This puts the issue of housing affordability into perspective. However, I'm surprised you did not mention a major cause of elevated house prices -- the failure to build due to numerous legal and regulatory restrictions.
This is very true in some locations. Always remember that you are buying land and improvements. Improvements typically wear out and depreciate over time. Land, however, can go up and down in value. It's why the exact same house can sell for $150,000 in Louisiana and $1,500,000 in LA. Land is generally worth around 25% of the overall value. It can reach 80% to 90%. In some cases, the land is worth more if there was no house on it. Real estate is a complex and entertaining market ;)
I wonder what the numbers would be for Europe. They have even worse problems with restrictions raising housing costs. My impression is that houses have not grown larger as much as in the USA but that's just my impression.
I live in a 5000 SQFT house in the exurbs. A quick look at the builders invoice would explain all this.
Land, taxes, and other fixed expenses made up a majority of my houses cost.
Material and labor made up a substantial minority.
Additional square feet cost substantially less per square feet as the number of square feet increased.
As such, building a 1,500 SQFT home vs a 5,000 SQFT home really wouldn't cost that much difference.
So what we find amongst builders is that they are going to the nearest plot of untouched land available (whether inner, outer, or exurbs based on the situation in the local city) and mass building some master planned community.
In my own case there are twenty homes. Four of them have young children in the homes (these are 5,000 SQFT homes BTW). Sixteen of them have retired childless boomers living in them. Because those are the only people that can afford real estate and they sell their urban homes and buy something "in the country".
I know a lot of other young people starting families that don't do as well as me (and more critically, didn't own real estate before 2021). They can't afford shit. It's not even remotely possible. And all their jobs are way out of the commuting range of buying one of these exurban McMansions.
This puts the issue of housing affordability into perspective. However, I'm surprised you did not mention a major cause of elevated house prices -- the failure to build due to numerous legal and regulatory restrictions.
This is very true in some locations. Always remember that you are buying land and improvements. Improvements typically wear out and depreciate over time. Land, however, can go up and down in value. It's why the exact same house can sell for $150,000 in Louisiana and $1,500,000 in LA. Land is generally worth around 25% of the overall value. It can reach 80% to 90%. In some cases, the land is worth more if there was no house on it. Real estate is a complex and entertaining market ;)
I wonder what the numbers would be for Europe. They have even worse problems with restrictions raising housing costs. My impression is that houses have not grown larger as much as in the USA but that's just my impression.
I live in a 5000 SQFT house in the exurbs. A quick look at the builders invoice would explain all this.
Land, taxes, and other fixed expenses made up a majority of my houses cost.
Material and labor made up a substantial minority.
Additional square feet cost substantially less per square feet as the number of square feet increased.
As such, building a 1,500 SQFT home vs a 5,000 SQFT home really wouldn't cost that much difference.
So what we find amongst builders is that they are going to the nearest plot of untouched land available (whether inner, outer, or exurbs based on the situation in the local city) and mass building some master planned community.
In my own case there are twenty homes. Four of them have young children in the homes (these are 5,000 SQFT homes BTW). Sixteen of them have retired childless boomers living in them. Because those are the only people that can afford real estate and they sell their urban homes and buy something "in the country".
I know a lot of other young people starting families that don't do as well as me (and more critically, didn't own real estate before 2021). They can't afford shit. It's not even remotely possible. And all their jobs are way out of the commuting range of buying one of these exurban McMansions.