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      05-23-2020, 03:36 PM   #11
Turkish Pickle
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Drives: MKS V6 AWD - F10 525d xDrive
Join Date: Dec 2009
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This is a question of inflation and the USD losing purchasing power. Which kind of loops back to your observation of "minimum wage tripled but home prices increased more than that". It's not that the home prices are high that's the issue, that's a very surface level overview of the situation. Your purchasing power has decreased because the US Dollar has lost value. I won't get into reasons why because I'm not an economist + there's lots of politics (and personal biases) that go along. But I can go into why homes are "expensive" since I'm a civil engineer.

"are material and labor costs that expensive?"

Yes and no. I strongly think paying $65/hr for an excavator is outrageously high, but it also scales up (as in doctors etc get paid more) so it kinda makes sense. Material per home can be acquired fairly cheaply, saving a few bucks per sq ft even if you change stores. But naturally higher grade stuff is going to cost more. Material however is really not the issue, if anything the "average" has been shifted up considerably.

Keep in mind that's one guy who runs 1 type of excavator to do a specific thing. Since you need multiple pieces of machinery and other operators to run it, an hour of work comes out to $200-250. At least in the suburbs of Chicago. Nothing gets done in an hour and it's not unreasonable to run up to $5-7k a day because of this.

Then you have all sorts of different trades and their bullshit unions that exist solely to be a headache on the general contractor. Add all of those together and you're paying a considerable amount more for the trades than the materials, for a reasonably middle class home.

Then you have the contractor's profit on there. Generally 10-15%. But of course you get plucked for every single penny along the way so realistically that profit ends up being more 30-40%ish.

Lastly, you have the developer that basically is the "idea creator" of the subdivision you're in. They get a cut too, why else would they have a business otherwise?

Homes are expensive because there's lots of inputs that go in it. you can build your own home in an unincorporated area, but that's only putting a bandaid on the issue.

Also, the dollar using value should also be kept in mind when making comparisons like that. $1 in the 70s is worth a $6.61 today. Unless your paycheck increased x6.61 in the last 50 years, your purchasing power has effectively decreased.
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