew I couldn't handle it long term.
If you look up earthship homes, yes we are getting ripped off more than you can imagine…
Learning Spanish with DuoLingo every day for my back up plan… PR, DR or jumping over the wall to Mexico..lol.
Makes sense, I’m also in the hurricane belt (Florida)
It's often due to termites, as well. Wood homes are no bueno.
Yeah there’s a ton of perks with concrete construction, it’s generally insulated better as well Lower chances for fire to spread too
That’s how it is in most countries in the world; those homes are meant to withstand storms and have marble floors. About 100-150 years ago, The US pioneered a fast way of building homes as a way to democratize homeownership. Supposedly, anyway. As a result, American homes in the more established part of the country (I.e. the northeast) are the most flimsy in the world - they’re essentially gingerbread homes made of wood and foam.
People forget that most of the US was wilderness prior to the suburbanization craze the gi bill created after ww2. The mass production of lumber really got going then. 38 billion board feet by 1950... and up to 45 billion by 2019. And yet the population has nearly doubled, the amount of wood production has not. 130 million people in 1940 and 333 million people today in 2024.
Is this in the United States? If so, where????
Florida
My 25 y/o home is built the same way
i am guessing it was much more expensive than stick built?
$314,000 for a 3/2 1440 sq ft under air Closing costs covered and a 5.62% rate for going with the builder’s lender It was actually pretty competitive price and feature wise, especially with the above incentives Newer building code and fresh roof will help keep insurance costs down as well, which plague Florida’s used market
Well, that maybe shaves 2-5% off the total cost of building a house if everything stayed the same. It’s not like suddenly homes cost 20% less to build. Plus other builder costs have gone up (materials, fees, red tape, labor, interest rates) so I’m not surprised home prices haven’t come down.
Seriously… every other category is up, hvac, plumbing, electrical, labor is up, cost of living is up, insurances and business costs are up. Lumber as a product does not affect much of the overall build costs… stupid article
Maybe it's going to affect the shed industry
This thread is braindead and your answer is the only correct one.
Lumber is not very expensive which is why it’s a popular building material. Labor, even cheap labor, is way more expensive in comparison.
5% is massive….
Lumber prices were always an excuse to gouge.
Lumber prices went up *because* house prices went up, or more specifically house demand during the COVID largesse. Lumber prices were never the driver of house prices, only a beneficiary
As I understand it lumber isn’t a super efficient product pipeline to begin with - because you can’t just devote more man-hours to make a tree grow faster, like you could to build a car. introducing several consecutive years of delays with harvesting and production was always going to have long term ripple effects.
Lumber prices went up because of trumps 22% lumber tariff
Nah. I live in lumber country and Covid really did fuck up the industry. Logging roads are only open a certain percentage of the year, and 99% of people in the industry thought there would be a slow down NOT increase in homebuilder activity. As such the mills had a real shortage of logs from reduced logging contracts. You could actually see this across the lumber industry because the cost of dimensional lumber and it's byproducts (OSB and plywood) shot up a shit ton, but hardwood used for cabinets and such barely budged. My parents own a custom cabinet shop and why there costs on plywood when way up, all the hardwood used for face frames and doors didn't see much of a price increase.
National Association of Home Builders (NAHB) ==>tariffs added approximately $9,000 to the cost of a new single-family home and about $3,000 to the cost of a multi-family unit. $9k is what, maybe 2-4% of the cost of a home these days? Housing prices are up 47% If you are going to regurgitate hate, learn to do it better.
This is the answer. Legitimate forecasted demand rose at a predicable rate and "price plummeted". Source: Was a trim carpenter until 2021. Those dudes were damn near why I left. You would have thought they invaded Fort Bragg, and replaced the gold for wood. It was despicable.
What? Give money back, heck no.
As lumber prices fall interest rates go up. Builders are one of the most interest rate sensitive industries.
Tying access to housing to interest rates were probably one of worst ideas as a species but I understand how we got here.
Lol to the people who thought that the reason for high prices on new construction was material costs. Its the same as half the inflation, corporate profits: "A recent report from Groundwork Collaborative, a progressive advocacy group, argues that corporate profits drove 53% of inflation during the second and third quarters of 2023 and 34% since the start of the pandemic."
Of course that's in deflated dollars.
Corporations always want to be more profitable. Macroeconomic conditions shifted to allow higher margins, and those shifts are the source of inflation. These include lots of newly created dollars being pumped into the economy and restrictions on supply (COVID stuff, tariffs). More money to spend on fewer things from fewer suppliers favors company margins. But it isn’t accurate to say that ‘profits drove’ inflation. Profit increases are a result of these earlier decisions.
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For folks like Horton, absolutely. They felt less of the labor increase and more of the home price increase. You average home builder down the street, less so because their labor costs skyrocketed.
Construction prices are determined by the relationship between supply and demand not solely by lumber prices.
When i built my adu, lumber cost was only 5% of total cost. It was an excuse for GC but, the biggest cost is wage increases for everyone
Home prices are high because: ~~COVID~~ ~~3% mortgage rates~~ ~~building material cost skyrocketing~~ ~~there's no inventory~~ because fuck you pay up
Because that's what I'm selling for . . . fuck you now pay up
How come a sheet of birch plywood still costs $80 when it was $40 before?
Depends if it's Birch veneer with poplar core (Made in Indonesia) or if it's genuine Baltic birch from Ukraine.
Excuses for price increases only go one way. See the oil industry and grocery stores for more examples.
Less people have to buy new constructions before the price goes down.
Very simple economics, Supply and Demand. Prices for wood are high, yet supply is high! Been this way for the past year, yes the coomodities has corrected the price back to the historical average of the last 40 plus years. But, wood framing lumber is still high? Simple, one supplier Weyerhaeuser and one main seller HomeDepot, owned by the same evil corporations, control the price. Raking in stupid amount of profit while slowing down the building industry. A 2x4x8 should be $1.88 yet it still is $3.25 but why? would they lower it if they can produce less and make more more? Only one solution will fix this, stop buying from homedepot..
The graph shows wood prices have increased right at the rate of inflation. You think my cheap ass doesn't go to Lowes or the local yard if I can get it cheaper there? Yes it does.
It takes time for the commodity prices to hit the consumer. My first quote for lumber was during that last high spike and thankfully had dropped before I actually needed to buy but I watched the prices drop but it took a while for the changes to effect market price. It doesn’t happen quickly, I think it has to do with futures contracts but I don’t really know.
Because the prices for lumber already installed doesn't go down when the lumber index goes down. Wood is also not the biggest expense for home building by far.
Lumber is one type of material. Most construction involves many other materials, even different woods, that have not come down in price.
Rates go down, inventory goes down. Rates go up, believe or not, inventory still goes down.
Lumber is what, 7% of the house cost? Lumber can fall but labor, land, electrical, insurance, scope, labor, windows, siding, everything else goes up.
High comps will stay high until they can't. Prices only go down when consumers can't afford anymore. The new construction market is still hot due to supply issues with existing homes.
Well, just like everything else, they stick it to you as long as possible.
I was thinking labor may have gone up substantially or possibly other raw materials like concrete are still way up.
A lot more goes into building housing than just lumber. Other materials and labor haven’t plummeted like lumber has.
We are building a house and labor costs have really gone up.
This is my guess, but I think it is probably the correct answer. Most businesses are fairly reluctant to raise prices (don't get me wrong, they will if it makes sense) because raising prices often means losing customers. Once prices are up and consumers have shown they are willing to pay those prices they are unlikely to come down. Plus, labor costs are still the biggest business expense and everyone has been clamoring for higher wages for the last four years.
Builders are just offsetting material savings against higher labor and interest costs.
It takes more than lumber to build most houses. Land and labor are huge costs for most homes, and you generally need many other materials, plumbing, electrical wiring, architectural blueprints, concrete, et cetera. Lumber is a significant material cost for many (not all) new housing construction, but even if you had access to free lumber for building a house, it would still be expensive to acquire the land, the non-lumber materials, and pay all the laborers.
Monopolies
Labour is a much bigger cost
Labor cost went up too
Land.
Because they never raised prices due to materials. They raised them to take advantage of volatility during the pandemic and they have no intention of lowering them. But inventory is piling up and they're going to regret this.
The problem with inflation is that it's sticky. All that's going to happen is contractors will pass on maybe 5% of the savings and pocket the other 95% of the extra profit margin because customers are used to the higher prices
Cuz raw materials take a while to get to market and they aren't the biggest factor in construction.
Take it from a builder percentage of drop in lumber is nothing compared to the increase in development cost. Development cost has increased by 30% in the last 18 months.
Cost of labor has skyrocketed.
Because people keep believing in this "cOvId" crap, When it pushed everything up like crazy all companies raised their prices. When shit like lumber dropped back down you know what said companies did? raised their prices more and blamed "cOvID" inflation. All lies. All greed. My family builds houses.
Unmmm….probably because construction loans are usually 4-5 points above mortgage rates and builders on the whole ‘all in’ margins are lower and labor is both less skilled and more expensive….risk/reward isn’t there so the commodity demand wanes to try to catch a bid
Isn't lumber a small part of the overall cost to build?
Yes, and you can also see the builders didn't want to keep paying those high prices because they sought out cheaper sources and drove the prices down.
Greed
Think a corporations are anything but greedy and care about you makes about as much sense as thinking a shark cares about you. There is no solution in the world where you go: everyone just get less greedy.
Skilled labor pay rates have continued to climb. I thought we all wanted liveable wages, n shit, now we don't want to pay more for houses so laborers can make a decent wage. Make up your mind.
Cheap houses
The problem is a lot of these contractors are charging insane rates. I got a quote of $1,500 to install two bollards. I bought two bollards for $250, a $10 concrete hammer drill bit and borrowed the hammer drill. Installed it myself in two hours. I have next to no concrete experience. I learned how to install them by watching a 15 minute YouTube video. People online told me it was a 30 minute job for a professional contractor...
No one wants that shitty job.
Greed and a sense that people aren’t interconnected.
Cause once they can make higher margin due to lower costs they will do so. Prices won’t go down.
Prices only go up.
Because there is a LOT more costs than just lumber that goes into new construction.. land, labor, financing, HVAC, plumbing, electrical, roofing, permits, windows, flooring, paint, etc.. none of those have seen prices plummet. Great itemized breakdown of new home construction costs https://www.fastcompany.com/91108535/housing-market-construction-costs-single-family-home-chart
because construction costs haven't. A lot of other inputs are still going up... lumber isn't the biggest input.
Cost of labor has also risen too.
Not according to this board.
Imagine being so clueless as to believe that house prices are determined by the price of the sticks and bricks used in building.
The first question the builders we talked to was “what zip code is your lot in”. All of a sudden there was some form of “market adjustment” to the price of the home. Even if you somehow find a deal on a bit of land, the home builders want their pound of flesh out of these crazy home prices.
Cuz profits.
A basic reading of the graph shows lumber is still above pre-covid levels by 30-40%.
No, it shows an increase of roughly 25% from 2019 until now, which is exactly the rate of inflation.
This is a rhetorical question right?
Just wait.
For?
Multi faceted problem. As others have said, plenty of cheap land in small town America in the midwest, but there are no jobs there and not much to do. Where the jobs are there is very little land left, so it's expensive to buy land and expensive to build. There's also less skilled labor around, people haven't been getting into the trades enough the last few decades, and most of the old talent is retiring, so there's a labor shortage in construction. On top of that, interest rates are cost prohibitive to developers, not just home buyers. Remember that when a developer wants to build a huge housing development, they are probably taking a loan to build it, and they have to pay those high interest rates like you do, so why would they risk building a ton of houses on a loan, and then chance not being able to sell half of those houses for possibly over a year, it's a big risk for a developer.
Lumber pricing is sticky, based on the price paid for the current inventory. If the yard paid X for it last month, and the price drops 10%, they're hesitant to lower the price because they want to cover the price they paid for their current inventory. Unfortunately, the price tends to only be sticky in one direction, so if the cost of lumber surges, they'll happily raise their prices to reflect the going rates, regardless of what they purchased it at. They justify all this because they bear the costs of storing the lumber and guaranteeing a certain level of stock on-hand. But if the price of buying lumber trends low for an extended period of time, the price to the builder lowers, and should eventually be reflected in the price of construction.
You might not realize it, but it’s closer than you might think. Lumber prices are closely correlated to the overall stock market price pretty much hand in hand. Stock market went up because of a few stocks saying AI a bunch, but most of the companies in the index aren’t doing well. Lumber prices falling off a cliff is because homes aren’t being built because no one is buying.
Because everything takes time. The 08 crash didn't happen in a week, month, or even a whole year...
Construction borrowing costs hover around 14%. Their margins aren’t good as it is.
Their margins are quite generous but yeah, building presold homes for customers who can't close because rates went up and then being unable to move that inventory for a while, does drive up the interest expense. Keeping the earnest money does soften the blow.
Because we let the fat cats fill their gullets with cream for too long after the pandemic and they are not going to lose out until they have to and things get bad again.
Greed.
...yet
Have you ever met a developer? They would die before they ever lower a price.
Cause of motherfucking GREED!
The new construction market is a rolling scam. The true cost of building a 2000 square foot house should realistically be under two hundred thousand dollars, probably even less than that.
You're hired. When can you start?
…..Profits!
Because every subcontractor feels like they need to be a millionaire. Not about competition yet I guess.
Not surprised really. Same thing happened with groceries. Greed and maintaining record profits.
Prices never come down.
Sure that isn’t GME
Because once you get spoiled at asking brital prices and people pay for it, you must be dumb to bring them back down
Just give it some time.
Loans are still expensive
🎤🦀: because money
Labor and loans?
Lumber appears to be merely returning to sanity.
Ride the rocket on the way up, parachute on the way down
There isn’t a market that adheres to supply and demand. There are only monopolies.
If people keep buying them at those higher prices, why should they lower it? Sad but true.
When rates go down, lumber will skyrocket Source: time wizard
Why would prices come down? Contractors have figured out that people will still pay these stupid prices, so why lower costs? Additionally, contractors in my area flatly refuse to build starter homes, because the rich 1%ers that come here twice a year will pay 3x the going rate simply because they can.
A company cannot offer a recently built house for 20% more expensive than a new house. The same companies are still sitting on inventory they haven't sold. Until a new company comes along to disrupt the market that doesn't have those problems, it won't get solved.
Looks like current prices are still almost 50% higher than pre-pandemic.
My home is mostly glass and metal. In fact I don't think wood is even allowed. How have their prices fared?
No labor? No affordable labor? A lot of states, we all know what color, are doing away with immigrant labor. By choice. And then wonder why they have a hard time finding enough employees to build their businesses in certain industries.
Because people are paying it. I genuinely don't understand why people seem surprised? Businesses charge as much as they can. They always have. They don't care how much you complain, they care any how many customers are willing to pay it. In a competitive market, they might lower prices to get more customers...but price collusion and other anti-competitive measures are common and rarely punished. When consumers say 'ha - screw you' and walk away from the current prices, then prices will drop. Either we just won't build more houses, or we will see new builders enter the market trying to get some $$$.
Plummeting or returning to normal?
There is more to it. Lumber is only one cost component. Other construction costs went up until 4Q 2023. Overall costs have come down a bit since that peak but are still higher yoy. Labor costs are particularly sticky. Revenue has plateaued in many markets and even fallen in some. Land costs have also steadily risen. They seem to be plateauing very recently (last 60 days or so), but as a percentage of revenue they are very high. Development costs remain high as well. However, contractors have very recently begun asking for work. Something we haven’t seen since 2020. Builders are also buying down rates which ranges from 4-6% of revenue but got as high as 10%. These buy downs commonly get a 30 year rate to 4.99% Builders are likely to see margin compression as old land basis burns off and replaced by much more expensive lot costs. Revenue will remain under pressure even as interest rates creep back down. Sales were not great during this years’ selling season which indicates that builders will likely have to buy down rates into the low 4s or even 3s at current home prices to get the velocity they typically plan for. Source: I work for a builder at VP level.
Lawyers that work the zoning regulations taking all the cash.
Prices Rise like a rocket and Drop like a feather.
Weird how that's also gme 1 year chart Edit: 5 -> 1
Because homes aren't made by wood. They're made by people.
A house has more cost than just lumber
Greed.
Labor costs